When to expect a collapse in American markets?

When to expect a collapse in American markets?

The United States is uniquely equipped to deal with any financial turmoil. This means is ultra-soft monetary policy, or the printing press. The last two serious crises (2008 and 2020) were dealt with by the United States with the help of it.

The reserve status of the dollar allows Americans to resort to unlimited monetary indulgences without consequences – the United States acquired this status, in fact, having turned out to be the main beneficiaries of two World Wars.

No matter what happens and no matter what “black swan” arrives, the United States can resort to quantitative easing at any time.

The single most dangerous thing that can end this practice is inflation, because it undermines the debt market through which the Fed stimulates the economy. Why hold someone’s debt that yields 5% a year when inflation is 10%? Therefore, it is necessary to wait for inflation in the US to get out of control.

When will this happen? Inflation is picking up in the US today, but we are now in a stage where some inflation is good for business and stocks. In general, Japan has been striving for inflation for 30 years already. With a rise in prices, companies earn more, and stocks are a hedge against inflation (however, not all). For inflation to “turn” the market down, it takes some time for inflation to begin to pose a real danger. It is hardly worth waiting for this earlier than the second half of 2022, or even earlier than 2023. More precisely, a detailed study of inflation and the Fed’s response to it in the 1970s will help with timing.

Follow us in: Telegram / Patreon