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Stock-Markets / Credit Crisis Bailouts Oct 16, 2008 - 09:53 AM GMT

By: Ian_Brockwell

Stock-Markets With the present system, a company´s worth is dictated by its stock value, which means even the best company can go out of business if its shares fall dramatically, regardless of whether it is profitable or not.


There are perhaps two ways in which this can be avoided. The first would be to restrict the purchaser of shares from selling them within a certain time period, thus eliminating the get rich quick speculator. Or alternatively, introduce a different method of valuing the shares. This could be done by estimating the real value of the company and dividing this by the number of shares issued. For example: If you bought one share at $10 (when the company was valued at $100 million), this would then be worth $20 if the value of the company doubled.

Such a system would still require Stock Brokers (or agents) to buy and sell shares for their clients, with the usual commission fees, but the value of the shares would be related to the real results of the companies involved. Shareholders could still sell their shares at an above market price, if there is a buyer willing to pay this figure (very possible for sought after shares), or sell at a lower price (and take a loss) if they wish to sell their shares quickly.

Investors can still make good profits, but they are more likely to choose companies that have a real chance of succeeding, and not one day wonders.

This is obviously an over-simplified suggestion, but in principle it could work, if those involved can be persuaded to adopt it (in some form). Clearly the bailout is not working, as most can see that this is only a temporary solution (benefiting the usual people again) and the "gamblers" will continue to destabilize the Stock Markets by "cashing in" their profits as soon as the shares look like they may be recovering.

If we can eliminate the gamblers and manipulators, stop printing money that can not be backed up by tangible assets, and stop encouraging people to spend money they don´t have, the economy will quickly recover. However, that would put the financial "criminals" out of business, so it is unlikely that we will see that happening. Unless of course the people bring this change into force, but that doesn´t seem very likely either!

By Ian Brockwell
http://www.Profindsearch.com

Ian Brockwell is the creator of Profindsearch.com and interests include writing, teaching, politics, climate change, UFO reports, businesses of all descriptions, medicine and generally trying to enjoy life. Profindsearch is a very small search engine, which hopes to be a Google one day! (We can all dream)

Ian Brockwell Archive

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