Stock markets around the world have taken a dive over the past week, prompted by the apparently sudden realisation that the "era of virtually free money" — which has played such an important role in driving the prices of shares (and other assets) to successive new highs over the past decade — is drawing to a close.
As is nearly always the case when markets undergo a sharp reversal, the receding tide is exposing some of the concealed risks that investors have (knowingly or otherwise) taken on board in the search for higher returns — and that is serving to amplify the volatility associated with the shift in thinking about interest rates.
Gyrations of the magnitude we've seen over the past week are almost always accompanied by breathless commentary about the number of billions of dollars that have been wiped off the value of the market, the implication being that we should all be "very afraid" of what this means for us personally.
Americans aren't exposed
The New York Times' economics writer Patricia Cohen points out that about half of American households have absolutely no exposure to the share market, whether directly or via retirement savings plans (IRAs and 401(k)s, as they're called in the United States) and that most households who do have some portion of their wealth in shares hold less than $US5,000 in total.
In other words, the majority of American households are not going to be adversely affected in any material way by the falls on Wall Street over the past week.
Indeed, they're probably going to be more positively affected by the acceleration in wages which triggered this past week's selling frenzy — assuming that the latest news on wages isn't just a "statistical blip" — than they will be hurt by the decline in the value of whatever stocks that they might own (if any).
Moreover, it seems unlikely that the fall in share prices over the past week is a harbinger of broader problems in the US or global financial system, as was the case leading up to the global financial crisis of a decade ago.
This week's turbulence seems more reminiscent of the "tech wreck" of 2000, whose effects on the broader economy were relatively mild by comparison with what came eight years later.
But Australians are more exposed
In Australia, 37 per cent of adults have direct ("on exchange") investments in shares, according to the most recent ASX survey.
That's down from a peak of 53 per cent in 2005, though still well above the levels prevailing before the mid-1990s, when a wave of privatisations and de-mutualisations brought a large number of Australians into the share market for the first time.
However, a much larger proportion of Australian households have an indirect exposure to the share market through their superannuation funds, more than American households or indeed households in most other "advanced" economies.
According to APRA statistics, there are more than 27 million superannuation accounts, of which nearly 19 million are active. That's roughly one for every adult.
Of course, many people have more than one superannuation account (I've got four).
Even so, most of the more than 12 million Australians with jobs will have at least one, and so will many of the more than 3 million Australians who are 65 or older and no longer working.
Keep upheavals in perspective
The most recent ABS financial accounts show that as of September last year, Australian households held $910 billion directly in "shares and other equity", and $2.7 trillion in superannuation funds — of which, according to APRA, 50 per cent are in Australian or international shares.
That means that Australian households have about 25 per cent of their total wealth directly or indirectly exposed to share markets.
Other ABS statistics suggest that even households in the bottom two quintiles of the wealth distribution have between 10 and 20 per cent of their total assets in the form of shares, held either directly or via their superannuation funds.
So the upheavals on the Australian and international share markets are, or should be, of more than passing interest to the broad spectrum of Australian households.
That said, it's important to keep these upheavals in perspective.
While the total value of the Australian share market may have fallen by about $60 billion over the past week, it's still $44 billion ahead of where it was this time last year, $220 billion ahead of where it was three years ago and $736 billion ahead of where it was 10 years ago.
They're the sort of time frames which households should have in mind when they're thinking about how the share market affects them.
Saul Eslake is vice-chancellor's fellow at the University of Tasmania and an independent consulting economist