KEY POINTS:
As the shockwaves of the financial crisis spread around the world yesterday, there was little New Zealand investors could do but look on and shrug off a sense of impending doom as one country after another suffered its own minor quakes.
The big news was in Britain, where Halifax Bank of Scotland waved the white flag and agreed to be taken over by Lloyds TSB for $32 billion.
But in Hong Kong they outdid Wall St - shedding 7 per cent on the Hang Seng market.
In Russia, trading on the stock exchange was suspended as the country's credit markets broke down completely. The situation was resolved when the Government injected 282 billion roubles into the system.
That's actually only $18 billion, which is nothing in these crazy days. Unless of course you're in New Zealand, in which case it's enormous.
In fact, the $3 billion that failed British bank HBOS has invested around New Zealand in various property developments could cause plenty of problems here. But for the bank's new owners - Lloyds TSB - it's a figure that might be written off with the stroke of a pen.
There's no doubt these are worrying days. But it would be wrong to assume that the situation is spiralling out of control.
That markets continued to tumble - even after the $130 billion bailout of United States insurance giant AIG - was inevitable. The fallout from the collapse of Lehman Bros was always going to be bigger than one dark day.
The real problem is not the stock markets, even though they are the most dramatic barometer of the crisis. They can and surely will recover over time.
The NZX-50 has been hit hard this week but is still trading above the low it hit in July. Barring Telecom, our companies are bearing up well.
Far more worrying is the deterioration of credit markets and the failure of financial institutions that are going down as if some mystery virus has been let loose on the world.
Without credit, businesses cannot grow. And without growth the system doesn't work.
But Australia continues to give New Zealand a solid last line of defence. Its big four - ANZ, Westpac, Commonwealth Bank and National Australia - remain in good shape.
As long as Aussie banking bosses don't plan any nasty surprises, there is no reason to be putting your cash under the mattress just yet.
