Traders work on the floor of the New York Stock Exchange on August 25, following a day  of steep drops in global markets the previous day in New York City.

Article by Robert Morely, August 26, 2015  •  From
But don’t worry. The experts say it will be alright.

On August 24, many Americans woke up to the smell of coffee brewing and news that China’s stock market was once again in free fall.

By 9:30 est, a totally different aroma was infiltrating boardrooms and offices inside America’s biggest banks and Wall Street houses.

It was fear.

Suddenly, memories of the 2008 economic crash were being replayed in high-definition Technicolor with brokers clinging white-knuckled to their computer keyboards and iPads—watching in disbelief as stock prices went into free fall. In less than 10 seconds on Monday, over 1,000 points were wiped off the Dow Jones Industrial Average. Hundreds of billions of dollars simply ceased to exist.

Three minutes later, the carnage continued as it fell an additional 300 points. The 1,300-point loss was the sharpest single intra-day drop on record.

Analysts wondered what would happen next. Never before have the markets been exposed to such massive leverage. Corporations have borrowed a stunning $9.3 trillion since the beginning of 2009. Rarely have investors borrowed such massive sums on margin.

Could this be the beginning of another Black Monday? Another 1929?

For a brief period, anxiety shot so high it blew out the Chicago Board Options Exchange volatility index—often referred to as the fear gauge. The computer algorithms couldn’t handle the unprecedented volume as the index tripled. For 30 minutes, investors were greeted with patchy data and empty screens.

The last time the index reacted so sharply, bad things followed. Think 2008 Great Recession and Wall Street meltdown.

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