The History of the Stock Market

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The History of the Stock Market

Once there was a time when “shares in business corporations were rarely bought and sold because few companies were considered promising financial profits” (Blume 21). That is hard to believe considering almost everybody has invested in some stock today. The stock market went through some distinct changes since its inception, and has evolved into a shaping force in the world today. There is one idea that sparked the fire which produced the stock market: capitalism. Everything the stock market is, and was, rooted in the basic idea of capitalism. Without that idea, stocks and bonds would never have come to be.

Capitalism is an “economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market” (Peterson). When a person buys a stock, that means they own a part of the company in which they invested. The average person can thereby invest in a public company and receive a piece of that company's success, or failure. This process helps not only the smart investors, but the companies as well. The investors' money must go somewhere, and that place is the treasury of the company they endorsed (Simonson). The company then uses that money for its financial needs, providing the company an income in addition to simple sales profits. Then, the investors make or lose money based on how much that company makes. Basically, people invest in an idea, and make money based on how that idea performs in the real world (Blume 35-39). While the stock market is based upon capitalism, this type of enterprise was shunned by the community in 1792 because of financial panic (Blum...

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...inflation. This caused stocks to tumble. Real estate and fixed income became the prominent assets. From the 80's on, the market has enjoyed many years of prosperity, with the 90's being the decade of largest market growth. However, none of it would have been possible if it weren't for the lessons learned in the 1920's (Brown 90-107).

Learning from the past is very important, and a great example to learn from is the crash of 1929. We caught the monopolies before they became too out of control, but failed to stop the small investor from driving the market down (Sharp 210). We must learn from history to make sure we never make the same mistakes that Wall Street made at the turn of the century. However, nobody can predict the future; with the rise of new types of stocks, online trading, and faster riskier trading, are we setting ourselves up for yet another fall?

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