How is recession in stock market?

In 80s recession, how does the stock market collapse drag economy down.?

• As far as I know, everybody put their saving and funds as investments into stock market. Where did all the stock market money go?

• Answer:

  When stock markets collapse, a large number of people, households, firms, pension funds etc lose a great deal The value of their individual and group wealth falls substantially and suddenly. They therefore need to rebuild their wealth through fresh additional savings. They feel having become poor and therefore save more. Firms do not find many investors to invest in and buy their shares and therefore cannot raise adequate money for their new or expansion business ventures. With lower and lower demand for consumption goods and lower and lower investments in capacity, the economic activities decline with lower absolute level or lower growth of employment. The moneis going wawy does not arise. You bought a house for $1000 and sold it later at $900. The money of $100 did not go anywhere. It had in the begining gone to the person from whom you bought the house. You had a house that you bought at $1000, its market price rose to $2000. But you did not sell the house at that time as it was your residence. No the property prices fall by 40% to &1200. You lost $800 in value. There was no money involved and nothing has gone any where. You are simple valuing your house at a lower price now.