Yesterday a couple of the world’s most famous financial institutions sank without trace, one of the world’s largest insurance companies struggled to stay above the waves and companies around the globe saw billions of pounds, dollars and euros wiped from their market values. But did anything important happen?

The question may sound callous, even slightly barmy. In the space of 48 hours we may have witnessed the end of investment banking as we know it. We are certainly observing some of the darkest agonies of the worst financial crisis in decades. To those whose lives are not immediately and directly exposed to the nightmare on Wall Street, however, a hint of scepticism remains valid.

Is this crisis, you might ask, or this stage of this crisis, actually going to do real economic harm, unlike all the other ones we’ve seen in the past couple of decades?

Consider this: in the past 20 years, the increasingly integrated global financial system has lurched from one crisis to another, each one greeted on its arrival with ominous headlines that predicted economic ruin on the scale of the Great Depression of the 1930s.

In 1987, equity prices fell by more than 20 per cent in a day and everyone thought it was 1929 Revisited. In fact, the heart of the global economy didn’t miss a beat and the leading industrialised economies kept growing for another three years or more.

In 1998, the US authorities were confronted with the devastating financial consequences of the Russian debt default and had to orchestrate a rescue of a Wall Street company that some feared would produce a domino-style collapse around the world. The economy shrugged it off, though, recording in the following year its fastest pace of growth in a decade.

The September 2001 terrorist attacks forced Wall Street to close for almost a week and produced panic-selling in equity markets and wild gyrations in bond markets when it reopened. Yet, far from slipping into a slump, the economy actually emerged in the next few months from the recession into which it had already fallen.

So you could be forgiven for wondering what all the fuss is about. The US economy has, over the past year, actually picked its way rather well across the minefield of financial disasters that have made the headlines: the subprime mortgage crisis; the collapse of Bear Stearns, the rescue of Fannie Mae and Freddie Mac.

In the year to the end of June the economy expanded by 2.2 per cent, not a spectacular rate for sure. It’s worth remembering, though, that in the year before that – in the 12 months before the housing and financial crises erupted – the economy grew by just 1.8 per cent.

Is there any reason to think that the latest bout of knuckle-chewing and ledge-leaping on Wall Street and in the City is really going to make much of a dent in our prosperity?

It is too soon to offer a definitive answer as far as yesterday’s traumatic events are concerned but, for the broader financial disruption that gave rise to them, it seems that this time it really is different.

The first point to note is that, in all those previous phantom disasters, much worse outcomes for the real economy were avoided by timely policy responses by central banks and governments. It is surely the case that the extraordinary measures taken by the Federal Reserve, the US Treasury, the European Central Bank and, belatedly, by the Bank of England, have helped to shield the broader economy from worse damage.

The scale of the financial problems this time, though, is greater than in the past and its consequences are being felt more directly by individuals. The worst is certainly not over, and it is not clear there is much more that the authorities can do.

The relatively good news on the US economy so far is almost certainly going to prove to be short-lived. The Government’s tax rebates for more than 100 million Americans, which probably helped to soften the blow, have all gone.

The most up-to-date evidence for the US economy is dispiriting. Yesterday, lost in the Wall Street story, the US Government reported that industrial production dropped in August by its largest monthly amount in seven years. Consumer spending, which has not declined in any quarter in the past 17 years, looks likely to record a drop in the three months to the end of September. In the past four months there has been a surge in unemployment: up from 5 per cent of the population to 6.1 per cent.

The clear evidence is that this time the scale of the credit crunch and the unprecedented fall in house prices represent much stronger headwinds than anything we have seen in at least the past 30 years. That does not necessarily mean a recession worse than anything we have seen in that time, but a period of prolonged stagnation seems almost certain.

The irony is that yesterday’s traumatic events may prove cathartic for financial markets; the necessary and painful adjustments to an unsettling new reality.

For everybody else, unfortunately, catharsis seems some way off.

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