I have been doing some research in anticipation of two presentations I'll be making on the financial market meltdown.  For those looking for a good chronology of the events that brought us to this point, here is one by the BBC that highlights the global dimension of the crisis.

The first presentation is today at the Rockefeller Center at Dartmouth.  I will be moderating a panel of three of my colleagues in the Economics department -- Bruce Sacerdote, Eric Zitzewitz, and Nancy Marion.  If you are in Hanover at 4:30, be sure to stop by.

The Dow finished up 936 points (11.08%) today.  Last Thursday, it finished down 679 points (7.33%).  Two weeks ago, on Monday, September 29, it finished down 778 points (6.98%), and the next day, it rose 485 points (4.68%).  These are nothing like the gyrations of 1929 through 1933, but they are enough to make your head spin.  Check Wikipedia for the complete list of Dow gyrations.

Why does this happen?  In one word -- uncertainty.  Markets hate uncertainty.  When the House failed to pass the Emergency Economic Stabilization Act of 2008 on Monday, September 29, the markets felt they had nowhere to turn for relief and plunged.  The next day, after statements by President Bush and congressional leaders, the markets bounced back in anticipation of House passage later in the week.

Every morning this week the Fed has announced another action to bolster financial markets.  At 7 a.m. this morning, the Fed and six other central banks announced a coordinated 50 basis point (half a percentage point) interest rate cut.  That's the first global economic policy change ever.