Guess l should've become a policeman, civil servaant, etc...like my parents said!!!!!! That private pension which promised so much seems to be slipping, thanks Maggie. Nevermind, someone always gains. Mr. Average.

nigel, Tokyo, Japan

Richard and Fergus:

When a bank makes a loan to a consumer or businessman, it is an hoc loan, supplied for a specific purpose. When the loan is repaid (gradually or in a lump sum), the money loaned disappears. (It was an addition to the money supply.) Also, the specific purpose of the loan has been accomplished.

The vanished money normally is replaced by new ad hoc loans.

But when there is a credit crunch (as now) or a recession, consumers and businessmen borrow less. That worsens the situation because there is less ad hoc money. To counteract this, central banks try to push more ad hoc money, and perhaps more printed-paper money, into the system. The central banks also lower interest rates.

But who are the commercial banks going to lend to? It can only be to consumers and businessmen formerly considered "sub-prime" borrowers or worse.

(To be continued)

John Wilson, Santa Cruz, California

Amazing, all the large salaries and bonuses and look how these so called wise ones react. Like a herd of sheep on a whisper of something or nothing.
This is gambling, no matter how university courses like to dress it up and the golden rule of gambling, is do not bet what you can not afford to lose.
And like all bad gamblers, they now take the rest of us with them.
When will the banks etc start looking at who they employ to make sensible returns long term rather than who makes the biggest xmas bonus payout?

If money be the food of love, gamble on, give me excessive bonfires of it till my appetite so dies of it.

The trouble is with this expensively paid panicked sheep running the cash supply, many healthy businesses are going to suffer and so the panic spreads outwards.

So the question is, is this a wake up call to the banks or society as a whole on how banks are run?

R Oakland, York,

Not a very balanced response, John Wilson. The new loans are to be made available to the banks in order to cover obligations, not to homeowners. A little more thought before you sound off might be advisable.

fergus, london, UK

Credit rating system is to blame - the more credit you've got the better your "score" and likelihood of being given more borrowing. What about ability to repay?

E. Bishop, Sutton Coldfield, UK

I agree with John with regard to abolishing credit and his associated comments.

I am already attempting to abolish the GBP in Jersey and re-introduce the barter system. I also intend to bring back witch trials, abolish the infernal combustion engine, re-introduce the horse and cart and make electricity (the work of the Devil, some might say) available only to hospitals. Which obviously will have been taken back to the good old days of leeches and hot oils.

That'll learn those darn mortgagees for not being able to afford to pay cash for their houses.

Bobby See, St Helier, jersey

John Wislon, could i point out to you that these pages are littered with useless uneducated comments too.

Richard, Leeds, UK

Make no mistake, this is a crash of 1929 proportions. Let's look at the fundamentals: nobody can give any accurate figures of how much is owed, or how much lost (that is a BIG problem for markets that claim to know wealth), the vast majority of loans are for over-inflated business deals and to people already mired in debt, savings rates are at record lows, and most wealth is now tied up in houses and contingent on the value we place on homes. That is a toxic mix of factors that is now unwinding in a very unpleasant way. It would be much worse if the government hadn't already pumped in billions of tax payers money. But that will run out in a few weeks, and then the wild gyrations will come back like a ferry passenger with sea sickness.

Bob Macdonald, London,

The present stock market crunch was triggered by the increasing faiure rate of "sub-prime" home loans in the US. (These are loans made to people whose credit rating is not of the best.)

To counteract the stock market situation, the US Federal Reserve and other central banks are making more money available for loans.

Who will take these new loans? US banks were already down to "sub-prime" borrowers in the home-loan market. Will the new loans go to sub-sub-prime borrowers?

It can all be blamed on credit (once forbidden by the Catholic Church as immoral), and on paper money created by banks and government printing presses.

Perhaps we should abolish all credit, and go back to gold coins as well.

As a final note, I will point out that the halls of history are littered with worthless paper money.

John Wilson, Santa Cru, California

Such a way with words, to make out the hiccups of the last few weeks are, in fact, the first waves of Armageddon. A truely colourful turn of many phrases including "frenzied trading...mounting fears...global credit crunch...worst session...explosion...savaged...panic...implosion...bled 5.4 per cent...worst one-day performance in seven years...asset destruction" all make for a gripping read. The markets (if you've got any significant exposure) also make for a gripping read. Heh, well done!

Justin, Alford, UK

Barton's "fallacies" have been around a lot longer than Blair and Bush. Why do these people try and blame everything on two politicians?

And physics has nothing to do with economics.

Roger Tilbury, Worthing,

Economics, mathematics or astro-physics. The stars have made their moves. The cycle turn is now evident. To quote Confucius: "I have but one lamp by which my feet are guided, and that is the lamp of experience. I know no way of judging the future but by the past. For it can surely be said that the future belongs to those who make ready for it today." We have seen it all before, and we shall see it yet again.

Tony Gold, London, England

I'm not savvy to the stock market, but this rate cut seems to tell me that the free market is not so free. In fact, it tells me that it can be manipulated at will for what ever reason, or outcome that is desired.
Does this prevent the real problem form coming to a head?
I don't know.

