Already US growth rates have slowed sharply, despite two interest rate cuts by the US central bank, the Federal Reserve. As soon as banks and investment houses see the stock market going down, there is less enthusiasm for investment. There is not less money - just less people investing in new businesses, which are vital to the health of the economy. The general climate of caution and uncertainty leaks into the wider economy, especially in countries like the United States, where a large percentage of the population owns shares. Consumers feel less confident about going out and spending money, buying a car or moving house.
Big corporations delay upgrading their computer systems or placing big orders.
That weakens the prospects for big computer companies like Intel further. In the global economy the share price of a company like Intel or Yahoo is the first link in a complex, electronic chain reaching out to stock markets in London, Tokyo, Frankfurt and beyond. Few economies in the world will be untouched by what happens on the Nasdaq and other US markets over the next few weeks. And as these tech firms like Intel, Yahoo, Microsoft and Motorola have issued profits warnings, so their share prices have fallen, setting in chain the whole negative cycle again. Anyone who knows the answer to that question could soon be a very rich person.