Among the potential triggers of the economic collapse were the bubbles in the Chinese markets, Japan's high debt burden, and the cryptocurrency boom. And all the respondents agreed on one thing – the threat of collapse is quite real.
Global stock markets this year are just doing their best to break records. This is especially noticeable in the United States: the Dow Jones and Standard & Poor's 500 indices exceeded the highs reached before the 2008 crisis by about 80 percent. The last time what is called a “correction” was observed on them at the beginning of last year and was a trifle by any standards.
Stock indices continue to grow for several years, despite numerous forecasts of the inevitable blowing of the bubble.
Sometimes there is a feeling that a period of infinite growth has come. But exactly the same feeling developed before all previous crises. Sooner or later, a collapse should happen, the only question is how strong it will be and what will serve as a direct trigger.
Quantum or quantitative funds are investment funds, where all investment decisions are made on the basis of mathematical models that do not take into account the influence of subjective factors. In recent years, such investment funds have brought greater returns than other asset managers, and have gained immense popularity.
Meanwhile, the first call of the global financial crisis of the late 2000s was the collapse of such funds in August 2007 and called the “quantum earthquake”.
Then, few people paid attention to this, and for another six months the world market functioned as usual. Only the collapse of Bear Stearns in March made financiers think.
According to the head of one of the largest quantum funds AQR Capital Management, Clifford Esness, the fundamental prerequisites for the crisis are now much weaker.
In particular, the debt level of market players is much lower. On the other hand, the attention of the media to the stock market is much greater.
The collapse of one of the players, including among quantum funds, is able to create “positive feedback” when the escalation of passions in the media is accompanied by a negative reaction of market participants to what is happening. And the wave of crisis will accelerate.
The course of the most popular cryptocurrency in the world managed to overcome the mark of 11 thousand dollars. The indicator is unthinkable: at the beginning of the year, bitcoin was worth about 2 thousand and even then it was considered very overvalued. Having reached a market capitalization of $ 160 billion, he continues to shame skeptics, and voices will sound that the virtual currency is unreasonably cheap.
All this, however, we already went through in the late 1990s, when the shares of Internet companies grew over the course of a couple of years tens, hundreds and even thousands of times. As a result, the bubble nevertheless burst, and the next 10 years the industry took to lick the wounds. In the long run, cryptocurrencies can change the entire global financial system, but after experiencing several more ups and downs. And where is the guarantee that in 10 or 20 years Bitcoin will remain the most popular cryptocurrency?
Who knows about AOL, the leader of the American market for Internet startups in 1998?
Serious money has been invested in bitcoin. His the collapse will lead to an exodus from other cryptocurrencies. A collapse could destroy the value of hundreds of billions of dollars, and then it would not be good for the "conventional" market, but in the long run for the wider economy.
The Chinese economy, although it slowed down a bit, is still the fastest growing in the world. Globally, the current 6 percent growth per year is much more than 10 percent 10 years ago. China's GDP annually increases by about 800 billion dollars (compared to 300-400 billion in the past decade).
Accordingly, if the PRC economy suddenly stops growing, the consequences for the whole world will be enormous – companies will lose hundreds of billions of dollars, which will inevitably lead to serious financial problems. Add to this the inevitable panic, and here you have the recipe for a global crisis.
There are enough prerequisites for this.
The Chinese economy has grown 5 times over 10 years, but the volume of domestic debt has increased tenfold. This does not indicate financial health. Chinese authorities are trying to blow out bubbles in the market by tightening regulation, but no particular success has yet been seen.
It is believed that the global economic center is gradually moving from North America to East Asia. So, from there you can expect a crisis. There are enough contenders for the role of a global collapse trigger besides China.
In Japan, for example, public debt is steadily approaching an astronomical figure of 300 percent of GDP. If you do not take measures to remove this debt canopy, then the Land of the Rising Sun can finally accelerate inflation (the last 20 years have been unsuccessfully achieving it there).
However, the acceleration will be such that it will not bring joy to anyone.
According to Goldman Sachs, a crisis is inevitable if only because the shares of most companies are too expensive, inadequate to the profits and dividends that they bring. Investbank has calculated that the ratio of share prices to profits in the US market is now at its highest levels since the beginning of the last century.
The situation is aggravated by the fact that US government bonds are now extremely expensive, whereas earlier these figures were in antiphase.
A sharp revaluation of the value of shares may cause an increase in the key rate.
Analysts at Goldman Sachs, however, found it difficult to predict which particular key bet level would be truly dangerous.
Recessions just happen
The economy develops cyclically, and even long periods of growth are replaced by a strong decline. Moreover, the most severe crises occur after the most violent take-offs – as, for example, in the 1920s.
Now the climb was sluggish. Even the US economy, the fastest growing of the developed ones, on average, after the 2008 crisis, grew by one and a half percent per year (almost twice as slow as before). But the duration of the period without recessions.
This means that the US economy will inevitably be in crisis, and in the foreseeable future.
In this situation, the collapse of markets and the spread of recession throughout the world is a matter of a very short time.
Whatever the cause of the new storm in world markets, the consequences for the Russian economy will be sad. First of all, the price of oil will collapse, and the task of switching from exporting hydrocarbons to another model is far from being solved.