Two days ago, a small friend asked a very interesting question, why do you think the US stock bubble will not burst now?

We have to wait for interest rate hikes to prick the global asset price bubble and trigger a global financial crisis.

The reason is very simple, because the rise in interest rates caused by inflation is the most important factor behind pricking the US stock bubble.

Speaking of which many people have asked this question, in this article we will focus on why the interest rate is so critical.

01 interest rates and economy

First of all, we have to figure out what the interest rate is and what it has to do with the economy itself.

The interest rate, in popular terms, is the price of money. In a certain period of time, the level of interest rate represents the cost of using capital.

So what determines the interest rate, the cost of the use of funds?It is determined by the supply and demand of funds in the market.

At a time when the economy is growing rapidly and it is easy to make money from investment, there are naturally more people who need money.

At this time, everyone needs to invest money or loans to make money, so naturally there is a strong demand for borrowing money.

At this time, when you go to borrow money, you will feel that the supply of funds is small and the demand is high. Then the cost of borrowing money from others is naturally high.

Older people may know that banks gave you about 10% interest on deposits in the 1990s, not to mention the loan interest rate.

This is largely because at that time, when there was less supply and more demand in the market, it was relatively easy to make money, so people would borrow money to invest at such high interest rates.

When economic growth slows and it is difficult to invest and make money, there are fewer people outside who need money.

Because when it is difficult to make money from investment in all industries, there will naturally be fewer people willing to invest.

If no one needs to borrow money, it means that there is more supply of money and less demand, and the cost of borrowing money from others is naturally low.

The most typical is the mature society like Europe and Japan. Banks use very low interest rates and want to lend money to people to invest or do business.

But even if interest rates are low, most people still don't borrow.

Because debt is rigid, you can't invest money when you borrow money. Why borrow it?

At present, interest rates in China are much higher than those in Europe and the United States, and it is also because at this stage, the profit margin of our industry as a whole is higher than that in Europe and the United States.

This means that under the same circumstances, it is more profitable to start a business in China than to invest abroad.

This is why we can see that a large number of foreign funds pour into China every year to invest in setting up enterprises.

In addition to setting up businesses, there are many large institutions that borrow money from places like the United States and Japan, where interest rates are very low.

When the exchange rate is stable, as long as the spread between China and the United States or between China and Japan is large enough, they can deposit risk-free interest in the bank.

If they catch up with the appreciation of the RMB, they can earn not only interest spreads but also appreciation gains by buying RMB and selling US dollars.

02 the relationship between interest rate and GDP

When you see here, you should understand:The level of interest rate is essentially the price of money borrowed in the market over a certain period of time.

The price of borrowing money on the market is essentially determined by the supply and demand of funds on the market at that time.

What determines the supply and demand of funds in the market? Is the actual growth rate of GDP.

GDP growth rate not only represents the actual wealth accumulation rate of the whole society, but also affects the supply and demand of funds in the market.

The reason is very simple: when wealth accumulates quickly and there are more opportunities to make money in the market, more people will borrow money to make money, and the demand for funds will be strong.

If the economic speed slows down and it is very difficult to make money in the market, who will borrow money to make money? the demand for funds will naturally come down.

Since the growth rate of GDP represents the speed of wealth accumulation in the whole society at a certain stage.

That also means that the growth rate of GDP determines the level of interest rates that can be paid for the wealth created by society as a whole during this period.

As we said earlier, in the 1990s, if you borrowed from a bank, the interest was always in double digits.

Why do people still have loans in this situation? Because of the rapid growth of GDP at that time, the wealth accumulation rate of the whole society was much higher than the level of interest rates in the market.

Although people earn 10% interest on loans, they may earn 20% a year, so they dare to borrow money in this case.

Why have the interest rates on loans from banks become lower and lower in the past two years? In fact, it is also because GDP growth has slowed down.

The rate of return on capital is limited by the wealth growth rate of the whole society, so it can not give such high interest.

Someone here wants to say that when the economy is growing fast, if the price of capital is high, then if we print more money, the interest rate will be cheaper. Why didn't you do that at that time.

Because money can not be randomly printed, money itself is only the general equivalent, is the medium of commodity exchange.

Money itself is not real wealth, physical goods is the real wealth, the total amount of money issued is actually restricted by the production capacity of physical goods.

The central bank controls the total amount of money we usually spend from the point of view of issuance, and this total amount is controlled by the production capacity of physical goods on the market.

