Last week, the United States’ stock market was on a rollercoaster ride. Stocks plummeted, then soared, then stabilized. Some people panicked. Some calm and collected folks didn’t blink an eye. A large chunk of the population probably didn’t even notice anything out of the ordinary.
But we should start noticing, especially we future educated citizens. College kiddos, we need to understand what is going on in the stock market and world economy.
Wall Street faced an unexpected loss early Monday, Aug. 24. The Dow dropped 1,089 points, surpassing the Flash Crash of 2010. Basically, at this point people are freaking out. In an extreme case, we could be looking at a serious stock market crash.
No need to fear: a week has passed and the U.S. stock market has once again stabilized as much as a stock market can. But why this sudden drop happened is important. It all has to do with the stock market on the other side of the globe.
China’s Black Monday sent world economies reeling. It is the second largest economy in the world, and while its stock market is more controlled than ours, its crash shows maybe China isn’t as strong as we thought.
Now let us use those educated minds and remember that China is a Communist country. In some world history class, we probably learned that communism and free trade don’t go hand-in-hand. Basically, the Chinese stock market exists for the extremely wealthy to have some fun. When things start getting rocky, the Chinese government finds the money, floods the economy and balances everything out. This is how they got so lucky in 2008 and 2009 when the rest of the Western stock markets crashed.
China’s stock market in the past few months has some really smart economists a little worried. Maybe China doesn’t have as strong an economy as everyone thought.
Why does this matter to you? While the U.S. does not depend solely on foreign trade with China, we do lean heavily upon the Chinese economy. As of June 2015, the U.S. debt to China was $1.272 trillion. We also rely on the country for its cheap production for goods that we sell in the US and abroad. If China starts to fail, the U.S. will suffer as well.
Any kind of recession leaves young adults in a vulnerable spot. For those joining the real world, jobs will be scarce. Money will be tight, so any job you get will be paying you less than what you need to pay back your loans. And the government will come hounding after the money you owe it.
It’s a scary economy out there. College students need to start understanding the world they are about to be thrown into, to know what they might be facing. And for those of us who are still clueless, we’re in luck. There’s time to sign up for economics classes.
The worst thing you could do is know you are not educated on the economy and all the ways that it could affect you and do nothing.
*Disclaimer: Dominique is not an expert on economies and trade. She only just started macroeconomics and cannot yet explain to you why or how the economy actually works. Money management and having more than $80 in savings are the most elusive mysteries to her.
