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The issue is 80% of investors are retail/ mom and pop investors. Not banks, funds, etc. Likewise most stock is purchased on the margin with loans leveraged agai
by valarauca1 11y ago
The issue is 80% of investors are retail/ mom and pop investors. Not banks, funds, etc. Likewise most stock is purchased on the margin with loans leveraged against potential (and expected) growth of the stock. This is literally what happened to the US before the Great Depression. Not only are people losing their life savings, but they're immediately shackled to debt they have no means to pay off.
So now a larger number of brokers/banks are tied to toxic debt, which is in a quantum of state of both being/not being an asset (if you think it is the crash of 2008 wouldn't have happened). While I doubt we will see bank failures (The CPC will step in), it will resonant.
- holdenc 11y agoThe timeline for the rise and fall of prices has been very fast. For example, if the US stock market indices double in price tomorrow then fall by 50% a week later how much worse off are we? Yes some people are getting hurt by this, but not as much as if the run-up in prices had been more reasonable.
- TheGrimDerp1 11y agooooh margins! So it's gonna be more like USA 1929 or 1907...
- tptacek 11y agoAccording to the Economist, a very small fraction of Chinese households are invested in the stock market.
- valarauca1 11y ago<1% of Americans owned stock when the market crashed in 1929. But its slightly beside the point. The depression was more triggered by a perfect storm of incompetence/environment debt. -Hawley-Smoot Tariff did not work at all, and made things MUCH worse. -Farmers burning their crops in protest of rock bottom prices post crash instead of selling them. -The Dust Bowl worsened the situation greatly. -Wide spread bank failure.