In other words, the total amount of money issued by the central bank in a certain period of time must correspond to the physical goods on the market.

The reason is also very simple: too much money is issued and the production capacity of physical goods can not keep up, which will lead to soaring prices and inflation, which will threaten the stability of the country.

At this point, maybe many people still don't understand. Let's take the familiar Fisher formula as an example, and it will be clear.

We know that the composition of the Fisher style is MV=PT, where M is the total amount of money, V is the velocity of money, P is the price of goods and services, and T is the capacity of goods and services.

In a stable economy, the velocity of money is usually constant. When the money supply increases, the MV product on the left side of the formula becomes larger.

The production capacity of goods and services cannot be expanded rapidly in a short period of time. In order to maintain the balance between the two sides of the formula, only the price of goods and services can become larger in the short term.

This means that after the central bank printed money, prices skyrocketed on the premise that the production capacity of goods and services could not expand rapidly in the short term.

Previously, if the production capacity of goods on the market was 100, in the case of you printing 100 yuan, the price of each commodity was 1 yuan.

If the production capacity of physical goods on the market remains unchanged and the number of money printed becomes 10000, the price of each commodity will rise to 100 yuan.

That is, your hard-earned money, because of the large amount of money printed, the purchasing power depreciated to 1% of the original.

Who can bear this? ordinary people worked hard to save money for a long time, and finally turned into golden coupons. If anyone still has the mind to work and create wealth, the society will not be out of order.

We have specifically talked about the story of Golden Yuan coupons in this article "Taiwan Stock Market Bubble" before. If you are interested, you can take a look at it.

It was said in the article at that time that old Chiang Kai-shek did a big printing of golden vouchers before liberation to pay for the war expenses.

At that time, the Kuomintang government overprinted gold coupons, which eventually led to the collapse of the economy of the Kuomintang-controlled areas. in fact, it was the same truth.

Therefore, in the final analysis, the amount of money issued is determined by the relationship between supply and demand in the market, and it is also restricted by the production capacity of physical goods.

How much physical commodity production capacity is on the market and how much investment capital is needed. Taken together, these factors ultimately determine the amount of money supply and the level of interest rates.

If you understand this, you should understand.The production capacity and value of physical goods are the real wealth and the most benchmark thing.

Whether the amount of money issued in the society is excessive, or whether the price of securities assets is bubbling or not, can be judged by this benchmark.

This is why Buffett likes to use the securitization ratio of GDP to measure the degree of bubble in the US capital market.

Because GDP itself represents the production capacity of physical goods and services. Using GDP as the benchmark to calculate the securitization rate is too high, which means that the stock market bubble is huge.

03 lower interest rates are a major trend

As we said earlier, the interest rate itself represents the price of money and the cost of capital for the use of the money at a certain stage.

Why add the attributive of a certain stage? Because for a long time, with the passage of time and the continuous development of society, the cost of capital is constantly declining.

Here we can look at a picture from Paul Schmelzing, a history researcher at Harvard University.

The man looked through numerous materials and counted eight countries in the United States, Britain, Germany, France, the Netherlands, Italy and Japan. It was only after 700 years of data that he made the following picture.

The early data in the chart are mainly based on bank lending data. Later, with the emergence of the concept of state, more and more use of sovereign debt interest rates.

First calculate the average interest rate of each country each year, then adjust it to the real interest rate according to the level of inflation, and finally calculate the overall interest rate according to the weight of GDP.

The above colored lines are the regression lines obtained by selecting different lengths of time.

The eight countries, the United States, Britain, Germany, France, the Netherlands, Italy and Japan, were chosen as the benchmark because they accounted for 80 per cent of the world's total GDP in the past 700 years.

It can be seen that real interest rates fell by an average of 0.0175% a year in the 700 years from 1317 to 2018.

Why is it that real interest rates keep falling? Because what is directly related to the long-term interest rate is the wealth accumulation rate of the whole country and enterprises, and the average profit.

It can be seen that the wealth accumulation rate and the average profit are in a downward trend with the development of society and the passage of time.

Let us give a simple example here, and we will understand it.

If it is very profitable to open a restaurant now, the average profit is 15%, and the interest rate on bank loans is 5%.

The end result must be that many people go to the bank for loans and pour into the restaurant industry.

Because when you open a restaurant, you earn 15% of the profit, and if you repay the bank loan with 5% of it, you can still have 10% of the profit.

For a long time, because of the 10% interest rate spread, more and more people will join the restaurant industry.

