askchapo

So when people talk about "the value of the stock market" they're doing an extremely dubious bit of reasoning where they're taking the recent transactions and multiplying by the number of stocks. When the stock market surges or collapses some small fraction of those stocks are being sold at higher or lower prices than they were recently. That's it, no money is made or lost except by the sellers comparing historical buy price, and sale price modified for dividends, inflation, and opportunity cost.

Naively stocks, being a portion of legal right to the profits and assets of a company, might be expected to track the actual productive capacity of a company +/- material assets and debts. They do not do this, they are 100% speculative vibes. If the vibes are good people might want to buy for more in the future so line goes up. Bad vibes? The line goes down.

Money is made real by trust that others trust that money is made real. That society is functioning enough that if I do a thing for you or give up some material asset, I will be able to later claim some service or asset without needing to ensure I am made good now. That debts need not ever be made square because the structure of mutual indebtedness is sound.

So when the line goes down or up, because everyone believes this is extremely important, it does affect people's trust that money means what we thought it meant moments ago and this has an effect on people's willingness to give loans or do work expecting that future returns will mean something then. This is like potential future money though, it's not like underneath stock exchanges a group of robed individuals ritually burn some dollars while a single tear rolls down their cheek.

If you're thinking: "This is dumb, this is so fucking dumb. We could just ignore stocks and do productive things for each other and the social compact would hold without this insane and precarious system" well... yes.