I have had so many thoughts on this thread that I haven't had the time to follow up with my own post.

Since it happens so rarely, I wanted particularly to point out where numan and I agree: The greater risk to economic stability and a "free market" is market dominance (monopoly, primarily) by global conglomerates rather than governments - although governmental market manipulation can also have destabilizing effects, they tend to be less long-term than market conglomerations.

Our overreliance on "stock prices" to determine the "health" of the economy has always troubled me, particularly as it is based upon a premise of constant expansion - anything less is considered "unhealthy." But the stock market is a pretty crude barometer of economic health, especially as it misses most of the most important aspects of what the average person considers important: e.g. cost of food and fuel, employment status, wage status, etc, and instead relies on "feelings" and "expectations" about the market rather than fundamentals underlying it. "Booms," "bubbles," and "busts" exaggerate the importance of the market to the overall health of the economy.

For most Americans, the economy has been ailing for over 30 years, as they have seen the cost of everything outstrip their income and more and more of the "expectations" of life - health care, insurance, education for children, adequate housing , an adequate retirement - slip further and further from their grasp. Middle Class 'On the edge' - CNN Money; American Middle Class Still Losing Ground - American Progress; The Heart of the Economic Mess - Rober Reich, 25 July 08. This has been masked, in large part, by the growth in the Dow Jones, NASDAQ, etc. - which means little to the average American wage earner, but, because of conditioning, they rely upon it to gauge how "the economy" is doing.

Long term, I think, the world economy has become less stable and more control has been concentrated in the "big pools of money." (Giant Pools of Money - This American Life). As these pools chase returns, they slosh around the markets and tend to destabilize whatever markets they touch, at the same time driving up prices for everything, without contributing anything to productive capacity. That, I think, is where the real economy is hurting most - we are losing productive capacity and relying more and more on "investments" to sustain "growth." This is a chimera. Some have described it as the problem with "fiat" money, and to that extent, I agree (although the reality is, in my opinion, that all monetary systems are fiat by definition). The end result, inevitably and inexorably, is that the world economy will collapse back in on itself as the gap between the production economy and the investment economy grows beyond even ephemeral support. The mass contraction will be devastating.

A well reasoned argument is like a diamond: impervious to corruption and crystal clear - and infinitely rarer.

Here, as elsewhere, people are outraged at what feels like a rigged game -- an economy that won't respond, a democracy that won't listen, and a financial sector that holds all the cards. - Robert Reich