Eventually, the industry will be turned into a red sea, and profits will continue to drop until the average profit of the catering industry is killed to 5%.

In this way, there will be no more newcomers to do the restaurant, because at this time the barrier to entry becomes higher, and only the veteran or head company can make a profit.

If the average profit reaches 5%, some people will continue to cut prices, and the profit of the industry as a whole will be killed to 1%.

According to this profit margin, it means that after a year of hard work, it not only fails to make money, but also deducts 4% of the bank's cost of capital.

Catering practitioners are not stupid, ah, if this situation continues, most people's rational choice is to close the shop and find another way out.

In this case, the entire catering industry will gradually pick up profit margins from 1% because of fewer competitors.

When it picks up to a certain stage, as long as it exceeds the bank lending rate of 5%, people will start pouring into the industry again, repeating the previous cycle.

Although the example we give here is a restaurant, if you switch to any non-monopoly industry with market-oriented competition, you will come to the same conclusion.

Because from the bottom logic, in essence, there is no big difference between the industries with market-oriented competition.

As long as there is no monopoly, everyone is in market-oriented direct competition. With the continuous addition of competitors, the final profit margin of the industry must continue to decline.

Here, if you have experience of doing business in different industries, you will find a rule that works well in any industry.

Most industries start out with high profits. In the later stage of development, it will gradually decrease, following the average profit of the industry.

In theory, the average profit margin of the industry would be infinitely close to the bank interest rates on the market at that time.

Or take the bank interest rate as the central axis and fluctuate up and down.

This is what we said earlier, the average wealth accumulation rate of the whole society is roughly equal to the GDP growth rate of the country.

Here we can also see that the pricing standard of interest rates in a certain period of time is actually the GDP growth rate of this country during that period of time.

04 how does the interest rate regulate the economy

When we understand this, we should understand that a country can adjust the heat of investment and economic development through the level of interest rates, that is, the price level of capital.

If the country feels that the economy is overheating and starts to raise interest rates, raising the current interest rate from 5% to 8%, that is to tell you that start-ups will quit without 8% profit.

This is tantamount to raising the cost of capital to discourage over-investment in low-margin industries.

If the country feels that the current recession needs to be stimulated and cut interest rates to 2%, it is telling you that it does not matter if the profits of start-ups are lower.

Now that we are in a recession, we pay more attention to employment. As long as we can solve the problem of employment, 2% of the profit can be done.

This is equivalent to reducing industry access by reducing the cost of capital to maintain employment during the recession.

By adjusting interest rates, that is, the price of capital, during an overheated recession, the state can adjust the speed of investment and economic development.

After the COVID-19 epidemic, in order to stimulate the economy, western central banks implemented a very radical monetary policy. In addition to the substantial release of money, there has also been a sharp cut in interest rates.

Many countries have cut their benchmark interest rates to 0.25%, 0%, or even minus 0.25%.

The root cause is that the COVID-19 epidemic has led to economic stagnation, and the central bank reduces industry access by reducing the cost of capital and spends money to maintain employment.

When the epidemic was at its worst in March 2020, we did a video to talk about it.

Why is it that money is printed every time the economy shuts down?

Looking at the picture, we also know that the US federal interest rate is now at an all-time low close to zero, with little room for decline.

Later, as the economy recovers, it is almost inevitable for the Fed to raise interest rates gradually, because inflation is coming.

As we said in "inflation is followed by debt collapse", central banks will be forced to raise interest rates to a certain extent, eventually pricking the bubble.

05 foam visible to the naked eye

Since we say that raising interest rates will prick the bubble, there must be a bubble first. We think that the current bubble is already visible to the naked eye. The global asset bubble will burst around the beginning of next year, led by the collapse in US stocks.

At present, by any measure, US stocks are already in a bubble, and the bubble is quite big.

For example, if you look at Buffett's favorite stock market valuation indicator, the bubble is already obvious.

Let's also talk about the significance of Buffett indicators here by the way. And why Lao Ba likes to use this index best as a measure of bubble.

The Buffett index itself uses the real wealth of GDP as a benchmark to calculate the degree of securitization of the real economy and the degree of bubble in the capital market.

The calculation of this indicator is also simple, dividing the total market capitalization of the US stock market by the total GDP value of the US dollar.

The reason for using this indicator to measure is also simple: GDP itself represents the actual wealth created by a country.

The total value of the stock market represents the corresponding monetary value after the securitization of the actual wealth created by a country.

