In an age of uncertainty, one thing can always be relied on - a brisk trade in gossip, rumour and nervous speculation

PSSST. DON'T TELL anyone I told you this, but the rumour mill has gone into overdrive. Petrified by the shudders, rumbles and astounding collapses of the global meltdown - where the previously unthinkable now seems to be happening on an almost daily basis - we're ripe for rumour-mongering.

It's a primitive reaction: when fear strikes, we get into huddle formation and start whispering frantically to each other. Which of our banks are teetering on the edge? Which big household-name companies are on the verge of going under? Which titanic property magnates are going to hit the iceberg?

While we're enthusiastic gossipers at the best of times - witness previous frenzies over the Irish rugby team and supposed Roy Keane "bust-ups" - in this climate of intense financial uncertainty, we're turning as never before to nervous speculation, counter-speculation and gossip.

The trouble is that certain kinds of unfounded rumour can send share prices see-sawing all over the place. Richard Lambert, director general of the British employers' body, the CBI, said this week the media should take a hefty share of the blame. Unsubstantiated gossip is fuelling the crisis, he said, frightening savers with unsourced quotes and melodramatic descriptions.

Gossip and hearsay are as vital a part of the currency as cash itself, and rumour is a dangerously powerful tool. In April, the US Securities and Exchange Commission charged a Wall Street trader with allegedly spreading false rumours, and the British Financial Services Authority (FSA) investigated wild trading in HBOS shares in March. No evidence of market manipulation was found, but the FSA noted that "both the opportunity for, and the adverse impact of, spreading rumours" increase during nervous and edgy times for markets. It is calling for "rumour policies" to combat abuse.

We must remember that rumour is based on emotion rather than reason. A recent report in online journal Psychology Todayfound that we're pretty impervious to the facts once we get into gossip mode. Simply hearing a rumour repeated by several different sources, or even by the same person, makes us more likely to believe it. And if those rumours tap into our existing biases and prejudices, we're more than halfway to being persuaded.

As crisis communications strategist and blogger David Bartlett points out, when we're consumed with anxiety, it's the knee-jerk reactions that dominate.

"Just ask Apple investors whose stock lost 10 per cent of its value in 10 minutes after false reports that CEO Steve Jobs had suffered a heart attack hit the blogosphere," he says. "Even the smartest people are easy prey. Verifiable facts, and even simple common sense, have little or nothing to do with the way a rumour spreads. Utterly improbable urban legends persist even though they can be easily disproven. And, of course, once a rumour finds its way to the web, it lives forever."

Reining in a rumour once it's taken hold is akin to extinguishing wildfire - difficult, time-consuming and inevitably messy.

"The lesson for anyone trying to combat a fast-spreading rumour is that what people feel usually matters far more than what they know," says Bartlett.

Rumour-mongering may be irrational, childish and even morally reprehensible, but at least it's keeping us from out-and-out recession panic. And besides, it's free.