I realize that the much larger problem today is that the lending system is shut down but long term, losing $2 trillion (and likely a heck of a lot more) is unthinkable. We have friends who have lost 20% since opening an IRA at the start of the year, though that was the figure three weeks ago. It’s surely much worse now. Will the market bounce back? Probably, but how long is it going to take to recoup those losses? How many lost months, possibly years will it be? Americans rely on the success of Wall Street for their retirement much more today than in the past so whether we like or dislike Wall Street, we’re stuck with the results.

I started my business career working with Japan so I’ve always had the bubble stuck in my head and today I can’t help but think about the Nikkei peaking at almost 39,000 at the end of 1989. Today the Nikkei fell over 9% and is sitting barely above 9,200. Japan has never bounced back from the 1980’s bubble. The economic dynamics of the two countries are obviously different but even Wall Street stagnated in a tight range of trading for most of the 1970s, offering little growth.

Now that this is very much a world problem, central banks are all offering plans to rescue their system. A global coordinated effort would be ideal though in such a climate of panic, this will be a challenge. This morning the British government announced a new $350 billion plan to back up the banks and (in theory) force them to lend to consumers and small business. The banks will also have to slash (or cut completely) dividends and “take into consideration” executive compensation, for whatever that’s worth. Remember, the UK population is only 60 million, so these are substantial figures.

European markets are falling hard out of the gate (5% to over 6%) so we may be seeing the next round of emergency action in the US very soon.