What would a Stock Market collapse look like today?
We’ve recently seen a stock market crash at the end of 2007 until the beginning of 2009. The stock market had a major dip back in may, which is thought to be caused by a fat finger trade, e.g. someone adding an extra few 00’s to the end of a sell order. This cause chaos in the US when some stocks value fell to almost 0 only to shoot back upwards again almost instantly. Some people made money from this error but most had their orders cancelled as it was deemed to be unfair. So I suspect that there would never be such a thing as a stock market collapse these days. But still you never know. Any thing is possible.
Central banks can and have done much to stabilize credit markets. The crisis was marked by a sharp increase in interest rates on bank lending over the targeted cost of funds set by central banks. Partly by injecting reserves into the market, central banks have ensured there is sufficient liquidity and reduced the “risk premium” attached to loans. The London Interbank Offered Rate (LIBOR), the peg for trillions of dollars of bank loans, has fallen from 5.75% last August to just over 3% today because of actions by the U.S. Federal Reserve. These declines have eased the anxiety in the credit markets.
