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What would happen if the economy hit ROCK BOTTOM!!!

Discussion in 'The Economy' started by rjc79, 30th Sep, 2008.

  1. rjc79

    rjc79 Member

    Joined:
    18th Jun, 2008
    Posts:
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    Location:
    adelaide
    I got thinking today, what would happen if the economy died so badly, Banks had no money, sharemarket was dead. millionaires would lose all their money, the whole way of life as we know it would completely crumble. Nobody could access money, where would we go from there, how would you possibly recover from that? Inflation was that of Russia in the early years.

    Hypothetical, but if?
     
  2. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi RJC,

    Interesting question.

    IMHO, banks will always have money as people want to get interest for their money. If people stash their cash in the mattress they won't receive any interest and their money will be eroded by inflation.

    Basically it comes back to risk and return, if depositors believe that the banks are riskier than the returns they will get (anywhere between 0.01% to 7.5% or so) then they will take funds out (ie, having runs on banks) which has happened in the UK and US.

    One of the staff today asked me what would happen if the index dropped to zero. I explained that this was highly unlikely and explained how the index was made (weighted averages etc...) and that the All Ordinaries Index (close to the S&P/ASX300) started in January 1980 at 500. If the index dropped to zero it would be anarchic!!!

    Cheers,

    Dan
     
  3. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    If it did the majority of us would be unemployed....:eek: