The stock market is down by more than 20 percent and we are now at a confirmed bear market and this crash in the stock market will soon spread to other markets like the real estate. The state of the whole economy is always reflected by the performance of the stock market. The current crash in the stock market is going to slowly spill over to the entire economy and many companies will be affected. It will not be a wonder if we see some companies filling up for bankruptcy in the next few weeks. Some banks and other financial institutions that are heavily leveraged might have to be bailed out by the government. It is just a matter of weeks before we see a 20-30 percent crash in the housing market just like it happened back in 2008. Our economy has been a big bubble for years and now this inflated economy has already begun bursting!
The repo market is also going nuts almost every day and this has forced the central bank to intervene. This is a reflection of how our financial system is troubled and this has just begun spilling over to the whole economy. The crash of the stock market means that pension funds and banks collapse will happen. In the process, many companies will also go udder and millions of jobs will be lost in the process. If the fallout in the stock market continues, American companies will deplete their cash on stock buybacks. To prevent the whole stock market from collapsing, they will need help from the American tax payers and the government will have to bailout many companies and financial institutions. Banks will be bailed out at taxpayers’ expense just like it happened in 2008. The Federal Reserve will also come up with a series of quantitative easing as a way of avoid the economic collapse.
Economic flaws that have been hidden for years are now coming to light as the whole economy that has been inflated for years begins to collapse. Right now, we are facing the consequences of all the poor financial decisions that our leaders have made for years and the question that everyone is asking is whether we will have a lasting solution this time round. It is very clear that it is impossible to sustain an economy by debt. Maybe the Federal Reserve will print more money to boost our dying economy but the biggest concern is how they will finance the subsequent deficit considering the fact that the inertest rates are headed to zero. We might also the dollar being devalued to ridiculous levels and this will only result to a hike in prices and an increase in the cost of living. The United States is not an energy independent country and the devaluation of the dollar will make the cost of energy to hike depending on the intensity of the devaluation. Increase in gas prices will cripple the economy at a time when we cannot afford it.
It seems that the Federal Reserve is not doing enough in addressing the current instability and slowdown of the economy. We have an economy that has been a bubble for many years and now we are experiencing a severe economic meltdown. The Federal Reserve needs to come up with a lasting solution that will fix the economy otherwise this stock market crash might culminate to a depression similar to what we had in the 1920s. A big economic storm is here with us and the government needs to fix this immediately!
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