The Stock Market has been apart of many American lives for years and there are many out there who may not all agree on whether it is good or bad for us. At the end of the Roaring Twenties the stock market was in a booming state and life was great in America, but then, the unexpected happened and it crashed without the slightest warning. This caused the Great Depression and many people lost their jobs, homes and sometimes these people died because of the conditions that they had to live in.
All of this heartache happened because of this horrific stock market crash. Even in today’s world, the stock market causes lots of problems and stress for many Americans and others in London as well. Some of the older generations have lost their retirement benefits because of the downturns of the stock market. The people who are in the 401(k) retirement program are in the balance of how the stock market does. “When the stock market slumps, people in these plans are poorer. They have to work longer to enjoy a comfortable retirement.”(Burtless).
If the stock market does good however then they can have the possibility of having an amazing retirement and being safe from losing their money. On the flip side however, when the stock market takes a turn for the worst their retirement benefits take a nosedive and they end up having to work much longer than they would normally need to. Many people out there believe that the stock market is a hazard to our society, but there are some who believe that the stock market does nothing but help improve the economy. The stock market can help businesses make more money and be able to branch out their company to different states and this creates more jobs in the process.
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“Companies mostly listed on stock exchanges are much valued higher compared to their privately-held counterparts. This higher, although harnessed valuation can also have companies allowed to offer more flexible share options to their employees”(7th Generation Advisors). The companies on the stock market can make more money because of their ability to receive recognition from their positive stock growth. The stock market often hurts the economy through depleting many retirement funds, decreasing the amount of jobs, and increasing the amount of homeless people in the country.
There are many out there who agree that the stock market can damage lives and chances to live a happy and successful life. However, there are a select few who believe that the stock market is a great source of economic growth and a way for people to make extra money outside of their normal jobs. The stock market not only provides extra wealth for those who buy stocks and the companies involved in it, but it also provides jobs for the people who help run the numbers and work inside the actual stock exchange building. The stock market has a vast number of positive effects on companies that are involved in stock trading.
“Companies mostly listed on stock exchanges are much valued higher compared to their privately-held counterparts. Companies which are listed on any stock exchange are more recognizable than their privately-held counterparts” (7th Generation Advisors). The stock market provides a way for big companies to get their name out there more and become more associated with the general public. It also helps bring in another stream of income revenue to the company and provides for them a way to create more jobs. The stock market also has the possibility to help raise up more retirement funds for workers that are trying to work to make enough to retire peacefully when they get old and can not work anymore.
The 401(k) program provides retirement funds through the stock market when it is in a period of growth. “When equity prices soar, workers in 401(k) plans become richer and may be able to retire at a younger age”(Burtless). The 401(k) program can be extremely beneficial to those who are involved if the stock market does good. It can also help them make more money to put towards their retirement without having to work as much. This will help them to be able to retire much sooner than the individuals who are not involved in the 401(k) program.
Another benefit of the stock market to the growth of the economy is a big source of a company’s income in any given year. “Without stock markets, businesses would largely resort to borrowing huge loans – which must be repaid with interest- from banks or individuals with well-oiled pockets”(Green). Taking out loans is something that can cripple a large business in the long run because of the incredibly enormous interest on that loan. Therefore, the stock market provides a way to make vast amounts of money without having to take out any loans to grow their business. The stock market can also be a source of government funds in the projects that they create which in turn creates many jobs for the unemployed of the country.
Stock markets provide a trading platform for governments too. Sometimes a local, state or national government may need more money to develop a community housing estate, build a water treatment plant or initiate any other public projects. Instead of increasing taxes to raise the required revenue, it can issue bonds through the stock market. When investors buy these bonds, the government is able to raise the money it needs to launch various projects that can ease the cost of living or even create jobs for locals. In the long run, this improves the economy. (Green).
When the government does this, it helps decrease some of the taxes that they could make and raise enough money to create jobs and grow the workforce. All of this makes the economy grow through buying and trading stock in the stock exchange.
