This is from a mail from the FT, received just now:
Some won't remember previous occasions when reporting of stock exchange highs was undertaken almost daily (as now) with mounting excitement on the part of news organisations as if this meant good news.
Some are too young.
Some wish to forget.
Some are deliberately forgetting.
I don't. 1987. 2000. 2008. These were all periods of such hype. They all heralded crashes.
These things repeat.
They are repeating, now.
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The stock market now registers not the settling of fair prices for shares but just how much money is being thrown in the gambling ring. It’s only there to lure the unwary to risk their money in the pot. It’s like a shell-game that’s been transfered from Oxford Street to the Stock Exchange in an attempt to make it respectable.
Quite so
Steve Keen points out that much of this rise is fuelled by debt.
http://finance.yahoo.com/blogs/daily-ticker/stock-market-debt-fueled-bubble-steve-keen-121950839.html
I seem to remember that is not a good thing, and you don’t have to go back very far to see that. It is not plausible to suggest that “some are too young” to remember 2008: I don’t believe anybody forgot. I do believe that we are in a quicker and quicker cycle of “this time it is different”. But it is always tulips.
Unlike land, the stock exchange is not part of the real economy, which affects the ability to put a roof over your head (basic human need). So, although not good, I shan’t be losing any sleep over this.
You do not think that a stock market crash will lead to any consequences for the real economy?
The stockmarket performs no useful function – it’s just a gambling den. It does not help to allocate financial capital to where it is needed. The bursting of the dotcom bubble was supposed to lead to disaster but it didn’t. Even Steve Keen got it wrong. It’s the nature of the land market combined with uncontrolled credit creation which causes real harm to real people.
I agree it is a gambling den: but I do not agree that it has no impact on the real economy. If that were the case they could be left to get on with it and the rest of us could safely ignore it. As it is, a stock market crash causes real unemployment and real hardship for folk.
I would have thought a stock market crash would have consequences for the real economy. Take for example, people who borrow extensively to fund their activity on the share market. When the market collapses, those individuals/firms now have to sell other assets to cover their losses and debts. If it’s a firm that goes belly up, that means hundreds or thousands of people out of work. Multiply that across the global economy and you have a serious problem. And then we have people’s pensions also to consider.
I suspect pensions will soon have to be replaced with a universal social credit. Where would such sums come from? They’ll need to be ‘printed’ into existence and we can arguably do so without fear of inflation as most people would necessarily have to spend them pretty damn quickly to survive, creating demand and so employment and eventually wealth. Create money from nowhere to create wealth and you don’t have inflation is what I’m saying, albeit by a circuitous route. Thoughts?
Wait for my new paper on this – out v soon
In this interesting blog post, Gordon Pearson (who writes about the impacts of economic and behavioural theory – particularly on management),suggests that the FTSE index no longer reflects expectations about the UK economy but has become more a measure of the profitability of anticipated disinvestment.
http://www.gordonpearson.co.uk/09/the-ftse100-and-the-uk-economy/
As stock market price is always driven by news, the investor will decide whether to buy or sell a stock according to the news. I don’t trust news anyway because stock value cannot be decided by news maker.