Stock Market Tumbles - 600 Billion Dollars disappears!
The stock market in Shanghai recently took a tumble (9% down), what was interesting was the next trading session in New York repeated the action. Why? Because both markets are hugely linked. The economic growth in China is the heartbeat of the world current economic growth. China is growing so fast that the rest of the world is struggling to keep up. Thus when China's growth sees a stumble the rest of the world - including America takes note. What will now be interesting is to see how China responds to New York's drop. As America is China's largest market anything that might slow America's economy, will scare China and vice versa.
What has brought about this situation. When one billion people within a decade go from being 'peasants' (in terms of wealth not intelligence) to modern consumers it going to have a massive impact on the rest of the world. Factor in that India as well is trying to expand rapidly as well (thanks to being the new I.T. center of the world) and you have a huge drain on the worlds resources (hence the resource boom in Australia and other nations and the increase in the price of just about everything - particularly oil). What is surprising is that rampant inflation hasn't yet exploded, but it is bound to come.
These limitations have meant growth can't continue forever. Further to understand the stock market, despite the brokers assurances that the markets can be predicted, history of the stock market has shown huge unpredictability. Despite the fact that computer programs run much of the markets and decisions the fact is world stock markets are controlled by one thing "Human Emotion". That's why we often see slow long term growth and then explosive drops. Also factors like 'stop losses' (where people sell shares once the price drops to a certain point to try and realize any gains) mean the stock markets have a history of massive drops, even in the space of a day or a week. 600 billion dollars were taken off the U.S. stock exchange and where N.Y. goes the rest of the world follows. Australia's stock market likewise opened to a fall today and the dominoes will continue around the world. The real question now is will China rebound or will the "FEAR" set in seeing more falls and the world sink into recession or even a depression.
If this happens you or your neighbor will lose their job. What will you do? Have you learnt to have financial freedom?
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