Just in case you ever thought that the vagaries of the stock market had anything to do with the economic health of the country or anything to do with your life, look at the financial pages these days.
Economic Situation
I suppose you noticed, the world is in the middle of a disaster. And besides the humanitarian angle, we’re not doing too well economically either. Whole industries are shut down or scaled back to nearly nothing. Canada’s unemployment rate is above 10%, where last year it was under 7%. We have about a million less jobs than we did a year ago. We have to consider that most of the world is probably in worse shape.
Stock Market
And what’s happening in the stock market? Well, after a bit of a hitch a few months ago (a correction many economists said was long overdue) it’s rolling along fine, thank you very much.
The Obvious Conclusion?
I have been known to express this opinion before, but it bears repeating. The stock market has nothing to do with the real economy of the world. It’s like a bunch of gamblers standing around a penny-ante poker game, betting millions of dollars on who’s going to win.
Derivatives
And that’s not just an opinion. According to some statistics, 11% of the shares exchanged on the stock market worldwide are related to companies actually providing a product or service. The other 89% of the trading is based on predicting whether the stock market, or a section of it, is going to go up or down. Straight gambling.
A Closed System
The other thing to remember is that the stock market is a closed system. On average, worldwide production increases 3% per year. That means all the profits made worldwide have to come out of that 3%. The conclusion? If you make 6% on your investments, then it doesn’t take very complicated arithmetic to figure that somebody else lost 3%. And who’s winning, who’s losing? As if we need to ask.
A Rigged Game
It also helps to know that there are two ways to make money on the stock market. First, if you buy a stock and it goes up and then you sell, you make money. That’s the easy part. The second way is called “selling short.” If you buy a stock at the right price and somehow sell it at the right time (don’t ask me how; it’s all witch doctor stuff to me) you can make money on that stock too. So if you know what you’re doing, you make money when the market goes up and when it comes down. If you have the money to buy into the game and the smarts to play it right.
The Class System
It also doesn’t take much thought to see that this system benefits the super-rich. They’re the ones with the money to invest and to pay the experts to tell them where to invest.
It’s also useful to the middle class, mainly because everybody with a pension plan can put money aside and it will grow (slowly, but still grow) until they retire and start spending it. When a lot of people pool their money in a pension fund, they can afford to pay experts to manage it for them. If you can’t pool with others, you buy mutual funds, which work the same way.
And of course, if you’re in the lower class and have no spare change to get in the game, you’re doomed to sit on the sidelines and never get anywhere. You’ll work till you can’t work anymore, then exist on your government pension until you die. Which is why there are so many people in the United States who are so frightened that they will vote for anyone who tells them that he will fix it for them. Despite the fact that he is one of the billionaires who are most invested in keeping the system rolling exactly as it is.
The Bottom Line
Changing the stock market is no solution to this problem. The stock market is a symptom of the situation, not a cause. The problem can be ameliorated by regulating the stock market a lot more and tightening the insider trading rules. However, as long as our society continues to laud the winner-take-all attitude created by the winners, this is how it’s going to be, folks, with most of us staring with hungry eyes through the mansion window at the elite feasting on their ill-gotten gains.
(It’s 241 days until Karl Marx’s 203rd birthday, but 418 years since the Amsterdam Stock Exchange was created. Just sayin’.)