@BrightNoon,
I am not saying investors panic due to what they see on the media; though CNBC, Bloomberg, and the WSJ do have a real influence over the market. The panic comes from wall street itself with the instinctive dumping of stocks when the herd of bears is on the run.
My point about the panic is that it is an overblown response (compared to the norm on wall street) to what economic data we do have, which doesn't seem to indicate a "crisis" at the moment.
As for monetary policy, we have already slashed the interest rates and the current policy is undoubtedly expansionary, and probably should be. Fiscal policy is clearly at this point back to excessive borrowing and spending. When Obama gets elected, his various proposed economic restrictions and increased taxes on the wealthy certainly won't help the economy get back on track.
So, as far as monetary and fiscal policy goes, the die has already been cast. The purpose of looking at panic is important, because what it will take to get the market back on track is confidence in the economy. When confidence is restored, these large investors will be taking advantage of the low-interest financing and low market prices to start building their portfolios and businesses back up, and starting new businesses. And so in a couple of years from now we will probably look back at the dip(s) in the market charts that are being caused by the market now, and smile, because times will be better. The markets have to adjust for lenders and homeowners signing off mortgages on the basis of hopes and dreams (the credit bubble), and then adjust again for the investors who hit the panic button and sent prices to artificial lows.