it's inside story.

the last time we went through this, economists explained something called the wealth effect. when your house was said to be worth more, even if you weren't going to catch in either of them, you were more likely to spend freely, to feel richer and that was a good thing when consumer activity was the main driver. well now even after years of steady recovery, healthier balance sheets will you start spending less because you aren't feeling as confident about your wealth today? the stock sell off followed the sun around the globe. there were jitters at the opening day, but there was no free fall. the s&p and nasdaq up slightly, but it's been a

very bad month. certainly gets attention, we see the decline as the inverse of the sell off in the stock market. volt tiltty what causes it, markets don't like uncertainty, and there's plenty of unknowns shaking confidence. >> there is oil, isis, there's concerns about central banks. the economy has been rebounding, slowly, since the depths of the great recession, that but that is not strong enough to lift the global economy.

the fear of a triple dip recession, is making markets nervous. >> germany has been a star eyed boy, who was going to lead everything to the next phase of the recovery. that's not happened and it feels like they have been dragginged back to the likes of france, and italy. but hold on, why should the u.s. be worried about europe's economy? there's plenty of good news here, interest rates are still at rock bottom, mortgage rates are dipping again, unemployment rate are the best we have seen in almost a decade, and gas prices many americans are now paying less than 3-dollar as gallon. >> it definitely helped out. when it comes down 20 to 30 cents that means i am not putting 80-dollars in here. lower prices may make you feel better, but take a

broader view. and the benefits to your wallet now could be offset later if the economy faltering. let's get back to the markets, yes, in the past five days market power looks bleak. i think our markets need volatility, it is healthy, moving in one way, one direction, up or down is nos healthy. maybe the new fear is just a reality check, a correction of sorts. and that is what global investors are trying to tell us the world economy, the securities market, and the economy

that begins at your front door, this time on the program. are companies really worth trillions less, what the stock market sell us and don't about the health of the economies. joining us for that conversation, an economics editor in the wall street downal, where he directs coverage of u.s. and international news. professor, one after another, as the sun brought the morning to different exchanges in the opening bell rang, the indexes started to plunge. in hong kong, and the tokyo, and then moved on to europe, and then on to the united states again. when you are standing in a pit, what does it matter what somebody 4,000 miles away did in response to their local

economic concerns? why does this happen. >> we are in a new normal. which means volatility is contagious. and it is at the speed of light. a small bank got into trouble with it's books and the dow fell 400 points. this is the new normal. i don't think there's any getting away from it. the g.e. worthless? is knockee worth more or less. >> absolutely not. but it is fear. and anxiety that is driving this. so are we talking about one, or a few big things or a lot of little ones that finally had a cumulative effect? >> all combining at the same time, a lot of people like to use the perfect storm analogy in rah case like this, but it is a series of events that have been bubbling under the surface for a while.

the first, one, of course, the euro zone fears. 18 countries that have been struggled for years and they are now back at the top of the global agenda, it has become very clear that it is going to been near a recession this year if it isn't actually in one. there's clearly a low down occurring and then a number of those things that are very much big in the news now. ebola is a big concern, and the potential threats. the crisis involves isis what it could do to the region, but to the global economy. and long simmering issues like the russia ukraine stand off.

leads people -- particularly about financial markets was justified. and main country where it is involved tiny tiny participants in world trade. the united states has a few cases but there's knock, nobody that is to be taken seriously, that imagines there will be a very large number of cases in the united states. it will cost some money and concern, and eventually this country will get it's arms around this thing. so you are standing in a trading floor, in new york, or in the america tile exchange in chicago, or the pacific stock exchange, and how does the fact that there's this worrisome new thing, effect what you do do and your perception of value? >> it effects it in a few ways.

what people are talking about,en if a lot of people are talking about a threat, it tends to doe press confidence, it has the risk of draw ago tension away from other things. people not going out and shopping it is a minimal risk in the united states right now in terms of being a meaningful factor from a direct economic effective. when you add it on, it comes to a point where are adding another risk factor. forty-five's what each additional case, makes people more jittery. there is a potential to suck up even more oxygen.

