Economists like to talk about market cycles. The theory of cycles is based on the history of crises and recoveries for the past 300 years. Throughout this time, events kept on following the same scenario, but now things are different. And there's a real risk of an uncontrollable financial collapse at a global scale.
The market cycles theory says that after each crisis, the economy begins to recover. Interest rates are low, and there are a lot of unemployed people who are happy to work for small wages. After many businesses have gone bankrupt, those that remain gain access to cheap labor and manufacturing assets.
As the recovery progresses, there is less and less available labor on the market. People's purchasing ability grows, and prices begin to rise. At some point, the central bank has to start increasing interest rates to contain inflation. It's not easy to contain, however, as the economy is booming. Wages keep on growing, as well.
More time passes, and the economy overheats. Manufacture contracts are followed by growing unemployment, falling consumer demand, and sometimes also a decrease in prices. This turns into a new crisis, with a new wave of bankruptcies. The central bank has to cut interest rates again. After a while, growth resumes, and so on and so forth.
Each cycle usually lasts 4 years. Or rather, it used to last 4 years. Why so? Because this time, everything is different. Central banks and governments in the West have decided to save not only the economy as a whole, but also each enterprise in particular – as well as to preserve the economic conditions of people who have lost their jobs.
As a result, instead of a large-scale crisis, we see a flood of money. Companies that should have gone bankrupt long ago are doing just fine. Fired employees don't want to look for a new job, because their unemployment benefits often exceed their former wages.
Essentially, companies and employees have become parasites on the body of the economy. Businesses have lost motivation to function better. This is possible to lead to an enormous increase in debt – both that of enterprises and of the states themselves.
The global financial system is structured as a debt pyramid and is based on an infinite accumulation of debt that nobody is planning to pay. This pyramid is currently balancing on the edge of an abyss, and the next step is an epic collapse.
If you think that the collapse will mostly hit industries, you're wrong. Governments can keep enterprises afloat by giving them money. The problem is that the money held by the population and in banks will lose its value, while any other assets will grow rapidly.
This is exactly what is happening right now in the gold market, and everyone can see it. The stock market problem is far more serious, though. Companies are suffering losses, and yet their shares are extremely expensive, when judging from a standard point of view. In reality, though, the new normal is for the shares of near-bankrupt companies to be worth so much, because the newly-printed money flooding the market is worth so little.
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