Learn to Earn by Peter Lynch & John Rothchild

Author:Peter Lynch & John Rothchild
Language: eng
Format: mobi, epub
Publisher: Simon & Schuster Paperbacks
Published: 2013-11-05T17:29:16+00:00

Buying Shares on the Stock Exchange

If somebody asked you to name five institutions the country couldn’t live without for a month or two, what would you say? The military? The police? Congress? The courts? Electric companies? The water department? Hospitals? Close your eyes for a minute and make your five choices, without looking at the next paragraph.

Did you include the stock market or the bond market in your list? Most people wouldn’t. Wall Street doesn’t immediately come to mind when we think about essential services that give us food, gas, lodging, and a dial tone, and keep the robbers from the door. But the truth is that the financial markets are very important to the well-being of the entire population, and not just the owners of bonds and stocks. The White House could give itself a month off and the world would go on, but without a stock market or a bond market, our whole economic system would seize up.

A company or a person that needed to sell stocks to raise cash would be out of luck, because without a market, there’d be no buyers. The government, $5 trillion in the red already, would have no way to sell bonds to cover its expenses, the way it normally does. It would be left with two choices, both bad. It could print tons of fresh cash, cheapening the value of the dollar and sending prices through the roof, or it could stop paying its bills, leaving millions of Americans without their main source of income. Companies would go bankrupt and banks would go bankrupt. Mobs of people would rush to the nearest branches to rescue their money, only to discover that the banks had run out. Stores would close, factories would close, and millions of people would be thrown out of work. You’d see them wandering the streets, searching the Dumpsters for half-eaten pizzas. Civilization as we know it would come to a quick end, and all because the markets shut down. So these markets are much more important than we give them credit for. We couldn’t survive for long without them.

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