Mike Hermsen, Omaha, Nebraska/U.S.A.

So the weeks reporting of financial meltdown was completely over the top, worrying small investors, who panic and sell off stock only to find the market comes back after they have sold, allowing someone else to make a profit from there panic, so what about more accurate reporting of the financial markets and the impact of panic selling............. maybe financial reporters should be licensed like the rest of us in the financial services markets and then they can be accountable for the panic they cause via their cheque books

Mark, Leeds, Kent,

Unfortunately, at times like this the nuts & bolts of the stock market can't cope. I just sold two parcels of shares in anticipation of the market falling Monday so I can buy them back cheaper. In one case the delay was such that the price obtained was nearly 2% lower than when I sent the (website) order. I also entered a Limit order and I saw the limit price reached an hour later, but the deal didn't go through. OK it was only reached briefly but in quieter times it would have been processed. So now I still have shares I don't want and missed the chance of a good trade.
The simple fact is that when the market is really busy my not-small stockbroker can't cope, neither the Market team nor the Limit team. In the bull market this delay showed up by them 'improving' on the price, but now the truth is out. They're understaffed. So when we really need to deal, we can't. Rather worrying, really.

Ivor Duarte, Shepperton, UK

prolonging the inevitable and building even more pressure before things go pop. will the greed never end?

Adrian, London,

The patient has cancer but instead of surgery, the Fed gives a hit of painkillers. It doesn't take away the fundamental problem or bad debt, and it will wear off all too soon. The economies of the UK and US are propped up with massive amounts of debt, much of it bad, and until we start the painful process of washing it out of the system the ultimate pain will keep worsening

Dave, Bath, UK

Mark is right. Housing prices are being kept high by a lot of risky loans,interest only mortages on 5x salary to cohabiting couples, for example. These won't be made any more, causing the amount of money bidding for housing to be reduced, a fall in prices, and the end of the bank's collateral. Previously safe loans will become sub-prime, and if there is also a recession, lenders could lose out heavily.
However non-mortgage stocks shouldn't fare all that badly.

Malcolm McLean, Bradford, UK

when the indexes plunge like this, the traders are in their starting blocks to reap the profits on future index selling positions. If individual traders do it, why not the banks? These analysts are really taking us for fools!

Georges, London,

Blaming some poor hill-billy for refinancing his mobile home in the backwoods of the USA for the ups and downs of the worlds money system seems a little rich!

Refinancing and borrowing against assets is the very basis of banking theory; suspect the banking fraternity may have had its leg lifted?

RayDimmock, London, England

That story is overblown nonsense in my opinion. This is just a normal six monthly correction and we are near the bottom. It will spring back up again soon and will be forgotten.

Arthur, Melbourne, Australia

The choice facing Bernanke in the present crisis was does he defend equity and house prices, or does he defend the dollar. Well now we know. The dollar is being sacrificed to keep the credit/property bubbles going at all costs. And immediately it comes under attack of the forex markets. Thus the leading central bank in the world has signalled that financial booms must be kept going insofar as it is in the power of the monetary authorities to do so. Moral hazard! What moral hazard! Pile into equities and derivatives chaps the Greenspan put is still in place. Where will it all end I wonder.

F.V.Lee, London, UK

A rise of less than 1% in the dow can be classified as "soaring"?

John, London, UK

Capitalism at work!

A lot of people are going to make a lot of money from this and the big losers will be people who did not practice sound risk management.

Mark, Leeds, UK

The hedge funds get hammered by a spike in interest rates, so to bail them out the Fed cuts rates. Yes, the Fed and other central banks must act as lenders of last resort, but that should be at a penalty rate of interest, otherwise we'll just get the same behaviour all over again in a few months, fed by an apparent acceptance of the old "too big to fail" line. Even ignoring the obvious damage such a U turn does to the Fed's most potent weapon i.e., its own credibility, this suggests the Feed is panicking. Unless of course the Fed is anticipating a slew of bad news at close of markets on a Friday ....

EB, Slough,

I want the last 10 seconds of my life back ,after reading the previous posting .....what on earth was your point ?

Matthew Howard-Smith, London, UK

After administering the coup de grace to private final salary pension schemes and reducing 125000 pensioners to penury I fervently hope that our thieving pm does not steal yet more millions from the taxpayer to feather his own final salary nest egg in light of a possible further shortfall due to the current scenario.

philip, Ipswich,

Kind of boring ...

Lewis, Orington,

In my view, the recent drops in the FTSE 100 to below 6000 represent an over-reaction. Banks' recent healthy profits have led to them being well-capitalised, so they are not as exposed to new financial developments as the media (who are desperately looking for newsa t this time of year) are claiming. It is the housing market, not the stock market, that is in most need of a correction.

Mark, Cardiff, UK

Stocks go up and down and pensions with it.
USA & UK will not be told. Bush and Blair compounded the falacies
True aspects of Physics and Economics can make economics a science. A few points all have missed!

MIBarton, Oxon., UK