RALL: Here's to the Next Stock Market Crash

Recently, the nation's financial markets went off on a wild roller-coaster ride, leading many analysts to wonder if the Nineties bull market was finally coming to a grinding halt. Mutual funds and institutional investors began to withdraw their holdings, a move which could make the next crash even worse. Securities issued by underachieving high-tech companies were hit especially hard, and news that a package bomb was probably responsible for the deaths of 230 people on TWA Flight 800 did nothing to reassure owners of jittery transportation stocks.So, is the market about to collapse? One can only hope.The most recent Wall Street crash, in October of 1987, had a number of positive results.First, urban property values were decimated, allowing twentysomethings to consider buying homes for the first time. In New York City, for instance, from 1987 to 1991, the average sale price of a new home plunged by over two-thirds. During the 1980s, baby boomer-driven real estate speculation drove up the age of a typical home-buyer from 24 to 32 nationally. Now that that trend has reversed, the American dream of home ownership is again within reach of young adults.The implosion of the real estate market also caused rents to slump from the absurdly inflated levels of the mid-1980s. In 1988, I was lucky to find a two-bedroom apartment in Spanish Harlem for $1,450 per month; by 1991, my rent could have legally increased to $1,720 under the city's rent stabilization laws, but my landlord considered himself lucky to get $1,200.Since the early 1990s, the runaway stock market has driven another round of real estate speculation that has put thousands of people on the streets and squeezed wallets all over the country. Another market correction is long overdue to restore sanity to rents.It's easy to forget that the majority of Americans are renters, not owners. Even for those who are wealthy enough to own their own homes-and make no mistake, owning a house indicates that one enjoys relative wealth-a drop in property value is no big deal. It's a paper loss, one that only affects you when you want to sell. As long as you're willing to stay put, you'll still have a place to live. Besides, there's always the option of refinancing at the new lower interest rates that invariably result from cyclical downturns.Another social advantage of stock market crashes is their leveling effect. Our economy is transforming from a ladder of different income class levels into a two-tiered income structure. According to the newly-released United Nations Human Development Report 1996, 358 billionaires control wealth greater than the combined annual incomes of countries that have 45 percent of the world's population.Meanwhile, three billion people make less than $2 a day. As report co-author James Gustave Speth says, "An emerging global elite, mostly urban-based and interconnected in a variety of ways, is amassing great wealth and power, while more than half of humanity is left out." Here in the United States, 20 percent of workers earn an average income of $5,814 per annum.Contrary to corporate propaganda, most Americans don't own stocks. Over 80 percent of stocks, bonds and options are held by huge institutional investors-the few employees who participate in mutual funds or 401(k)s do not keep a significant percentage of their savings in such securities. When the market crashes, the super-rich suffer, not average citizens. So in this zero-sum, us-versus-them economy, the super-rich's loss is everyone else's gain.It is true that, in a recession, some companies will have to lay off employees due to the fact that they can't fund their operations by borrowing against their share values. But by far the largest layoffs from 1981 to 1994 took place in the years before and after the 1989-1992 recession, because in a bull market the drive to maximize shareholder value is driven by fierce competition for investors. As we've seen for nearly 20 years, working for a profitable company is no guarantee of job security-in fact it often means the opposite.Stock market crashes also offer a number of subtler benefits. The recent "cocooning" trend -- in other words, spending quality time with friends and family -- is a positive symptom of the desire to put relationships with other people ahead of the pursuit of higher credit limits. That began in the last recession.But most satisfying of all is the sense crashes provide of mythic retribution against the arrogant rich. Watching the gods of capitalism humbled reminds us of the arbitrary nature of success and the danger of believing your own hype. The further those 358 billionaires fall, the harder I laugh -- so bring on the crash!

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