I've said on this blog (probably quite a lot) how far removed I think Stock Exchanges are from reality.
The reason is simple. The fact is they are far removed from the real world. HBOS, for example, was not in crisis yesterday.
But they have massive impact on the real world. Take this from the FT:
The Russian government was facing one of the biggest tests of its market economy after it was forced to close its two main stock exchanges to halt a market rout that has led to the steepest declines since the August 1998 crisis.
I suspect there is little real value in the Russian Exchange. Just as I have long said I see little real value above 4,000 points in the FTSE 100. But when this reality is appreciated the herd instinct gets going, fear gets in, liquidity dries up (because, let's be clear, the prime consequence of these markets is to deny liquidity, not create it when it is needed) and then the real world impacts result.
Question for the future: how do we resolve this madness? Keynes suggested trading twice a day, I think. Why not?
I know there will be those who say alternatives will be made available in that case, but just make their contracts legally unenforceable and we can stop them.
For the sake of the world economy the irrationality of markets has to be curtailed.
So too do the economist who argue that markets are rational and the solution to all problems. Surely we can put that idea to death forever now?