Wed 15 October 2008, BBC News

This is an economic Krakatoa

By Paul Mason
There's a lot of catastrophic imagery being thrown around about this crisis, but I think I have finally found one that fits: with the 15 September meltdown, the stock market panic and finally the economic chill that is falling on the world and depressing growth. It's like the eruption of Krakatoa. On 26 August 1883 the Sumatran volcano exploded so big that the sound was heard in Perth, Australia. That wiped out about 3,000 villagers and the local ecosystem. That's like the week of 15-19 September. Then, a tsunami killed 30,000 people. Nobody had ever seen one before so they were not prepared. But it was still basically a regional not a global tsunami. That is the credit freeze and the stock market crash of last week combined. Finally, in the year after Krakatoa erupted, global temperature fell by 1.2 degrees centigrade because of sulphur dioxide emitted into the atmosphere, and sunsets were red for years That's the global recession that is intensifying and feeding back into share prices and bank solvency. Fortunately, a cooling sky has no direct ability to make volcanoes erupt again or cause tsunamis. This is not the same as with a cooling economy: it is full of latency to cause further bank collapses, or even country-level debt defaults. This is the difference between the decision to let Lehman go bust without having a plan B and the Krakatoa eruption.
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