In a mature country that has completed the securitization of physical wealth, the ratio of the total market value of the stock market divided by GDP is actually a measure of the bubble degree of a country's physical wealth.

As can be seen from the chart below, this indicator broke the peak set during the last dotcom bubble in 2019.

If you have done some statistics, you will find that:

Valuations of U. S. stocks are now well above their peak during the dotcom bubble.

This is true whether it is measured by the price-to-earnings ratio, the price-to-sales ratio or the price-to-book ratio, or the securitization ratio calculated on the basis of GDP.

The above indicators all indicate one thing:The US stock market is now grossly overvalued, greatly deviating from its ability to create physical wealth.

Therefore, the bursting of the US stock bubble is inevitable, and it is also inevitable to lead the world into the financial crisis after the burst.

Why is the bubble so big this time?

Someone here must ask, why is this bubble so much bigger than it used to be?This is because of unprecedentedly low interest rates and the flood of water after the epidemic.

In middle school, everyone should have learned a law of value. This law says that market prices fluctuate up and down around value.

Usually people use the degree of expansion of market prices away from the basic value of assets to measure the size of asset price bubbles.

So the bubble that we often talk about is simply the degree of expansion of the market price after it is separated from its basic value.

When the market price deviates too much from the value, the so-called price bubble will be formed. Now we often hear about bubbles, usually talking about asset price bubbles. So how did this big asset price bubble come into being?

For a long time in the past, major countries in the world have kept lowering real interest rates in order to stimulate their economies, resulting in a continuous reduction in borrowing costs.

In the context of low interest rates, market participants will increase investment and asset purchases and increase the demand for investment and assets.

The reason is also simple: if the loan interest rate is 6%, then assets or investments that generate 5% profit are bought and sold at a loss.

If the loan interest rate is reduced to 3%, these assets or investments that can generate 5% profit will instantly become popular and will be snapped up.

In addition, starting from 2020, major central banks around the world released a flood of water to save the economy after the COVID-19 epidemic on the basis of keeping interest rates low.

The result is:The valuations of the major capital markets around the world, led by the United States, are much higher than in the normal interest rate environment, passively blowing up a bubble.

The reason is also simple: whether interest rates remain low or money is flooded, it will lead to stronger investment demand and lower return on investment requirements.

Here we calculate the return on investment required at different interest rates, and we will see what is going on.

However, in order to understand the return on investment, we must first introduce a concept of price-to-earnings ratio.

The so-called price-to-earnings ratio is to calculate a value by dividing the total amount of your investment by the annual return on this investment.

This value is the price-to-earnings ratio, so the price-earnings ratio is calculated as the total investment / annual return on investment.

It can be seen here: the price-to-earnings ratio represents the number of years you need to recoup the investment.

Here we can also see that the reciprocal of the price-to-earnings ratio is actually your annual return on investment.

If you invest 1 million and generate a profit of 50, 000 a year, it will take 20 years to recoup the investment.

So the price-to-earnings ratio of this investment is 20, so the reciprocal of 20 is 100%.

So we can see that the figure of 5% is the average annual return on your investment.

Now that we understand the concept of price-to-earnings ratio and average annual return on investment, let's look at the average annual return on investment required to cover the cost of capital at different interest rates.

If the current interest rate on the market is 5%, that means that to repay this borrowing cost, it will take at least 5% a year to cover it.

As we said earlier, the reciprocal of the price-to-earnings ratio can be seen as the average annual return on your investment.

The 5% borrowing cost means that I can cover the cost by investing this money in a market with an average annual return of 5%, or 20 times earnings.

If interest rates now fall to 4% in the market, that means repaying the borrowing cost would require an annual income of 4%.

In an interest rate environment of 4%, it means that you can still cover costs if you invest this money in a market with an average annual return of 4% and a market valuation of 25 times earnings.

If the interest rate falls to 2%, it means that you can still cover costs by investing the money in a market with an average annual return of 2% and a market-wide valuation of 50 times earnings.

The same market, just because of the difference in interest rates, has brought about a huge change in valuation.

It can be seen that the impact of the interest rate on the valuation level of the whole market is so great.

We can also draw a conclusion here:

In an environment of low (or even negative) interest rates, the valuation of the stock market as a whole is likely to be much higher than in a "normal interest rate" environment.

By the same token, in a market environment with low interest rates, once the central bank begins to raise interest rates gradually and return to normal interest rates, the market will fall.

This is because as the level of market interest rates rises, investment can cover the valuation of costs and will decline accordingly.

