Behind the Global Markets' Meltdown

It spread from the U.S. Here's how it could burn us again

Illustration by Tom Miller for TIME; Shutterstock

$6.5 trillion in global stock-market losses on Oct. 6 and 7, as measured by Standard & Poor's BMI Global, an index of major markets worldwide.

The action was carefully coordinated for maximum effect. First came an early-morning announcement by the British government that it had crafted a $90 billion rescue package for its banks. Then five central banks from around the world, including the two big ones — the U.S. Federal Reserve and the European Central Bank — announced a cut in interest rates. Jean-Claude Trichet, president of the European Central Bank, described the cuts as an "important mark of confidence" that showed an "intimate cooperation" among monetary authorities around the world. Under normal circumstances, such measures would have bucked...

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