Have the world markets crashed already?

Sort of. There are crashes, and then there are crashes.

The stories I've read of the Great Crash in 1929 have a commonness by those who were there. They tell of the euphoric moment of intense trading. Then they speak of a great pause. Some place in there, they all realized that they had gone much too far. A furious pace of selling began. Since no one was buying except at enormously steep discounts, stock prices fell very much like a rock.

Some very wealthy people had in a fashion seen it coming. While many very rich people were reduced to a small sliver of their previous assumed values (it is that bogus market capitalization thing again: price per share times the number of shares outstanding, which has absolutely nothing to do with balance sheet assets and stockholder equity numbers), others were able to buy really, really cheap. J. P. Getty, famous as a rich oil man who was for several years reputed to be the richest man in the world of his days, remarked that it was easier for him to buy up companies than to drill for more oil, and drilling for oil was pretty easy those days. Value returned to common stocks, but very, very slowly.

Now, what we are facing today is a similar problem. We euphorically big up the prices for shares in companies and frequently with little regard to the business's direct worth or immediate prospects. It has become a relative thing, rather than a real thing, and it still is.

The Great Depression was not caused by the Great Crash, but there was an element of connection in that the reputed wealth was based on market reflecting bogus numbers (that market capitalization thing again). When people had to go back to the productive work of their economy, the money in market trading had evaporated. Suddenly, formerly wealthy people weren't so wealthy, so they couldn't say they had x number of shares of XYZ to hold in collateral, or able to sell for y dollars of value. I had a boss several years ago that he could get any loan he wanted from his bank because he not only had a large amount of money on deposit but the bank bought, and held for him, a large stock portfolio. He wanted to buy a bigger house one day in 1987 and suddenly the bank wouldn't float the loan. There was a strong market drop and his stock portfolio wasn't worth what it was before. He was stunned. Things later recovered and he bought the house after all but for a time there he thought he had worth that stock market prices no longer supported. It kept (although only temporarily) him from using the money with credit he thought he had available for the things he wanted to do.

Right now, lots of companies were banking on (pun intended) worth from home loans. Those home loans run a spectrum of solid borrowers to "why the heck did anyone loan those people that much?" borrowers. The government pressured banks and mortgage companies to 'put people in houses' with an implication that if they participated in this goal then the government would guarantee their losses. Some bright bulbs later got the idea of bundling up lots of loans into packages and they would sell these "collateralize debt objects" to banks and investors that didn't want to bother with acquiring them one at a time. If they were solid loans, this was a super deal (on my own mortgage I will probably pay my bank something close to 2.5 times the amount I borrowed to buy the house, others will pay over 3 times the amount over the course of the mortgage period, do the math) for long term investment. Lots of insurance companies invest heavily on home mortgages (I used to work for one that put too much of its investment into a certain part of the country and when that part had a property value crunch, the venerable old company went became insolvent and had to close).

Here is the real kicker, though, when American business decided to have things made abroad, rather than here at home, that meant that not only did they not have to pay the American wages and American benefits expectations, and American taxes on that American plant and labor and profits, but that all those thousands of unemployed American workers, and their families, could no longer afford those home loans. Banks, meanwhile, shot themselves in the foot by raising the interest rates on variable rate loans. In order to make the targets of getting more people into more homes, adjustable rate morgages were employed. The problem is that there should be real ceilings on the maximum rate and real gradualness to the ratcheting up of rates. When people by the tens of thousands suddenly found rates going from 5-ish percent to double-digit percentage rates within a year or two, then lots of those people could no longer afford them (I heard of one man who was asked to pay over 18 percent! He let the bank have the house back). So what happens to those houses people can no longer afford? Well, the banks take them back and the banks try to sell them, but with so many for sale at one time, the buying prices