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That has created a vicious circle, in which falling consumer spending is expected to weigh further on the economy.
And it would bring the economy dangerously close to deflation, the destabilizing condition in which falling prices freeze economic activity as people anticipate lower prices.
The second dynamic is the firesale aspect of busts, in which falling asset prices prompt panicked sales which cause prices to overshoot downwards, worsening the crash.
Some economists fear that cutting government spending could lead to a vicious circle, in which falling demand further depresses employment, leading to greater declines in demand and output.
I might place greater emphasis on the immediate channel through which falling sovereign bond prices force bank deleveraging, but we're picking nits here.
That allowed for a "diabolical loop" to develop in which falling confidence in banks reinforced falling confidence in sovereigns which reinforced falling confidence in banks.
Similar(30)
21, which fell on weekends.
Two other big funds that suffered were Vanguard Primecap, which fell 8.4percentt, and Vanguard Capital Opportunity, which fell 9.3percentt.
A weaker rand depressed Johannesburg, which fell by 5.8%.
Higher oil prices hit Seoul, which fell by 5.9%.
Turkey's deepening slump hit Istanbul, which fell by 3.5%.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com