they tend to be localized concerns that everyone notices and everyone reacts to,en because we with are all human, we with are all substitute septemberble to those fears. >> not just guys and gals with with badges on that have psychology when it comes to this, it is every day people. >> that is true. consumers do have a psychological experience, when they see the stock market dip and go crazy. but let's look at what is effecting consumers right now. low mortgage rates low borrowing costs low oil prices, actually some things are reallying looking well for the consumer. so even as the stock market is going a bit crazy because of all the these things that could impact the u.s. economy, the actual fundamentals have been improving in recent periods. and that is i think a bigger driver.

yet, if before this latest swoon we went out and talks to people, they wouldn't report feeling very good about the prospects for the coming year in the economy. psychologist sometimes doesn't match up. >> right. and it is also very slow for someone to get on the same page. we with have seen a recent uptick in job creation, that doesn't mean that everyone has a job. it's not like there is also sunshine and puppies in the economy. things happen, and we know that, what is different about this particular experience, is that the market and consumers have adjusted to a very low volatility environment.

and traders and financial markets in particular have been conditioned to look for black swans. we you go, there will be this 100 year event, mayben it's ebola, or europe, but we are always looking for the next black swan, they only are supposed to occur every 100 years not every two weeks, so i think these two things are very different this time around. >> we will mr. back, when we come back, we will talk more about the relationship of the market to the economy, is a rising or falling market a symptom of what's up in the wider world or does it drive the decisions you make about today, tomorrow, even next month. stay with us.

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last week the number of people applying from unemployment dropped to a 14 year low. houses and cars are selling well interest rates are low, and the latest unemployment is the lowest in six years. that didn't stop traders from shaving 1400 points off the dough and big numbers off the other indexes. what makes the difference between this being a hiccup and a panic, where tips. >> it will take a lot more than what we have seen, the numbers sound big, but the stock market just over the last few years has gone up almost 40%, so when you look at nit the context of that, seeing a drop of six or 7%, is meaningful, buts then't all that devastating if you put nit the context of the larger increase. the risk is we have come

off a period of incredible calm, where partly due to the federal reserve policy, partly due to other factors people have been feeling good about the state of markets. and it leaves them to do things that may not be rational. you can argue maybe the market shouldn't have gone up. and that we might be undoing some of that, but if you have too many people getting into that feeling and reacting to the fear instead of the fundamentals then all of this can feed on itself, and instead of six or 7% drop over a week, you may have that over a day or two, and if it continues that's when you get into a more dangerous period of a market shock.

were not anywhere close to a risk like that, and that's what is weighing in the back of everyone's minds. >> are people more con, than they were in another time. >> i think so. because this last market dip, the great recession, the last big one with, caused a lot of people to lose their homes. and responsible for embedding some of these products into the consumers lives. but the fact is, and what i find so ironic is that stock markets have been disconnected for a really long time, and now that the stock market is going down, we are starting the the economy is improving and mow it looks like the stock market is correcting. but before, the stock market was improving when the fundamentals were terrible. and just to see that movement reverse itself i find very

ironic. >> you still have your house, and a long time horizon before your environment, income, and all of those things, is there a feedback loon? do you feel this in one way or another? maybe not today, but next month, or for the rest of the year? as a professor i have ten years so i can't get fired for the average person, you have to understand while by have good news, unemployment is at it's lowest it is a fake number. we with have a lot of unwilling workers out there. this pleasure the job market is tight. don't forget, most middle class americans lost a significant portion of their wealth over the last six years. which they have not made back, that's why the feel good factor may be there because gas prices are

down. and these volatilities and dips we have what we call financial market fatigue. we are tired of being afraid of the markets. and it is probably going to happen again, because the german numbers are bad france is in trouble, and we are afraid of a recession there, hitting us here. and people are reading the news now, understanding that things outside of this country, can impact us and a feeling of almost not hopelessness, but not much we can do about it. a lot of factories have added back the shift they cut, and while it is perhaps something that you have some human

