No one has yet given me a clear, straightforward answer. Perhaps you can and will.

If a company wishes to issue new stock, I can see why the price of its existing shares would be a concern. I also understand that shareholder happiness or unhappiness would influence the salaries and perks of top management.

To the economy in general? In all likelihood, I am purchasing the stock from some other individual or institution, and not a penny goes to the company itself. Unless I am overlooking something, it would seem that the stock market serves three functions and three only:.

It is a way for a start-up company to raise initial capital or for an existing company to increase its capital through the issuance of new stock. The stock market does serve to distribute wealth and, presumably, risk , and that is a matter of no small importance. I have a truly terrific idea that will enable me to hire thousands, prolong life for millions, make me rich, and contribute to the U. The idea is The Lipo-Friction, a no-money-down sturdy home stationary bicycle for the overweight that generates electricity.

My ability to grow this fabulous firm depends on what? First and foremost, my ability to raise enough money to give it a fair shot. So, I better round up the usual suspects: The answer to your question, I hope, is beginning to emerge. Suddenly, my cost of capital goes up, because my share price is going down. The competition knocks me out.

Substitute GM, GE, AIG — any firm — and you see the importance of stock price to companies, and to the economy. Support the kind of journalism done by the NewsHour Become a member of your local PBS station. PBS NEWSHOUR WATCH politics.

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