Stock markets are made to have their ups and downs. After all, the United States bounced back in the 1920s after a decade of Depression due to what is recorded as the first stock market crash in the world, and for a brief moment in the 1980s, it was thought that the stock market in the States and in a number of countries wasn’t going to recover from another nosedive. Playing the numbers is a risk, even in a gentleman’s game like the stock market, and whether it’s Hong Kong or NASDAQ, analysts have a difficult time of predicting exactly what’s going to happen. One thing’s for sure, though: no one quite knew what was coming in 2008.
While those scientists of the stock market might have just been bewildered, regular people all over the world were more like stupefied. With so much faith in global economic systems, including the overall stock market, and the understanding that governments are supposed to have a series of checks and balances in place to avoid potential catastrophe, the grim dismal situation was first met with disbelief by regular people.
The world stock market’s value has been estimated at close to seven hundred trillion dollars, with the role of the United States economy in that market significant, at around forty trillion dollars. However, the last year or so has been a see-saw ride of recovery, with times looking up and times looking extremely dismal. Entire countries have been bankrupted through the cause and effect of foreign investments. Famously, the entire country of Iceland, a small island nation with only two or three national banks, managed to lose the entire country’s savings just because of the faltering power of the dollar and the Euro in unison.
While in the past, the markets might not have been tied together as strongly, with globalization in all areas, especially business, things are a little different now. Markets depend on one another because nations depend on one another. Nations do a great deal of business, relying on one another for markets and raw materials, but more importantly, companies invest in each other’s markets.
Part of the reason that the last crash impacted so many countries worldwide is that, instead of simply investing in national markets, many different investors of all tiers go outside of the country to other markets around the world. With an already fuzzy business of regulation, it gets even more confusing when people are working through international banking institutions.
Unfortunately, in the past ten years, that hasn’t happened fast enough. With the real estate market booming in the United States, a number of different companies represented on the floor of the New York Stock Exchange by hordes of high-strung brokers were dealing in mortgages that the borrowers could never have possibly paid back. When the banks and mortgages houses finally got wind of what was happening, everyone made such a fuss about backing away quickly that the economy went right with them.
It wasn’t just the market, but the banks, that played a part in the latest near-collapse. With so many banks folding left and right, not just in the United States but in many European nations, and even as far away as Asia, federal governments had to scramble. In some countries, like Iceland, the federal government couldn’t bail out the banks and outsiders had to step in, while in the United States, the government now owns shares in Bank of America, like it or not, and BoA has been an integral part of taking over other failing banks.
Playing the market has always been a little bit unpredictable, but the recent events are truly unprecedented. While regular people reading the newspaper might feel as though they have missed something significant in their inability to process recent current events in the financial sector, the fact of the matter is that it is baffling things were allowed to get this bad.