feeling abt marring in the streets of athens you wonder in kansas, or ohio, how come my retirement account is taken a whack because of this the local shopping strip, i am still depositing from the my checks and spending my money. i just don't get it. we put our retiement money in the stock market, and we put a lot of it. most pension funds tend not to end up there in the rest of the world, because they might be a little bit more saner about money that they have saved away. but we are -- we are gamblers, question are risk takers and i think more and more people have gone back introduce the market because of the loss that they experienced over the last five or six years as well, while that workers back at work, he might be backen at work at a lower

rate. students are graduating getting jobs but instead of getting a real job they are taking internships. as an employee is this issue has gone on for a while. we still have under employment, but that is not what is driving the stock market right now. and i think that's what is really kind of fascinating about watching this. >> hold exactly that thought, because when we come back, with more inside story after a short break, i want to ask you something, did we learn anything from the last time the zoch market swooned people who kept their heads didn't lose their shift shirts.

the next time you log on to look at your balance, mayben your shouldn't logging on, stay with us. >> on the stream, >> as another u.s. nurse falls ill to ebola, the nations largest nurse's union demands better ebola safety protocols. hear from those at the center of treatments. >> the stream, on al jazeera america

on this edition of the program, on the suspicion that most of you working at the moment are not hedge fund managers we will turn to what if anything you may do about this yourself. in the washington bureau, where he directs the coverage of international economic news. the chief economists at red fin, a national real estate firm, and a professor of international finance and business at the george washington university, you were talking abouten the disconnect between the actual operation, and what people are finding in the market. did we learn anything the last time? are the people pa went with through this more likely to be more careful

about how they respond? >> i think you see that in the volumes the is to be market volumes. we are obsessed with with prices and levels. don't play the game with the pros i think is the take away. >> is part of that gaudy market valuation we saw a result of there being very few places for regular people to put their money. are there a lot of reluctant stock pickers who would rather have other kinds of things? i was looking at the rates for a five year c.d., 1.25%. lock up your money for five years for a point and a half. >> theater, and that is by design. what we saw coming out of

the crisis is people were holding on to their money. individuals were holding on to their money, what the fed did is engineer a policy to force people out of the easier saving and into riskier investments. the obvious place has gone into the stock market, because that's the place where you get returns. also gone from professional investors into riskier places. the fed is on the line and responsible in some way because you talked earlier about the wealth effect, you want people feeling wealthier, and more confident about the economy and their own financial conditions so they go out and spend

that leads to more hiring and business investment, which in turn leads to more hiring and more consumer spending. and we are starting toking get that, and the fed isn't saying mission accomplishes but it is pulling band it's bond buying program. because it is the chief sum of it's goals along those lines and now markets are adjusting while these other factors are simmering. not just the fed that is influencing it, 40% of s&p 500 companies are reliant on 40% of their earnings commenting from overseas. that is difficult to understand what is happening inning china. hard for anybody to understand. where there are 18 countries with different political systems and

budgets. so it is hard to sort through all of that. >> should everybody take a deep breath and just wait to see what happens for a little while? today,en yes, but most people because of this hit have become more save i have understanding that really it doesn't matter where is happening out there, large corporations are taking advantage. the one thing we with haven't talked about is the dollar is the only safe haven currency. and it parenties the housing market, we with are seeing foreign buyers that want to move their money to a safe place, will choose housing markets. so this is the beacon of light for the world, but also in the real economy. and i think the only place where this

volatility has leggings, really, is that global demand. so the idea that the u.s. would be responsible for ever leading the world into growth when we have not recovered is a staggering right now. great to talk to you all, that brings us to the end of this edition of inside story, thank you for being with with us, the program may be over, but the conversation continues we with want to hear what you think about the issues raised on this or any days issues. send us your thoughts on twitter, well, 140 characters worth, a.j. inside story. or you can follow me at ray swarez news, we will see you next time on inside story, i'm ray swarez.

>> a ceasefire deal is reached in nigeria between the government and the group behind the kidnapping of dozens of schoolgirls. ♪ hello and welcome to al jazeera, i'm sami zeidan live from our headquarters in doha. also coming up on the show, more fighting between houthis, government troops and the military. and