Reply #24: ECONOMY 101

[fuzzyball]

There are two types of employers in the country.

1. Those who produce something useful to us, be it a gadget or service.
Examples are Automobiles, Cell phones, Clothes, Food products,
Computer software, Airlines, Trucking, Tax preparation, Hospitals,
Funeral services etc. These are mostly for profit outfits.

2. Those who impose tax on above and provide services for the public
such as IRS, Medicare, Social Security, Defense dept., Police,
Fire protection, Jails etc.

In order for those in category 2 to be able to function effectively
requires that those in category 1 be thriving entities. The more money
and profits by group 1 means more money is available to group 2.

In order to set up, expand, and maintain goods and services producing centers
requires capital. The capital can be obtained in mainly 3 ways.

1. The owners of the enterprise contribute their personal money
2. The enterprise can borrow capital by issuing bonds.
3. The enterprise can raise capital by issuing stocks which represent
proportional ownership in the enterprise.

The 1st item is limited since individuals do not have enough capital
to start a large enterprise.

The advantage of the 3rd method above is that the enterprise does not have
to pay the principal amount back. Bonds, when issued requires paying not
only interest but the face value of bond has to be paid back upon maturity.

Now getting back to your question how a rising stock market helps....

If a company's stock is high, they can issue ADDITIONAL STOCKS at the
higher price and raise more capital to expand, which means hiring more
people. If stock is selling poorly on the open market of stocks known as
Wall street, the company will not be able to raise significant capital.

Therefor a rising stock market is the primary engine for expansion and
job creation.