Hacker News Reader

HNHacker News

Top New Best Ask Show Jobs

Comment by acchow | Hacker News Reader

Parent Full thread

acchow·

The stock market is not the economy.

View on HN

Capital markets are crucial indicators of economic activity

Only because we use them as indicators of economic activity.

When stock markets plunge people panic and that panic is what causes economic instability. That's what causes issues. Economics is purely a product of human minds acting in unison or opposition.

I think it's the other way around, no? People panic, and then sell their equity.

I think it's both. That is, it's a feedback loop. Some people sell their stock, so the market declines, so more people sell their stock, so the market declines more, so more people sell their stock...

For this to happen, though, enough people must be thinking that the market is poised for a big fall, so they're on a hair trigger, ready to sell right at the start of the drop.

It basically is. It represents the state of capital investment, which as it is turns out is important in a capitalist economy.

The stock market would not be the economy in say, a Marxist system.

For a counterexample see Brexit. The FTSE 100 went up after Brexit, when other economic indicators were negative, because it primarily contains large multinationals which are insulated from the local economy.

So a stock market index is only correlated with the local economy if there are few multinationals.

Well, arguably the FTSE went up because the pound plummeted.

Reply on news.ycombinator.com