What would happen if the stock market system were entirely dismantled?

[Skidmore]

Serious question.

[StrongBad]

1. Um

Businesses wouldn't have efficient means of raising capital. That would essentially grind the economy to a halt or collapse.

That's the first main drawback. Of course people wouldn't be able to make money either haha...

[BushOut06]

3. How did we ever get by without a stock market?

:sarcasm:

[Sanctified]

8. Most people worked in Agriculture.

I think we have had a stock market since the 18th century.

[StrongBad]

17. Feudalism. It was fun!

Maybe we should go back to that?

[Skidmore]

4. Like businesses are so efficient in raising capital....

what did people do before there were these stockmarket pits to be mined?

[kenny blankenship]

9. Debt is the "alternative" to equity

before joint stock companies, for-profit enterprise was characterized by sole proprietorship or partnerships. (Think, Scrooge & Marlowe - they own the biz outright with no other stakeholders, and are personally liable for every cent of company debt) When those businesses needed money, beyond their own savings, to expand they would have to borrow from a bank, or a deep-pocketed person acting as a private bank, or they had to take on a partner who had the cash ready to put into the business.

I just want to add that policing the stock market is a good idea, but "dismantling" the stock market is not. Stocks are much more of a "democratic" means for capitalization of business than debt. Along with policing against the inevitable insider trading abuses, it's also important to police our political and financial system against the rampant creation of asset inflation bubbles. The government and central bank should not become a GUARANTOR of profits for stock speculators. The market crashes hardest when it has been prevented from correcting itself by central bank intervention in the past: that fosters a "can't lose" attitude among investors, who become overly bold and speculative, rather than cautious about what they invest in.

[StrongBad]

11. Then only the rich could own a business

Since incorporation is the process by which capital is raised for business owners, unless you have millions of dollars in your pocket to start a business, you can't start one.

So, in essence, the stock market is pretty necessary in a fair and equitable economy.

[Dora]

7. Wouldn't that only effect certain businesses?

Those businesses being the one that want to raise capital by selling "shares" in the company to the "public."

Many other business are run for years, and make a lot of money, without ever going public.

[StrongBad]

13. Well stock is still issued even if the company is not publically traded

But, the alternative to incorporation of a business to raise capital is a partnership or sole proprietor business...both of which just requires you to put up the money yourself or get it from a partner directly.

There are many legal benefits however for an entrepreneur to start a corporation as opposed to a partnership.

[Wcross]

2. Businesses would find it difficult to raise capital.

Serious answer.

[Skidmore]

5. Some businesses should be made to find it difficult to raise capital....

take for instance, Enron and a few others like it.

[StrongBad]

15. Well nobody would invest in a poor business like Enron anymore so your point is moot

Businesses don't just magically receive funds buy incorporating they need investors a.k.a. stock purchasers to do so. And obviously if you're an unethical corporation who runs business poorly you'll find no investors to finance you.

[SoCalDem]

18. Enron was considered to be a GREAT company, until

their books got a close looking-at..

The LACK here is in regulation/scrutiny.

As long as the ones at the top are able to spin away their troubles, and hide their scandalous bookkeeping, while they skim off the profits, we'll have problems.

In the "small world", if you own a business and you spend more than you make..you go out of business.. in the BIG world, you just shake down your employees, lay some off and borrow more and more money :eyes:

[Skidmore]

21. That was my whole point. That a company like Enron would not receive

investments. It was an unethical company run poorly and the people who worked for it and invested in it would have been better served if monies hadn't been so easy to scam through the mechanism of the market.

[Squatch]

6. Dogs and cats would start sleeping together.

In short: the end of the world.

[Davis_X_Machina]

10. Get a copy of Braudel's...

The Structures of Everyday Life: Civilization and Capitalism 15th-18th Centuries.

You're talking about the 'before' picture.

[ben_meyers]

12. The elimination of private equity markets

Would permit the State to rightfully control which forms of commerce to allow to exist. Complete Government determination of what is good for the people. Central control and planning of the economy so that everyone has a guaranteed job and end to poverty and suffering. No evil overlords, no elite upper class only power to the happy workers. From each according to their means, to each according to their needs.
Works every time it's tried.

[Skidmore]

14. Leaving it to business to determine what is good for people has brought

us a whole bunch of defective and harmful products, is limiting agriculture and restricting the natural foodbase, and polluting our world. Can't say that private equity markets and the free traders they spawn are equally desirable.

[Squatch]

16. You forgot the sarcasm tag...then again, you really don't need it.

Good post.

[LoZoccolo]

19. No one would really know what to pay for shares of corporations.

I met someone a few years ago who would trade things like fruits and vegetables (not really futures, but actual product) by making phone calls. He'd find out someone had X number of Y at $Z price, and find out someone else would pay more for them, and profit off the discrepancy. So if you think that people who trade stocks are parasites (they're not; people who buy and sell are creating liquidity) what do you think of what this guy does whose job it is to make phone calls and hope that buyers don't know where to get the vegetables he's selling them?

[1monster]

20. I'd lose my retirement fund, which, although it is not much, it is all I have to

ensure at least six months of worry free retirement... or maybe three months worry free retirement barring any medical emergencies which takes even that.