The financial situation is scary with echoes of 1929 when a financial catastrophe led to a dramatic shrinkage of the money supply, a prolonged slump with soaring unemployment and long queues at soup kitchens and ultimately a world war.
On the other hand we have the example of 1974 and, to a lesser extent, 1987, where terrifying plunges in share prices didn’t have that great an impact on the real economy. My guess is that the latter is more likely but that is because we think the people in charge know what they are doing, have learned from the mistakes made in 1929 and have the resources and ability to save the day. The truth is we don’t really know. The scale of the problem is enormous so it is not inconceivable that it could all spiral out of control.
...
