What would happen if...

[tabbiewolf]

Fun with random things that occur to me out of the blue and with no sense of justice implied (I mean that seriously, I am NOT being sarcastic believe it or not):

What would happen if the stock market ended? NOT in a terrorist act, or the power all went out and everything had to stop like Hurricane Sandy the other year, but...it just ended? Everything cashed out, everyone got the money they'd already invested/earned/etc., but there was no more stock exchange?

I suppose I'm talking about the New York Stock Exchange and NASDAQ specifically, but obviously stocks are something that happen worldwide. For the sake of my argument, let's keep it in the United States.

I really don't know enough about economics to even predict something like that, but it would be interesting to see how a capitalist society like we very much are would react to something like that happening.

Comments

[oldhans117.livejournal.com]

Well the top 10% of people in the USA hold 80% of the stock so it would be a massive reorganization of our society as all that locked up wealth flowed out.

[tugrik.livejournal.com]

Related, here's my probably very naive idealistic I've had in my head since about high-school age:

I don't think that people should be allowed to make money by simply having money. The idea that once you surpass a certain quantity your 'money works for you' and makes wealth just for existing seems like an exploit in a poorly written video game system. One creates, works, helps, advises or simply 'does' and makes money in return. Contribute to society, get compensated since we use a money system.

It just feels so wrong to know that if I could pool up a few million dollars and put them in the right investments I could make more money than I do now by simply sitting on my ass and letting my money do all the work. And yet that's how our entire society is built.

[stokerbramwell.livejournal.com]

Well, the thing is, that's kind of an inherent property of money itself. Investment has been a thing since looong before the stock market, and it long predates this particular society.

The only way you could do anything about it would be by coming up with a system which didn't use monetary incentives at all.

[firesplace.livejournal.com]

Have you ever read _Your Money Or Your Life_? It's an older book that's been re-released with various updates over the years, so I'm sure some edition can be had at the local library. Among other things, it talks about how folks of more modest means can attain the same financial freedom of having their money work for them, thus allowing them more flexibility in their employment. I thought it was an interesting read!

[indeterminist.livejournal.com]

Absolute chaos for about a week, then settling into a new equilibrium where instead of a central market with minimal spread you have individual traders taking advantage of all the newly-created arbitrage opportunities. The wealthy have enough scale to hire for it to be cost-effective to hire agents to seek out good trades, while all the individual people with just their own retirement account would lose most of their value overnight because of how illiquid it would become.

In reality some other exchange would pop up almost immediately and after a chaotic transition pick things up, but I'm pretending whatever got rid of other ones also prevented new ones.

If you also want to get rid of stocks entirely, then suddenly nobody owns any corporation in America any more. Whoever has the most influence available quickly takes control of them to the detriment of all smaller players, which most likely means the heavy hitters with the most existing influence over politicians get an even bigger piece of the pie than they already do.

Fun stuff!

[indeterminist.livejournal.com]

Also I'm not really sure what's meant by "everything cashed out." If you have $1000 in Disney stock, that means you own a piece of Disney that other people would be willing to buy from you for $1000 at the current moment.

If you want to change that into $1000 of cash, you sell it to somebody else and they give you cash. Each trade is a zero-sum game, so unlike a casino there's no "house" to change everybody's pieces of companies into cash.

[fenris-lorsrai.livejournal.com]

Yeah, there's no fixed value for a stock. Unless its one that pays a dividend or you have so much of it you have a controlling interest in the company, the value is entirely in its PERCEIVED value which can change due to any number of reasons. There's general long term trends in perception, but day to day, your average stock is only valuable is other THINK it is. so its basically just like any other collectible with no inherent worth, only perceived worth. It's generally easier to convert into cash, due to the stock market, than your Star Trek collector's plates, but its still only WORTH what someone will pay for it.

[tabbiewolf.livejournal.com]

That's really what got me thinking about this. Companies are valued, on a VERY basic level (and in my completely unschooled frame of thought), on imaginary money.

When you think about it -- and again, I'm totally uneducated when it comes to this kind of stuff -- it's kind of completely ridiculous. But it's been going on a LONG time.

[fenris-lorsrai.livejournal.com]

It's why most people that play the market lose. Only the house and dealers make REAL money.

In many ways its the "classy" version of horse racing. you're just betting on a financial race rather than horses. This horse will perform better than other horses! It will make me money when I decide to cash out! which is basically what MOST trading is where people buy and sell quickly.