Mr. Market will spontaneously adjust the valuation to a reasonable position according to the level of interest rates and the return on investment.

For example, if the central bank raises interest rates from 4% to 5%, the return on investment required to cover the cost of capital will rise from 4% to 5%.

We know that the corresponding reasonable valuation of the market will also fall from 25 times to 20 times earnings.

This is why global central banks such as the Federal Reserve need to fully communicate with the market before raising benchmark interest rates to avoid overreaction among investors.

07 how did the bubble burst

Why did we always say that a rise in the yield on 10-year Treasuries above 2% would lead to a bloodbath in US stocks?

Because the ten-year treasury bond, which represents the risk-free rate of return in the market, is the pricing benchmark for all assets.

If you don't understand what the 10-year Treasury bond stands for, you can take a look at our previous article, "Ten-year Treasury bonds are the anchor of all asset prices."

Some people here may wonder why yields on 10-year Treasuries continue to rise during the economic recovery.

The reason is that during the stage of economic recovery, a large amount of money will sell safe-haven treasury bonds and invest in risky assets.

We know that the prices of all commodities are determined by supply and demand, whether they are houses, stocks or treasury bonds.

If there are many buyers and few sellers, the price will naturally go up. If there are fewer buyers and more sellers, the price will naturally fall.

The most common thing people do during economic recovery is to get rid of safe-haven government bonds and use the money to chase higher-yielding commodities and equity assets.

Friends who are familiar with Merrill Lynch clock should have a very clear understanding of this conversion process.

When this figure rises to 2%, it means that the economy has moved from its previous recovery to an overheated stage.

After the economy enters the overheating stage, inflation will become more and more intense. At this time, the level of interest rates in the United States will also begin to rise by raising interest rates.

The higher cost of capital brought about by higher interest rates will, on the one hand, reduce the valuation level of the market, on the other hand, it will make buyers in the market weak to buy.

Raising interest rates will lower the overall valuation of the market, as we have said before. Here we focus on why raising interest rates will lead to a lack of buying by U. S. stock buyers.

If you want to know why interest rate hikes and cuts have such a big impact on today's U. S. stock buyers, you need to observe who is buying U. S. stocks.

According to the data, the biggest buyers of US stocks are non-financial companies. What are non-financial institutions? To put it bluntly, it is just the listed companies themselves.

These companies bought a total of $3.4 trillion, while ETF and mutual funds, which specialize in investments, bought only $1.6 trillion.

Why buy your own stock? To push up the stock price, of course. So where does the money come from? The answer is corporate bonds.

Against the backdrop of the Fed's continued quantitative easing and low interest rates, companies have obtained cheap capital by issuing large amounts of debt.

In this context, many companies borrow money to buy their own stocks to drive up their share prices. Many companies even do not hesitate to take on a huge amount of debt buybacks, pushing up share prices.

This is largely because one of the KPI of company executives is the assessment of the company's market capitalization.

And for the sake of tax avoidance, executives are mostly paid in stocks, which can be rewarded with higher share prices.

But quantitative easing and low interest rates will come to an end, and once inflation rises, the Fed will have to raise interest rates.

Once the Fed stops quantitative easing and starts to raise interest rates, these companies will have no more cheap money to push up share prices.

Not only is it impossible to borrow cheap money, but even the interest on previous loans will go up a lot and may not be repaid.

Without cheap money to buy stocks, it is impossible that the price is still hanging in the air, and the result must be a U-turn.

And after the Fed raises interest rates, it will not only lead to higher borrowing costs for companies. Subsequent falls in share prices will also lead to reduced solvency and insufficient collateral.

In this case, it is simply impossible for companies to obtain new funds to maintain stock prices to save themselves. If you can't save yourself, you won't be able to pay off the debt you borrowed before.

As a result of the failure of enterprises to repay their debts, a large number of bad debts have been formed without the money of banks, and the global financial crisis has followed. Does it feel like deja vu? Yes, what will happen in the future is the US stock version of the subprime crisis.

In the previous subprime crisis of 2008, it was an institution like Fannie and Freddie that allowed American families who simply could not afford to buy a house to borrow money to support the housing market.

This is the US stock market subprime crisis, in which banks extend debt loans to zombie companies that do not have much hematopoietic ability to support the stock market in the context of quantitative easing and low interest rates.

Although the participants of the two stories are different, it is certain that the final result is the same.

After the last death of Lehman, the financial tsunami entered the best part. The Federal Reserve has stepped in to rescue the economy through quantitative easing.

