06 August 2011

The ebb and flow of capitalism

So the FTSE-100 has fallen dramatically over the past week and umpteen billions have been wiped off the value of shares. Does it matter?

Well, obviously, it matters if you are an investor who happens to own some of those shares. But perhaps it matters less than you think. If you have to sell your shares, now or in the immediate future, you may experience a stonking loss (depending of course on the price which you paid for them - and many will have paid less for them than even today’s reduced price ). But most shareholders will hold on to their shares. Sooner or later (and it may be a year or two), the market will return to the levels of last month. Not that you will ever see headlines proclaiming that umpteen billions have been added back to the value of shares. But the market will eventually rise again.

As for the rest of us, the fall in share values may affect the private sector pensions of those due to retire in the near future. But, otherwise, calm down. The world is not coming to an end (unless you happen to live in Greece, or Portugal, or Spain, or Italy - but that’s another story.)

We have enough real economic problems, such as potentially increasing unemployment and real declining standards of living, without investing too much concern in capitalist shareholders.

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