E What To Do If The Stock Market Crashes?

There are warnings in the airwaves about a collapse of the Stock Market on March 15—or any time in the future.

What to do then?

There is a flip side to the set of considerations that I advanced a short time ago around the fact that there is almost no real wealth at all behind the three trillion of zeros accumulated in the Stock Market since the last election.

The flip side, the positive side, is this: No real wealth will be destroyed, if the Stock Market crashes. And the issue is not if, but when the Stock Market crashes.

When the stock market crashes is a question of great interest to individual players. Those who cash in in time will go home with a bundle.

Individual investors, who are determined to remain in the market until it might be too late, have some serious calculations to make: They have to determine what is the most they can lose without being utterly ruined.

Individual people can also find some sense of security if they—in time—make a run for gold. Since the price of gold has its own outstretched gyrations, what type of security is this? And there are many more objections to this false solution. First, what security is obtained if all other people around us are ruined. Then, what type of security is there when coming out of the bunkers one finds the entire structure of production and organization of society destroyed?

The individual alone can at best save himself. Real security, long term security, can be acquired only through the community as a whole. To adopt Benjamin Franklin’s warning, "We must, indeed, all hang together or, most assuredly, we shall all hang separately."

There are two actions that the community, the community represented by—and led by—the Federal Reserve System (the Fed), can immediately take before the crash. Quite apart from doing what it is planning to do with interest rates, the first, most urgent deliberation is to shut the lending door down, to shut down all lending destined to purchase any form of financial assets.

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Gary Anderson 4 years ago Contributor's comment

There is something about the Fed that makes it go in the same old directions over and over. The Bank of England is much more interested in attempting to help the real economy and the average citizens of the UK in a downturn. Since the elected representatives are beneficiaries of helping just the few, the Fed can be secure in knowing none of this effort to help the real economy will ever become law.

It should become law. If the BOE can do it why can't the Fed? Yes, the Fed has additional responsibility to provide liquidity to the world, but, killing small and medium business, by withholding credit, ultimately hurts the larger economy.