Why is the stock exchange so important?

Whenever I read about the financial crisis I notice that reference is always about shares and falling indexes on financial markets, and I am not an expert but I gathered that subprime caused the crisis together with the artificial value of stocks which vanished in thin air but my question is why should we rely so much on the stock exchange? If they rise and fall after 2 or 3 or 5 years again will we be subject to the whims of traders who are like kids playing with colossal amounts?

Public Comments

1. To answer your question, the stock market is so important because so many Americans have their retirement investments in it.

2. Stock prices are a good indicator of what the market (i.e. all the people who buy and sell shares) thinks will happen to business and industry in the future. If the market is confident that business will do well, they will buy more shares and be willing to pay a higher price for them, because they believe they will get a better return on their investment - either through dividends (the share of a company's profit that you get by being a shareholder) or through selling on the shares at a profit in the future. If the market thinks businesses will perform poorly, they will want to sell rather than buy, and be willing to sell at a lower price. The current low share prices tell us that the market thinks that most businesses will do badly.

3. The stock exchange is not really important at all. It's just used as a control measure to keep the general population under control. Right now it's being used to condition us to think and act in a certain way.