On Monday, the Dow Jones Industrial Average took a 635-point nosedive, capping a wave of frenzied selloffs fueled, at least in part, by S&P's downgrade of America's credit rating, and growing worries about the state of the economy. The Dow's sharp drop was the steepest one-day decline since the financial crisis nearly three years ago. And yet, by midday Tuesday, the Dow had climbed 200 points. Are we reliving the wild ups and downs of 2008?
No. The cause of this crisis is different: "Market turbulence alone isn't enough to prove that history repeats itself," says Francesco Guerrera in The Wall Street Journal. The 2008 crisis began with imprudent, overly confident home buyers and bubbled up through Wall Street, leading to the breakdown of the financial sector, and in turn, the recession. The crisis du jour is a "top-down affair"; governments around the world have mishandled their economies, causing financial institutions and businesses to lose faith. "Markets and banks, in this case, are victims, not perpetrators."
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