Bear or Bull? The Fragile Global Economy and Stock Market

Anyone who plays the stock market is first instructed to understand that things are not going to stay the same way the whole time. Investing in a stock market means a tacit understanding that there will be ups and downs. The downs may last a long time, but it’s the ups that are important. After all, many rich families were made off of a wise investment here and knowing when to, for lack of a better phrase, hold them and knowing when to fold them. It’s always been a risk to play the stock market, regardless of which stock market it is, but the world seemed to have largely learned how to avoid any crashes that would truly do a number on economics throughout the world.

No one has been more confused about recent events in the global economy than the numerous consumers in various countries. It truly came as a surprise to people all over the world when global markets started tanking in October of 2008, mostly because after other near-misses in the global economy, it’s mystifying to think that something could go on for so long and end so poorly.

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.

One of the reasons that the last stock market crash led to a global stock market crash is that industry is much more international now than ever before. Large corporations don’t simply do business in a single country: they are located on numerous continents, trading in more than one stock market, and generating large revenue by conquering the global market. Thus, if investments and capital are tied in on such a wide scale, it’s no wonder that something that upsets the balance of one or two markets could continue to ripple and have such a far-reaching impact around the world.

It’s not just the economy, either. Many investment companies have recommended branching out from one’s home country and trying various markets around the world. When the American dollar is the base of so many financial interactions and it starts to slip, it takes a whole lot of value and wealth along with it.

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.

The most recent mess was further helped along by people bailing out immediately, with no concern for local governments stressing the importance of the system keeping participants. Many banks in Europe and the United States tanked or were on the brink of tanking, requiring extensive government bailouts that are doing their own personal number of large nation’s economics, and thus, the global economy as well.

While many people chalk their confusion of recent economic events up to simply not understanding, the fact of the matter is that even those people who understand are surprised at the turn that events have taken, and at how far markets were allowed to fall before government stepped in to intervene. While playing the stock market used to be a pastime worth recommending, now is not a good time to start in with investing, regardless of if the market turns bear or bull.

Damian Papworth loves stock market trading. It is a big element of his work from home income.