Last night before I went to bed here in England, the opening Tokyo stock exchange for Thursday morning was in recovery mode, largely making up the big share prices slide on Wednesday. Today, waking up on Thursday morning here but close of day in Tokyo, the Nikkei index was in ‘bear territory’ again — a slide of more than 20% from its peak. Shares in Shanghai and Singapore are dithering but the BBC business correspondent says that it looks as though the world as a whole is entering a bear market.
And when that happens there’s no knowing how much further shares will fall. As Alan Greenspan says in his latest book, that is likely to be catastrophic — worse than the 2008 Crash. This month is already the worst month since September 2008. But if catastrophe for many millions of people happens, what else happens?
The most reactionary of the trade unions break up and, overall, wages decline. Competition between businesses increases and efficiency within businesses increases. Businesses that were already out of date finally collapse. New, more efficient industries come into being. Entrepreneurs think twice about actually launching their business. Investors will only consider buying the least risky shares.
And governments will have egg on their face in a big way. Let us hope that central banks, useless for the past eight years will disappear during the long — very long — recovery period.