Following the downgrade of the US sovereign credit rating, investors continued to do what they had been doing: selling riskier assets, such as equities, and buying safer ones, such as Treasuries. The downgrade provided no new facts but underscored fears that the world is a risky place.

The US is now adapting to a growth rate that is much lower and more volatile than it is accustomed to.

Working off the accumulated debt of the past two decades weighs on wealth, as assets are written down, and diverts a larger share of lower incomes to debt repayment, slowing economic growth for years to come. The reluctance of businesses and households to borrow, and of bankers to lend, makes growth more volatile because, rather than borrow to smooth the path of investment and consumption, when income declines, investment and consumption fall too.