Buy and HOLD is a totally different strategy and the daily reporting on stock market is completely and totally irrelevant to it.

But buy and sell is all a bet that if you buy it NOW you can sell it for more later. and it could be for virtually anything. The permit price just DOUBLED in a year on CO2 permits in the Regional Greenhouse Gas Initiative permit auction (to a whole $5.03)... because investment banks started buying up permits on assumption they'll rise in value as the other 40 states try to come into compliance with 2030 C02 goal.

They aren't exactly the same as stocks since eventually they COULD be used, but the bankers are betting the price will behave just like a stock and they can turn it around for quick, and poorly regulated, cash. Of course once it hits point where people feel like cashing out, you'll see sudden crash in price again and it'll start over. Just like other commodities, which have similar boom bust speculation cycle.

Stocks are just even more volatile than commodities because there's nothing that really corrects the market EXCEPT public perceptions. Commodities are EVENTUALLY consumed and replaced with new ones. Stocks can stay in circulation for decades... or centuries.

my mother has one stock she inherited from HER mother that's probably getting transferred to me as part of estate because she's hold it so long there's no way to sell the damn thing without losing all the value, plus still owning more taxes on top, so its unsellable. so literally only thing that allows a legal transfer of the damn thing that doesn't cost more than "value" of it, is it being revalued at death. which is all based on "perceived" value.

yeah, it makes a negative amount of sense. BUT THAT'S FINANCE.

[tabbiewolf.livejournal.com]

While I'm perfectly okay with complete economic chaos for the fun of it, I guess I mean by "cash out" is that you get back what was put into the market when you invested. Which I'm honestly not sure we actually have records for, but I assume something similar must exist in one of the multiverses. Basically it would be a "it's not an economic disaster that will cause us to plunge into post-apocalyptic chaos" because that's not what I was aiming for. I think.

It could also just mean "companies pay out whatever they're currently selling for" or "put the traders in a money cage" or "let's buy everyone a ball pit" or something similar to the hunt in It's a Mad Mad Mad Mad World. This was done purely as a "I am not really going to think this through further than I have to because this is not something that will happen in my lifetime" thing, but I wanted to hear what other people thought of the concept :)

[indeterminist.livejournal.com]

It's kind of like imagining people getting "cashed out" of their house. You could track down the person they bought it from and force them to buy it back, or even track all the way back along the owners since the original builder, but then you end up with the original builder having a house they don't want and suddenly having to come up with a big pile of money they probably already spent.

A stock exchange is just the middleman that hooks up person A that wants to sell X for $1 with person B who wants to buy X for $1. Each trade is one person selling something to one other person, so like with the house example if you want to undo a trade that means it comes out of somebody else's pocket.

[dalesql.livejournal.com]

There would be massive confusion, and pretty quickly some other mechanism would arise to satisfy the actual basic function of the stock exchange. That real function is a more or less central place for people to buy and sell ownership in companies. The problem is that this basic function has had this huge additional edifice of 'finance' built on top of it. then greedy people sneak into the system and run it with no regard for anything but personal gain. See Messrs Ponzi and his imitators. Also, these other finance people would go to their pet congresscritters to recreate their comfortable niche in the economic ecosystem

I absolutely agree that the whole financial industry needs to be taken out and put to work doing something productive, like cleaning out pigpens with their hands. The news media is very complicit in propping up the edifice of finance. The finance industry in all its facets generates vast amounts of statistics that people like Bloomberg have specialized in collecting, analyzing and selling the results. These results are actually useful to a relatively small number of people who work in the industry. But they are reported widely to the general public as important daily news as if they actually were measurements of the US economy. So this adds unjustified gravitas to the whole wall street money juggernaut.

Some wall street trader does not create wealth via his or her work. The farmer growing a crop creates wealth. A worker welding a bridge together creates wealth, an artist or designer creating something that never existed before creates wealth. A scientist discovering a new useful thing creates wealth. All that wall street does is allow ownership of things to be traded around, and for the inventor to sell a portion of his new idea to get the capitol funds needed to build the factory to turn his idea into wealth.

[firesplace.livejournal.com]

You know, that sounds like a question they'd do on the Planet Money podcast - they tackle a lot of questions like this! I listen to 'em a lot for that very reason.
In fact, they just did an episode on what would happen if all the banks went away.