What affect does mass selling of stock have on the economy?
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It all depends on the economic conditions, but stocks always fly too high or sink too low leading for opportunity to buy long and to sell short.
My view is mass selling/shorting of stocks due to speculation really isn't an issue for growth. Though it does tighten the credit market and make it harder to finance your company, especially if your company stock is undersubscribed.
Generally I believe stockmarket activity is symptomatic of any economic indicators, thus why it is so profitable to news trade!
Wealth and money never disappears, in fact they are always pumping in extra money into a financial system in order to ward off a credit crisis.
So who earns the money you would ask, well mainly the institutions as they usually hold the orders to stock trades and can see whether the crowd is generally buying or selling a stock, this is why it is very risky playing the stockmarket game.
Money/Credit never disappears, only gets harder to access it.
The Interest Rate as you know is the price of money...
When you are thinking about write-offs, money doesn't really disappear, it just means that their product is no longer worth as much as they thought it did.
Once upon a time ago I used to think write-offs and bankruptcies meant money just disappeared, but generally this didn't seem to be the case, someone had earned money on that trade, similiar to selling a stock short.
Yeah, you could have a win-win situation where you trade something that the other person doesn't have, but price wise you one of you is going to have an upper hand compared to the other.
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