Pandemic vs loss of wealth in stock market
The way stock exchanges tumble when fear or disaster looms ahead is unbelievable. What was a sign of confidence in the future is replaced by freight in the short term and people lose life's earnings, particularly individuals in this process.
But isn't it avoidable?
If I am the policymaker I would the following to protect the long years' hard work and wealth built up by individuals in such situations.
When such an act of God like a pandemic or disaster of an earthquake or tsunami-like natural disaster hits the entire nation and its economic activity, the policy could be :
1. Its exactly like a virus hitting the computer system, disabling the same. A restart needed and a snapshot of the condition prevailing at the time crisis hit preserved so that one can recover from there. So freeze the market at the moment and don't allow trades till normalcy is restored. Then markets opened to find their own levels.
2. The interests of individuals wealth very important. During the crisis for those who need to have ready cash for sustenance and who need to encash stock, with a limit of say USD 20k per month or some appropriate amount like Rs 1 lac for India, an emergency trading window kept open limited only for that purpose with prenominated Federal agency or willing Major financial agency who buy that stock at that frozen price level. But when markets reopen, within a week of opening whatever the revised price levels for the stock so bought by the supporting agencies, if sold at loss or gain, the net loss if any, is guaranteed to be paid by a disaster management fund guaranteed by Fed.
3. This process protects the markets from needless upheaval and stands to reason too. The societies in turmoil fighting for existence and for life, are not in sound condition to operate the market in a rational manner.
4. The relief package voted by the Congress or the parliaments of the nation will then be used in a focused manner while protecting the national wealth too.
5. The world should act as one and all governments could enter into an agreement to follow this policy so that the world needs not to suffer some imaginary loss of wealth which essentially quantifies fear of unknown.
5. The period between freezing and restarting of stock market exchanges be treated as "dies non" for all purposes of interest due calculations in accounts all over the world.
Wish a serious debate occurs in financial circles to work out the pros and cons of this approach.
But isn't it avoidable?
If I am the policymaker I would the following to protect the long years' hard work and wealth built up by individuals in such situations.
When such an act of God like a pandemic or disaster of an earthquake or tsunami-like natural disaster hits the entire nation and its economic activity, the policy could be :
1. Its exactly like a virus hitting the computer system, disabling the same. A restart needed and a snapshot of the condition prevailing at the time crisis hit preserved so that one can recover from there. So freeze the market at the moment and don't allow trades till normalcy is restored. Then markets opened to find their own levels.
2. The interests of individuals wealth very important. During the crisis for those who need to have ready cash for sustenance and who need to encash stock, with a limit of say USD 20k per month or some appropriate amount like Rs 1 lac for India, an emergency trading window kept open limited only for that purpose with prenominated Federal agency or willing Major financial agency who buy that stock at that frozen price level. But when markets reopen, within a week of opening whatever the revised price levels for the stock so bought by the supporting agencies, if sold at loss or gain, the net loss if any, is guaranteed to be paid by a disaster management fund guaranteed by Fed.
3. This process protects the markets from needless upheaval and stands to reason too. The societies in turmoil fighting for existence and for life, are not in sound condition to operate the market in a rational manner.
4. The relief package voted by the Congress or the parliaments of the nation will then be used in a focused manner while protecting the national wealth too.
5. The world should act as one and all governments could enter into an agreement to follow this policy so that the world needs not to suffer some imaginary loss of wealth which essentially quantifies fear of unknown.
5. The period between freezing and restarting of stock market exchanges be treated as "dies non" for all purposes of interest due calculations in accounts all over the world.
Wish a serious debate occurs in financial circles to work out the pros and cons of this approach.
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