Although we don't know what the iconic event will be this time, it is certain that once the iconic event occurs, it will be followed by the best part of the financial tsunami.

Our most optimistic forecast for 2022 is the 2008-level financial crisis. The most pessimistic prediction is the 1929-magnitude Great Depression.

Because whether in terms of the global polarization between rich and poor, or the state of the economy, it is very close to 1929.

In fact, the American elite is well aware of what will happen next, but no one wants the crisis to break out on their own terms.

That's why you can see that no matter who comes to power as president of the United States and chairman of the Federal Reserve, everyone is lowering interest rates and easing interest rates without raising money in inflation.

This is why we have been telling you that inflation can not afford, more than the cycle, you should understand this sentence by now.

08 dancing with foam

Here we can also think about what is the right thing to do in the face of global central banks releasing water and lowering interest rates to blow bubbles.

The first choice for most people is to avoid, because the bubble will burst, there is no bubble in the world that does not burst.

So you deserve to be poor.

The secret of getting better and richer for most people is essentially how to benefit from asset prices.

To put it simply: go in and dance when blowing bubbles, and come out in time before the bubble bursts. After a few rounds, he was much better than the others.

Because most people complete the primitive accumulation, rely on wages, this thing is essentially based on working hours for money, the ceiling is very low.

After the primitive accumulation of wage income, how to expand this primitive accumulation needs to rely on round after round of asset price bubbles.

For example, every time bull capital markets blow bubble valuations, the market-wide price-to-book ratio changes from 2 to 6.

Can you say that the company is doing three times better in a short period of time? This is bullshit.

In essence, it is because of people's good expectations for the future economy and the expansion of asset price bubbles. So after the bubble inflated, it was followed by a long valuation return.

In this process, you have to increase the principal in your hands, which in essence is to seize round after round of expansion and replicate it every few years.

After the COVID-19 epidemic, the Federal Reserve issued an unlimited water release policy. Anyone with a little common sense here knows that US stocks are going to blow bubbles.

What you should do at this time is not to shout that the bubble is going to burst in the future, but also to blow bubbles together with spare money.

Why the COVID-19 epidemic broke out in March 2020, when US stocks plummeted, when everyone thought the financial crisis was coming.

In this article "the collapse of US stocks, is the Great crisis coming?" we will say that not only will there be no crisis here, but it will be the best place to buy US stocks this year.

Look at the current interest rates in the United States, which are historically low.

If you look at the Fed's balance sheet, it has doubled in the past year directly because of the Fed's super water release.

This money will not disappear, will eventually participate in consumption and investment, you want to say that asset prices do not rise? That's not unreasonable.

Many people like to say that the bubble will eventually burst, just like people will die in the end, it is a correct nonsense.

Is it because people are going to die at the age of 80, they didn't live well before? Is it because the bubble will burst in a year's time, so we will not participate in making money by blowing bubbles now?

Of course, we are not encouraging everyone to participate in the bubble, after all, everyone's choice is different, but this is the truth.

At the end:

This is the end of the article. I believe you already understand why inflation and interest rate hikes will prick the US stock bubble.

At the end of the article, we also boldly guess the following script, you can see if it will happen in the future.

For the whole of 2021, we will first see the economy growing at the highest rate in the past few years, showing signs of overheating.

During this period of time, inflation will intensify, commodity prices will hit record highs, and global prices will soar.

As we said in "inflation is followed by debt collapse", this is the last boom before the economy turns into a depression.

The Fed began to raise interest rates after soaring prices brought about by an overheated economy, especially food prices, would be too much for people at the bottom to bear.

This gradual interest rate hike from quantitative to qualitative change will prick the bubble of global asset prices.

At some point in the future, you will see a sharp fall in U. S. stocks triggered by junk debt or bubble stocks. This time, as in 2008, there will be no return.

The bursting of the global asset price bubble was followed by a story similar to that of 1929.

At this time, there will be mass unemployment around the world, and local wars are likely to break out somewhere in the world.

Individual countries, such as India, are likely to show fascist tendencies. We have mentioned this before in "Modi's rebellious gamble".

In this economic crisis, Japan and Europe will become the hardest hit areas due to the serious aging, with asset prices leading the decline.

Global central banks will be forced to release water again to save the market, the market will continue to fall after a short-term rebound, and negative interest rates will begin to appear in major countries around the world. In this crisis, China will show good crisis management ability and rise strongly. That's why we said before, "Hot money will pour into China after the next crisis."