Although, there are many immense benefits to the stock market in the eyes of the prospective economy. There are by far, way more downsides to the stock market’s effect on the economy. For example, the stock market is a vote of confidence and when it crashes it brings the economy down with it. “If stock prices stay depressed long enough, new businesses can’t get funds to grow. Companies that had invested their cash in stocks won’t have enough to pay employees, or fund pension plans. Older workers will find they don’t have enough money to retire”(Amadeo).
When a stock market crash lasts long enough it forces companies to lay off workers and lower pay for the rest. This causes many people to lose their homes and much much more. In the crash of 1930 many lost everything that day and saw no hope of coming back so they killed themselves. The stock market is the biggest risk anyone can do with their money and oftentimes they’ll lose their entire life savings in a matter of minutes.
Falling stock markets, or bear markets, usually have the opposite effect. People feel pessimistic about the economy. Media reports about market trends can create a sense of panic. People start moving funds away from stocks into low-risk assets, which can depress stock prices even further. (Basu).
The media has a huge role in how the stock markets are viewed in the public’s perspective. Whenever these media advertisement come out about the stock market, people begin to freak out and withdraw their stock in the particular business. Which in turn causes the stock price to drop even further which forces the business to lay off workers and in some cases have to file bankruptcy.
This makes the economy lose even more money because of the loss of business in the country. As more and more businesses go down the question to ask is if having the stock market is even worth it. Sure it has some benefits to the people who can make money investing in companies involved but, the chance of a crash can be fairly high if people withdraw too much at one time. This is only some of the reasons why the stock market damages the growing economy.
Research proves that the people who invest in the stock market when it crashes they lose much more than they had in the beginning. For example, if someone were to invest in a business that appeared to be on the rise, but then it dropped severely without a warning they would lose a lot of money. In fact they could lose almost double of what they invested and it continues on down until they are left with absolutely nothing. This causes many to go into debt and lose their homes and their jobs. This problem was very evident during the Great Depression when everyone all over the country went bankrupt. It is also proven that when a country is struggling that the crime rates go up and many die in direct result of these horrific crimes.
The Great Depression was a time when street crime rates were through the roof and kept people in a constant state of panic and danger. The stock market can oftentimes create a perception of the entire economy as a whole. When the economy is in good shape then people are happy and invest in the stock market and the economy grows in turn, but when the stock market goes down then many view the economy as failing and they withdraw their investments from stocks. “Falling portfolio values can create uncertainty about the future of the economy. People hold back on their spending, especially on nonessential items. This slows down economic growth…”(Basu).
If citizens lose confidence in the economy then they will withdraw all of their money from the stock market, and it causes many people who work for those companies to lose their jobs. Then it just grows into a sort of snowball effect from there which makes the business go bankrupt, which in turn loses more jobs for workers. Then those workers lose their homes and have to live on the street just praying for a better day to come to change their bad luck. This sort of tragedy was very eminent during the Great Depression when the jobless and homeless rates were at the highest that had ever been in the history of the United States.
When people are desperate to provide for their families and keep their loved ones safe, many often resort to stealing and other sorts of crimes to make ends meet. This fact makes everyone extremely unsafe, especially our law enforcement officers who have to report to the calls of robbery. Sometimes these first responders are killed because someone was afraid of letting their family down and not getting food on their table. Then the poor officer’s family loses that family income and are forced out on the street where they could starve or freeze to death in the harsh nights.
In conclusion, the stock market damages many American lives each year and puts many families on the street to fight for everything that they have, all because of the failing stock market. In today’s economy the Great Depression could very well happen again if the stock market were to crash again. Many Americans have lost their retirement funds due to the downturns of the stock market because they are in the 401(k) financial program. Even though there are times when the stock market can help out struggling families make some quick and easy money, it can just a quickly take away everything that someone owns and has worked their entire life for.
In turn some turn to a life of crime to try and make it through and come back from their losses in the stock market. Something needs to be done with the stock market in order to make America safer from the possibilities of creating a second Great Depression. To make America a safer and better place for the rising generations, the stock market problems need to be resolved sooner rather than later.
