Business & Investment

Is financial market meltdown already possible?

You saw the news. Evergrande in China is the new Lehman Brothers. COVID is skyrocketing in high immunization countries such as Seychelles, Iceland, Israel, Bermuda and Singapore. Many of them were forced to reintroduce restrictions after declaring that they would live with COVID. Compliance with the blockade is declining rapidly around the world. Gas and electricity prices are causing a crisis in Europe. Iron ore prices have plummeted, deteriorating Australia’s terms of trade. The US debt cap is on the agenda again.

Therefore, there is no shortage of flash points at this time. What can cause a meltdown in the stock market, or worse Bond market.. At least under normal circumstances, they …

But today, instead of investigating the many possible crises, I would like to ask if it seems likely that a crisis will occur anymore. Specifically, whether the central bank or government will prevent it.

For example, when people ask if Evergrande is Lehman Brothers in China, they probably miss the point. What made Lehman Brothers so important was that it was allowed to fail. But what are the lessons to be learned? Is it possible for the market to plummet when something like Lehman Brothers or Evergrande fails?

I do not think so…

I think the real lesson is that nothing has happened since Lehman Brothers was allowed to fail. The bankruptcy of the investment bank caused a much bigger crisis.

So do you think someone will soon make the same policy mistake?

I doubt it.

Most of the time, anyway …

The lesson of Lehman Brothers was to make sure nothing went wrong in the first place. At the very least, it’s not an uncontrolled way to risk transmission.

But what if the crisis is too great?

Now, I also learned that central banks and governments have almost unlimited capacity to prevent crises. In fact, it’s unlimited and in a specific sense is explained below.

Do you think the evergrande crisis is worse than the pandemic mayhem of the last 18 months? I doubt it very much.

Equities, bonds, real estate, and other investment assets surged during the global travel and pandemic that closed the economy. Well, the blockage has shut down …

Similarly, GDP has recovered in many places, despite continued restrictions and cases of COVID. Think for a moment. That’s strange.

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Meanwhile, gold (a good asset when financial, financial, or economic systems are unreliable) has declined. This usually indicates increased confidence in the system.

Looking back at the financial markets, I think the pandemic ended in mid-2020.

You saw the news. Evergrande in China is the new Lehman Brothers. COVID is skyrocketing in high immunization countries such as Seychelles, Iceland, Israel, Bermuda and Singapore. Many of them were forced to reintroduce restrictions after declaring that they would live with COVID. Compliance with the blockade is declining rapidly around the world. Gas and electricity prices are causing a crisis in Europe. Iron ore prices have plummeted, deteriorating Australia’s terms of trade. The US debt cap is on the agenda again.

Therefore, there is no shortage of flash points at this time. What can cause a meltdown in the stock market, or worse Bond market.. At least under normal circumstances, they …

But today, instead of investigating the many possible crises, I would like to ask if it seems likely that a crisis will occur anymore. Specifically, whether the central bank or government will prevent it.

For example, when people ask if Evergrande is Lehman Brothers in China, they probably miss the point. What made Lehman Brothers so important was that it was allowed to fail. But what are the lessons to be learned? Is it possible for the market to plummet when something like Lehman Brothers or Evergrande fails?

I do not think so…

I think the real lesson is that nothing has happened since Lehman Brothers was allowed to fail. The bankruptcy of the investment bank caused a much bigger crisis.

So do you think someone will soon make the same policy mistake?

I doubt it.

Most of the time, anyway …

The lesson of Lehman Brothers was to make sure nothing went wrong in the first place. At the very least, it’s not an uncontrolled way to risk transmission.

But what if the crisis is too great?

Now, I also learned that central banks and governments have almost unlimited capacity to prevent crises. In fact, it’s unlimited and in a specific sense is explained below.

Do you think the evergrande crisis is worse than the pandemic mayhem of the last 18 months? I doubt it very much.

Equities, bonds, real estate, and other investment assets surged during the global travel and pandemic that closed the economy. Well, the blockage has shut down …

Similarly, GDP has recovered in many places, despite continued restrictions and cases of COVID. Think for a moment. That’s strange.

Meanwhile, gold (a good asset when financial, financial, or economic systems are unreliable) has declined. This usually indicates increased confidence in the system.

Looking back at the financial markets, I think the pandemic ended in mid-2020.

Until next time,

Nick Hubble Signature

Nikolai Hubble,
Editor, Daily Reckoning Australia Weekend

PS: Our publication The Daily Reckoning is a great place to start your investment journey. Let’s talk about the big trends that drive the most innovative stocks in ASX. Learn all about it here.

Is financial market meltdown already possible?

https://www.dailyreckoning.com.au/is-a-financial-market-meltdown-even-possible-anymore/2021/09/25/ Is financial market meltdown already possible?

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