What if there was no stock market?

stock-market

if there was no stock market then there would be no regulation ,and almost entire market would be in doldrums. without it you cant hope to expand or do your business

EnumaElish

Strictly speaking, the Fed is a quasi-private bank with independent policy-making powers. The "Fed system" is subject to congressional oversight, not executive oversight.

http://www.federalreserve.gov/pf/pf.htm

Re: the stock market, in a deterministic model of investment and economic growth, the equilibrium interest rate (in real terms) is equal to the real growth rate of the economy, and that's like the OP's idea of "people's bank" offering x% on all investments (net of inflation). Those models break down when you introduce uncertainty and risk.

Simple Minded

I'll be honest, my name says it all. I don't attest to have the education that most of you have published on this thread. I work in the financial sector and couldn't argue most of the points on this thread. The thought of a market without a "stock market" or the "communist" ideals of a constant rate (9% or whatever) versus the a free market appear to be complete.

What if we revised the question and simplified it a bit, which is ironic because that would be the basis of my new question. What if there was no centralized exchange of stock? No more centrally traded mutual funds, ETFs, or other complicated investment vehicles that are invested with 401K's, IRAs, Pension Funds, etc.

Who would suffer?

Companies could still attain capital through "private" equity and correspondingly investors could do the same; and both at market rates. Would investors become more focused? Would investment horizons become more "long-term" and less speculative (quarter to quarter)? Would companies suffer for that, or thrive? Would these Stanford Grads have difficulty raising funds for a search engine? Did they need a centralized stock exchange to get public funds for a product that was so superior at the time they issued public stock?

BWV

[QUOTE=SystemTheory;2513382]. The Capitalist culture of economic growth is based on the reduction of nature at the prevailing interest rate. [quote]

no, growth in a capitalist economy comes from the employment of energy, specialization of labor and technology. It is not necessarily a reduction of nature any more than a hunter / gatherer or agrarian economy is

Nature is not an entity - it could give a flying f*** about biodiversity

not correct because the distribution of the gains in real GDP are not, nor should they be, shared equally. If I create a cure for cancer that creates a trillion dollars of wealth in the global economy (through reduced medical costs, recovery of lost productivity etc) and I get 10 billion dollars for my effort, no one has lost


interest rates are based upon inflation, risk of not being paid back and the opportunity cost of capital, nothing else. They have nothing to do with environmental destruction - pre-capitalist economies have been responsible some of the worst environmental destruction through deforestation, overfarming, overgrazing etc. A capitalist economy allows the wealth necessary to have the scientific infrastructure to even understand ecology in the first place

WhoWee

I just found this thread.

The stock market is quite different than a casino.

A casino takes your bet - and you either lose or win - then you repeat.

The stock market is a place where cash is used to purchase an equity share of stock - that is ownership - in a company. This company has been weighed and measured and held to great scrutiny by Government regulators and independent auditors. The equity investment may increase or decrease in value and might pay a dividend. If the company loses money -the investor is not required to cover loses - although the investment may lose value.

Without the stock market - it would be nearly impossible for investors to participate in capital markets.

Tosh5457

Why such a social sciences sector's rat like me haven't seen this topic before, I had the same question as you in my mind

When you're speaking of stock market, you're referring to the primary or secondary market, or both?

On the primary market a company does its IPO, and raises the funds. The secondary market, which is the market we all hear about, only serves to provide liquidity to the investors who bought on the primary market. Who would buy a company's stock if it was difficult or impossible to sell it later? That would be a very big risk. But the secondary market also has influence on a company, because de-valuations on a company's stock results in a loss for important shareholders (those who vote) and that may lead to other problems I guess, but I don't know much about that.

So basically the speculators' role is to provide liquidity, and nothing else. They don't contribute to investment directly, only indirectly. If it wasn't for them (in the context of the stock market), it wouldn't be so easy for companies to get funding in the primary market. But of course, speculation brings financial instability, and that's a pretty big problem.

ON your suggestions of the bond market:
Seems right to me, but I don't know if the risk would be too big for the companies to get acceptable interest rates though. But no secondary markets, or a restricted secondary market, would also mean that cash would mostly be used to borrow, to invest or to consume. There would be no money used on unproductive "investments" like speculation.

WhoWee

In order for a security to be registered it must meet financial reporting requirements that help investors make informed decisions. A buyer of junk bonds (that's where this conversation is heading) will make a decision based on a prospectus - a snap shot in time. Once purchased the only indicator of investment performance will be receipt of payment.