Help Jess. O understand stuff about economics/ business and such.

[AppleXY]

Grr. I am yet to complete my explanation

lol.

I was speaking about why the the equities market was existent in the first place.

edit: completed.

[jess3254]

Another question: What has caused the share market/economy to crash in the past couple of days? I don't quite understand.

Thanks

[Collin Li]

Short objective answer: malinvestment. The market invested in things that did not realise returns. This happens all the time, but it happened in a massive scale in the sub-prime housing market, where banks gave out loans to people who cannot afford to pay them back.

How this came about? Debatable. You'll have people arguing for tighter regulation on banks, but my view is that there were other incentives involved (for example, the supply of cheap credit into the economy by central banks)

[brendan]

Another question: What has caused the share market/economy to crash in the past couple of days? I don't quite understand.
Thanks

The most you will probably need to noe for VCE Econ is that a whole lot of people sold off shares in companies because people realized the companies weren't worth as much as they were before.

[costargh]

Jess doesn't do VCE Economics. She is just a keen admirer

[AppleXY]

The stockmarket crash basically rose from faulty credit based investments. This has caused a "chain-reaction" of business collapses.

[brendan]

http://freakonomics.blogs.nytimes.com/2008/09/18/diamond-and-kashyap-on-the-recent-financial-upheavals/