Black Tuesday?

Damn, the stock market was pwned today. And I use that gamers’ colloquialism in the non-ironic sense. The stock market took a huge beating (I don’t even want to disclose how much I lost, but it wasn’t pretty). The sell-off was a result of huge downturns in the Chinese markets. The Chinese markets gained 100% over the past year on rampant margin trading (where people borrow money then invest the money they don’t actually have). Actual growth in China’s economic indicators did not gain 100% in a single year. So, earlier today, the strong centralized Communist government in China (correctly) realizes that there is a huge problem with their stock markets, and that they are going to crash very hard in the future because all of the numbers are based on unsubstantiated growth. Thus, the government of China steps in and says they’re going to deal with it.

What happened next was inevitable. The Chinese markets fell nearly 10% in a single day of trading on rumors that margin trading will soon be limited or banned outright. It was a correction on the false 100% growth of the previous year. Unfortunately, large downturns like this send ripples through the international markets, so all of the European and American indices took heavy losses as well. Which is how the Dow lost 400 points today.

What really annoys me is that months of slow and gradual growth can be erased in a single bad day. It never works the opposite way. The stock market never “suffers” huge jumps.

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