The UK FTSE index fell by 639 points today to 5,237.48.  Not so long ago it stood close to 8,000 (ie it is down by around 35%, and fell around 11% today alone). Does that matter?

Yes, it does.  It matters enormously.  First and foremost because large numbers of younger people – not to mention a few of those more seasoned – have their future security tied up in defined contribution pensions schemes (ie schemes for which they know what they have paid in, but have no idea what they will get out).   Accumulated contributions are invested in the markets, and a massive fall will have a stunning impact on the value of pensions when they are drawn.

Secondly, many savers make use of the markets to try and generate a return over and above the measly offerings on offer from the banks.  It is worth noting that the low interest environment form which savers have suffered for the last dozen or so years is the direct result of “quantitative easing” – providing ready money to the banks when they would otherwise have had to bid for deposits. But I digress: the key point is that as the value of their savings fall many consumers will rein in their expenditure. The consequent fall in demand will hit suppliers right where it hurts.

Thirdly, there is the impact on business to think about.  It is hard to raise funds in a falling market.  Investors face losses  and have less to spare for other projects: banks find themselves writing down the value of their portfolios, and writing up the losses on loans they have made to investment companies.

It is also worth remembering that big falls in the markets tend by their nature to be destabilising: as losses are made and stop loss limits triggered portfolios liquidated in an effort to stem the  tide in fact do precisely the reverse: they drive yet further falls.