Why the Stock Market is CRASHING! (2022 Stock Market Crash)

Now in today's video, we are looking at the stock market! Over the past couple of weeks there has been a lot of sell off due to high inflation! I hope you enjoy the video and any questions let me know!

What is a Stock Market Crash!

A stock market crash is a sudden dramatic decline of stock prices across a major cross-section of a stock market, resulting in a significant loss of paper wealth. Crashes are driven by panic selling and underlying economic factors. They often follow speculation and economic bubbles.

Why the market is selling off? 

High inflation rates tend to cause uncertainty and confusion leading to less investment. It is argued that countries with persistently higher inflation, tend to have lower rates of investment and economic growth.

Higher inflation leads to lower international competitiveness, leading to fewer exports and a deterioration in the current account balance of payments. In a fixed exchange rate, e.g. the Euro – this is even more problematic as countries do not have the option of devaluation.

Menu costs. – This is the cost of changing price lists.

Inflation and stagnant wage growth lead to declining incomes.

Inflation can reduce the real value of savings, which might particularly affect old people who live on savings. However, it does depend on whether interest rates are higher than the inflation rate.

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