‘Don’t Panic,’ Says Author of ‘Great Depression of 1990’

The author of a best-selling book forecasting a global depression in 1990 said that Monday’s huge sell-off on Wall Street is no reason to panic.

“I think (investors) should stay in the market. Don’t panic. The time to panic is two years from now,” Southern Methodist University professor Ravi Batra said from Pittsburgh.

Batra, in Pittsburgh to speak to a business group, is the author of “The Great Depression of 1990,” in which he predicted that the increasing concentration of wealth in fewer hands in the United States will lead to an economic depression. The book is No. 8 on the New York Times list of best-sellers.

Batra said Monday’s 508-point drop was set off by news last week that the U.S. trade deficit is showing few signs of narrowing “and other things that added to the total jitters.”

However, he called the Wall Street fall a “mini-crash,” caused in part by a change in people’s attitude to the market.

“In the 1920s, people thought the market would never come down,” he said. “But today, people think it will come down at some point, and therefore, when it does, everyone wants to get out. It turns a mini-crash into a maxi-crash.”

But he added that he did not see it falling any further.

He said he expects the U.S. government to announce by the end of the week an agreement with Japan and West Germany to bring interest rates down. “Once (interest rates) come down, the market will calm down,” he said.

In addition, he said, the government had other options, such as acting to curb the computer-driven program trading used by big Wall Street investors. Program trading has been blamed for big market moves.

Batra said restricting such trading might help stabilize the market.

“But in two years’ time, the government will run out of options,” he said.