Thursday saw the largest one hour drop on the New York Stock Exchange in the history of the exchange and no one wants to take the blame.
The theory goes that someone as yet unknown was typing in a sell order and inadvertently typed a “b” in front of “illion” instead of an “m” so that the sale order read “$16 billion” instead of “$16 million”. The result was a massive sell-off of stocks that caused the market to drop 1000 points in almost half an hour.
You’re thinking, “So what?” Well, if you’re a liberal, then you’re thinking that along with, “serves the bastards right.”
The problem is, that’s someone’s pension you’re talking about. Every time the stock market loses points, someone loses money in their retirement fund. It impacts everyone when the stock market goes berserk like it did on Thursday and news coming in from Greece isn’t helping matters much.
Whether we like it or not, all economies are linked together so that whatever happens in Greece will affect people in Japan. If America has a bad day, London will have one tomorrow. It all moved back and forth like water in a bathtub. You cannot say, “okay, we Americans are going to pull out of this industry” because if it does, people in India or Sri Lanka will wake up with no jobs. If Sri Lanka has no jobs to pay the people who do the work, the people stop buying whatever is being sold there. It is a ripple effect that goes around the globe almost as quickly as this article if it were called up in St. Petersburg, Russia.
Some Americans scream that by letting American companies ship jobs overseas, Americans are losing jobs. Others complain that if a company doesn’t go overseas, it can’t afford to stay in business because a competitor is selling the same widget for a lower price because that company is making the widgets overseas.
So what are Americans to do in this situation?
The simple answer is not so simple. The answer is to stop investing so heavily in the stock market. Since the explosion of the World Wide Web into our lives, activities such as stock market trading has become a pauper’s game. It’s the only kind of on-line gambling that is allowed to operate in and include participants from the United States. Typical on-line gambling sites are often run out of countries outside the jurisdiction of the United States but no one has ever bothered to shut down the single largest gambling racket – the New York Stock Exchange.
Buying stock is gambling. You lay down your money for a marker (stock certificate). The money you lay down is a bet. The bet is that after a specified amount of time has passed, the marker will be worth more than it was when it was issued. Now, what happens in the mean time is the company that handed you the marker takes your money and uses it in such a way as to improve the overall value of the company. This will make the marker worth more after the specified amount of time – usually a year or more.
Once the WWW began to allow people to buy and sell freely, the phenomenon known as “day trading” came into existence where a person would buy a stock today and sell it for a small profit in less than a week. By purchasing multiple markers at one, the day trader develops a “portfolio” that she can then manipulate as she sees fit to maximize her return on investment. Even if you don’t play the stock market, your very existence can depend on how well the market is doing.
And as America saw on Thursday, it only takes one massive sell-off to trigger a massive dive in the market. The way computer software is designed now, “Sells” can be pre-programmed to say, “When the price reaches this level, initiate a sell of x% of stock.” This is the collapsing house of cards that occurred on Thursday. It certainly seemed to recover by the end of the day Thursday and seemed to hold its own on Friday, but that’s not the point. Buying and selling stocks was once considered a rich man’s game. But as companies began to realize the massive influx of capital to be gained by allowing virtually everyone into the game, the idea of stock deals being everyman’s game grew in its appeal.
But it also put more people at risk of losing money – money they may not really have to lose.
Can playing the stock market go back to being only a rich man’s game? Sadly, no. But it should. When you minimize the risk of loss to the average working man, you tend to leave more money in his pocket.
The down side is that companies lose vast amounts of untapped capital to use to open new help centers in Bhopal. The upside is that middle and lower income families have more disposable income to spend on more reasonable purchases. The overall economic effect is relatively predictable: companies have less capital, they invest in fewer expansion projects, fewer people have jobs, unemployment goes up, inflation, etc, etc, etc. So a line has to be drawn somewhere. Do we limit the amount of money a company can make? Well, the current president seems to think it’s necessary. But to what end does that lead? If a company has less money, it creates fewer jobs. It’s as simple as that.
But what the hell do I know? I just spent the last two years studying for an MBA and spent most of that time learning about financing a company and the myriad ways of putting money into a company as well as the factoring in of the costs of manufacturing a product – including having to pay the schmucks that actually make the product.
And the ideas that are used to keep companies financially sound could just as easily apply to government. Except the government is run by idiot lawyers who think they know everything but repeatedly prove they don’t know squat about money – except how to spend yours.