i don’t want to take false credit for this, as it was actually the idea of an acquaintance of my father’s, but this is a really interesting idea. what if, when the stock markets opened on monday, everyone in the country bought just one share? would that be enough to boost our economy? how could we get people to do this? is this a good idea?
Our economy is not based on the stock market. The stock market is an indicator of the perceived future value of various companies.
The economy grows when production increases (as indicated by the GDP). A recession is indicated by a period of zero or negative real GDP.
So to answer your question, no. Each person buying a share of stock will not help the economy.
One share of what?
KellyM, one share of any stock they wish.
msmith537, i know that a recession is measured by GDP, but just as the GDP affects the stock market, can’t the stock market affect the GDP? you said the stock market is a perception of future values of companies, and if everyone bought into the companies, wouldn’t the actual future values of the company go up?
There are ~240 MM people in the United States.
The NYSE and the NASDAQ each do that volume before 11:00 each morning. So the answer is no.
All you’d have is a bunch people owning one share of a stock that they bought at the offered price on Monday morning.
Now here’s the bigger question. What if Americans suddenly changed from net spenders to net savers? In other words, if they actually consumed less than they earn, instead of vice versa.
In the short run, it would almost certainly mean a long, nasty recession, since it’s consumer spending and home buying that are barely keeping the econony out of recession now.
But over the longer run, the increased supply of capital would probably make for more innovation and thus economic growth.
watching the news tonight, i saw financial experts urging people to buy stock. some people are even announcing their plans to buy large amounts of stock, such as at this site.
are these people stupid? are financial experts aware that this will do nothing, as i have read here?
This isn’t a serious proposal, but just wondering.
Since it’s consumer spending that keeps the economy running, what if everyone went out Monday and bought something they normally wouldn’t, with a minimum value of around $10 - $20. Would that do the trick?
No. Take the dot-coms for example. The stock price was driven up to unreasonable levels. There was no way that earnings would ever catch up.
The stock market is only relevent if you have invested in a stock. The most important thing needed to keep a company healthy is to maintain a positive cash flow. As long as it does that, fluctuations in the market don’t matter that much.
Kind of a simplification, but you get the idea.
Our GDP is around $6 trillion per year. One $10 purchase per person is somewhat short of $3 billion, or less than 1/2000th of the GDP. Drop in the bucket.