Black Monday: lessons from the past

What happens to the economy when the stock market falls by 23% in one day? Nothing much, judging from the experience of Black Monday, whose 20th anniversary arrives Friday. That wasn’t what most experts expected at the time. But they missed a basic fact about finance, one that makes the current credit squeeze more worrying. Black Monday came as a bolt from the blue. The U.S. stock market had dropped 10% in the previous week, but no one expected the largest one-day drop, in percentage terms, sin...