No, it’s not 1987. But neither is it 1998

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Stock markets around the world are having another crummy day. It’s always worth reiterating that the plus or minus 2% daily drops we’ve been seeing are nothing compared with the more than 20% decline on Oct. 19, 1987.

But this decline is not the product of some weird hiccup in the workings of financial markets, as was the case in 1998–and even, to a certain extent, in 1987. It would seem instead to be a belated realization that after years of taking on more and more debt, a large segment of the American population is completely tapped out, and nobody’s willing to lend it any more money.

This isn’t the end of the world. It doesn’t even necessarily mean we’re headed for a recession. It does mean that a significant source of corporate profits, especially the profits of the financial industry, may have disappeared for at least a couple of years. Which seems to be a pretty good reason for stock prices to go down, and possibly keep going down.

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