The Overgrown Financial Bubble May Be Officially Bursting

Will the next year be the end of the overgrown financial bubble? Is investment insanity coming to an end?

We may have lost a little sanity in recent years, but we must not let madness take its place. In today’s volatile market where greed is rampant, it can feel like you’re always one step behind the competition. It seems the only option is to get rich quickly, where who can afford to be patient? In addition to stocks always going up, the property is also inflating in a bubble. The only exceptions are the often boring bond market and under-performing stocks. But even these have been on a steady rise this century.

As the term "Special Purpose Acquisition Companies" implies, shell companies are used to acquire existing companies with the goal of inflating their stock price. None of these things are new, of course. For example, in the 1720s, companies were formed and capital was raised just to "make money." Bitcoin, like any other speculative investment, can be worth nothing or millions of dollars. There are many who say it is the future of money, but there are also those who disagree. Bitcoin is not like tulip bulbs, because Bitcoin is digitalized. Bitcoin is just worth $2 trillion now, but 8 years ago it was worth $1 billion. Is Bitcoin the bubble of the century?

Value investing and wealth preservation is for people who are smart.

In this world where “get rich quick” is rampant neither value investing nor wealth preservation factors in. Why worry about preserving your wealth when you might make 14 times your money on the Nasdaq or 5,000 times your investment in Bitcoin?

Calling the top is a risky game. After looking at risk for so long, some of us who study the economy have been worried about the future of the overgrown financial bubble. To us, since the end of the Great Financial Crisis in 2009, the world has been one giant illusion.

When you pass GO in Monopoly, you get to collect more money. With the popularity of the game, it's not uncommon to have players who have surpassed the traditional $200 in just one spin. But in today's society, this isn't just a game. We are watching a virtual reality in which the rich automatically increase their wealth by millions or even billions of dollars every time they pass GO. But as the rich are getting richer, the masses are just getting poorer and more indebted.

In spite of the many people who see this as an illusion, those who have benefited from it know that this is very real. It may be a shock to those who believe that these gains are sustainable, though.

As I showed in a recent article, the combined wealth of the 400 richest Americans has gone from 2% of GDP to 18% in the last 40 years. This distortion is concerning for two reasons. Firstly, it's becoming an increasingly difficult extreme distortion for the rest of America's population. Secondly, this concentration of wealth is dangerous for the world. We're always catching up to this height but never reaching it.

A possible Economic Fall with a 90% drop

I think we're at the end of a major economic cycle. Not only are we dealing with insane markets and deficits, but debt and currency debasements as well. But also, morality and ethics have vanished and been replaced by lies and deceit.

Things seem like they're going downhill. We can't attribute any of this to one specific cause. But what we do know is that tough times will be followed by better ones, and those better ones will be followed by an improvement in economic conditions. In the end, we'll see a correction of major asset and debt markets that will end up being as bad as or worse than the fall we saw with this most recent downturn.

It is now possible to make major economic changes with the help of central banks. This is due to the unlimited money printing that many governments are doing, as well as new digital currencies.

Uncovering The Monetary Illusions And Risk Management Against The Economic Fall

It is important to understand that illusions cannot save the economy. We can't depend on virtual money or empty promises to solve our problems. These methods will not repay debt or change the laws of nature. These evil forces want to destroy everything, but something tells me that a heavily indebted and fake system can never be reset in an orderly manner.

I don’t think a fake or artificial reset will really work. It is not possible to fix a debt problem with more debt no matter how the Powers That Be try to make it seem like a good thing. A new digital currency will not solve the world’s debt problem.

If you write off debt, the assets on the opposite side of the balance sheet will also lose value. This is because debt is leveraged and, if it's written off, the assets will have a very long way to go before returning to their original value.

Is this really possible? The crash of debt will bring down the bubble assets which exist only because of the worthless debt. Remember, in the 1929-32 Dow crash, the Dow lost 90% of its value in just 3 years. It'll take at least 25 years for the Dow to get back to 1929 high.

For centuries, we've learned that bubbles can never be confident as they always grow and reach their limits. An example is the bursting of the "dot com" bubble in the late 1990s. It was followed by a major supercycle, and it could last as long as 2,000 years. Yet we still see evidence of an epic asset bubble. We have charts that point to the end of the overgrown financial bubble in markets and also indicators that all point to the same end.

Although it is important to know when the top is going to happen, it is much more important to understand the potential risks. We're in a state of inflation. If we get hyperinflation, stocks and other assets can rise in nominal terms, but they will fall in real terms, measured in stable purchasing power. Think about gold. The investment world is going to be expecting a lot more fake money in the coming months or years because most of it's been spoilt by fake money.

The bottom line is this: Making it through the economic crisis is all about protecting yourself from risk.