Problem

Disruption of financial markets

Other Names:
Stock market crash
International collapse of stock exchanges and bourses
Nature:

Stock market declines and even crashes are the result of more investors offering stocks for sale than offering to buy stocks. Investor sell stocks because they believe that their price will decline or their returns will decline, i.e. dividends will be lower because of decreasing profits, increasing interest rates or depreciating corporate assets.

Incidence:

Stock market crashes affect even those who do not have direct investments in stocks. Many people who do not own shares have an indirect stake in stock exchanges through their investments in pensions funds and insurance companies. If they don not invest, the companies work for probably do, which means there is less money around to pay for wage increases or jobs.

Claim:

A financial crash on the stock markets temporarily dislocates economic activity, disastrously effects those whose incomes and wealth are based on financial assets, reverse government policies aimed at selling assets to finance current spending, frighten away small or nervous investors in markets, and dramatically demonstrate the risk in market investments including private pension schemes.

In the months and years before the great crashes or 1929 and 1987 a large number of people and institutions were in the market only because it was going up, and they aimed to get out before it went down. The overwhelming factor was greed, which turned suddenly into fear.

Problem Type:
D: Detailed problems
Related UN Sustainable Development Goals:
GOAL 12: Responsible Consumption and Production
Date of last update
20.05.2019 – 15:35 CEST