SHORT STORY This is a broad overview of the current conditions of economy, an attempt to connect the dots between money supply, rates, deficit, inflation, stock and bonds markets, and how a major change can affect different asset classes.
The conclusion is that the incoming crisis will more likely be a dollar/fiat crisis, rather than a major recession.
How easy do you think it is to predict a financial crisis?
If it would be easy, would bubbles and downturns be as big as they have been in the last 100 years?
Economics is not an exact science, and one it its fascinating mechanisms is that if you leverage a certain parameter, it will subtly affect the whole system as much as you stretched it. You will not see it, but its effects will build under the hood.
An R&D programmer of a game development studio once told me “our engine has become like a very tall sandwich, so that every time you try to add something in between its layers, some other ingredients will be pushed out, somewhere”.Uh, yummy, do you think you can add some more tomatoes on top?
In summer 2017 a friend told me “they say the next financial crisis would be much bigger than the last one”. As an enthusiastic investor in the stock market, I took that statement with lots of skepticism. But, also with the prices reached already in 2017, soon later I started looking into some indicators. Three months later I was looking for alternative asset classes, the most uncorrelated with the stock market, the best.
This is not an exact science, but many indicators are red flags and people should be informed that there is a concrete risk in keeping their money invested in certain assets.An Old Story that Never Saw a Real Ending
Proponents of an incoming financial collapse — or at least a downturn — have been growing in the last year, first among independent thinke...