Federal Reserve chairman Ben Bernanke soothes international markets over the state of the US economy, reassuring investors that the US will not experience a recession this year.

But the historical significance of this week's stock market plunge should not be under-estimated. When it comes to risk, it's a whole new ball game with global capital markets now more integrated than ever before.

Meanwhile, China's stocks continue to fall as jittery investors bail out knowing they are over-valued, reinforcing the message that came through loud and clear this week: China is now pivotal not only to the global economy but financial markets. The smallest blip there can send shockwaves through the world's big financial centres.

True, the decline in stocks is just an indicator of the simple law of gravity. China's stock market rose 130 per cent this year and we know what happens when things go up. Nor will the fall in stocks damage the booming Chinese economy which has helped drive global growth, particularly the resources sector.

But China aside, the scary part is the amount of money and debt sloshing around capital markets. Worse still, investors seem to be pricing risk too cheaply. Now that we have a blip of sorts, markets will continue to be spooked over the next few days. How will Wall Street travel? That's what will tell us whether this correction will get worse, or whether it's just a blip.

The other aspect to the risk is the malfunction of the computer systems. The computers simply weren't equipped to handle investor panic of some 4.5 billion trades on the Dow Jones, almost double the average, according to news reports.

The big question however is whether the optimism of some analysts is justified.

As Wall Street's Dr Doom, morgan stanley's head of global economics Stephen Roach said, as reported in The Guardian: ''After four fat years, convictions are deep that nothing can derail a Teflon-like global economy. Investors, policymakers and politicians have now succumbed to a dangerous complacency. That's the time to worry the most."