Avinash Persaud: Tumbling share prices will hurt people on the street

It is not overstating the case to say that yesterday was a major event with major implications. And it would be wrong to think of it as being confined to the United States. In fact, the implications are global because, as the world's largest economy, the US has global reach. You might say that when the US sneezes, the rest of the world catches a cold.

The US economy has a number of fragilities. These have been evident to economists for some time, and their continued existence was unsustainable. Until today those fragilities have been papered over by cheap credit and a competitive dollar. But now we're seeing some chickens come home to roost.

Much of the recent excessive lending is turning sour. That is impacting on all of the credit markets in the US - not just the risky parts. Though it started in the sub-prime mortgage sector, which is a niche area, its effect will be felt way beyond.

We often find lax lending in a period of low interest rates, but, as that period comes to an end, the difficulties become obvious. These difficulties could have been expected. There have been signs of slowing earnings growth in the US corporate sector, and that is compounding some of the anxieties within the credit sector.

It's going too far to say that we're witnessing some kind of financial apocalypse. But we are seeing a tipping point where a number of favourable factors have run out of steam.

In the UK, we will witness a spillover in terms of a weaknesss in the equity and corporate credit markets, which will in turn make it harder for British companies to finance investment. British investors will certainly suffer the consequences of market turmoil.

Avinash Persaud is the chairman of Intelligence Capital

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