{"id":41115,"date":"2018-11-30T19:39:01","date_gmt":"2018-12-01T00:39:01","guid":{"rendered":"https:\/\/olduvai.ca\/?p=41115"},"modified":"2018-11-30T19:39:01","modified_gmt":"2018-12-01T00:39:01","slug":"this-is-how-the-everything-bubble-will-end","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=41115","title":{"rendered":"This Is How the \u201cEverything Bubble\u201d Will End"},"content":{"rendered":"<header class=\"content-header\">\n<h3 class=\"entry-header content-list-title\"><a href=\"https:\/\/internationalman.com\/articles\/this-is-how-the-everything-bubble-will-end\/\">This Is How the \u201cEverything Bubble\u201d Will End<\/a><\/h3>\n<\/header>\n<div class=\"content-thumb\"><a title=\"This Is How the \u201cEverything Bubble\u201d Will End\" href=\"https:\/\/internationalman.com\/articles\/this-is-how-the-everything-bubble-will-end\/\"><img decoding=\"async\" class=\"img-responsive\" src=\"https:\/\/internationalman.com\/wp-content\/uploads\/2018\/11\/bubble.jpg\" \/><\/a><\/div>\n<p><button id=\"freeAccess\" class=\"btn btn-sm btn-info popmake-4305 pum-trigger\" type=\"button\"><i class=\"fa\n\t\tfa-envelope\"><\/i> Subscribe to <em>International Man<\/em><\/button><\/p>\n<div class=\"content\">\n<div class=\"at-above-post addthis_tool\" data-url=\"https:\/\/internationalman.com\/articles\/this-is-how-the-everything-bubble-will-end\/\" data-title=\"This Is How the \u201cEverything Bubble\u201d Will End\" data-description=\"If history is any guide, this next downturn is going to be a doozy. Here's how to survive the crash.\">\n<div id=\"atrsb2\" class=\"at-resp-share-element at-style-responsive addthis-smartlayers addthis-animated at4-show\" role=\"region\" aria-labelledby=\"at-e453f742-a241-4021-aa04-bedaec94155f\"><span id=\"at-e453f742-a241-4021-aa04-bedaec94155f\" class=\"at4-visually-hidden\"><\/span><\/p>\n<div class=\"at-share-btn-elements\"><a class=\"at-icon-wrapper at-share-btn at-svc-facebook\" tabindex=\"1\" role=\"button\"><span class=\"at-label\">Facebook<\/span><\/a><a class=\"at-icon-wrapper at-share-btn at-svc-twitter\" tabindex=\"1\" role=\"button\"><span class=\"at-label\">Twitter<\/span><\/a><a class=\"at-icon-wrapper at-share-btn at-svc-google_plusone_share\" tabindex=\"1\" role=\"button\"><span class=\"at-label\">Google+<\/span><\/a><\/div>\n<\/div>\n<\/div>\n<div id=\"pl-6113\" class=\"panel-layout\">\n<div id=\"pg-6113-0\" class=\"panel-grid panel-no-style\">\n<div id=\"pgc-6113-0-0\" class=\"panel-grid-cell\">\n<div id=\"panel-6113-0-0-0\" class=\"so-panel widget widget_sow-editor panel-first-child panel-last-child\" data-index=\"0\">\n<div class=\"so-widget-sow-editor so-widget-sow-editor-base\">\n<div class=\"siteorigin-widget-tinymce textwidget\">\n<p>I think there\u2019s a very high chance of a stock market crash of historic proportions before the end of Trump\u2019s first term.<\/p>\n<p>That\u2019s because the Federal Reserve\u2019s current rate-hiking cycle, which started in 2015, is set to pop \u201cthe everything bubble.\u201d<\/p>\n<p>I\u2019ll explain how this could all play out in a moment. But first, you need to know how the Fed creates the boom-bust cycle\u2026<\/p>\n<p>To start, the Fed encourages malinvestment by suppressing interest rates lower than their natural levels. This leads companies to invest in plants, equipment, and other capital assets that only appear profitable because borrowing money is cheap.<\/p>\n<p>This, in turn, leads to misallocated capital \u2013 and eventually, economic loss when interest rates rise, making previously economic investments uneconomic.<\/p>\n<p>Think of this dynamic like a variable rate mortgage. Artificially low interest rates encourage individual home buyers to take out mortgages. If interest rates stay low, they can make the payments and maintain the illusion of solvency.<\/p>\n<p>But once interest rates rise, the mortgage interest payments adjust higher, making them less and less affordable until, eventually, the borrower defaults.<\/p>\n<p><strong>In short, bubbles are inflated when easy money from low interest rates floods into a certain asset.<\/strong><\/p>\n<p>Rate hikes do the opposite. They suck money out of the economy and pop the bubbles created from low rates.<\/p>\n<h5>It Almost Always Ends in a Crisis<\/h5>\n<p>Almost every Fed rate-hiking cycle ends in a crisis. Sometimes it starts abroad, but it always filters back to U.S. markets.<\/p>\n<p>Specifically, 16 of the last 19 times the Fed started a series of interest rate hikes, some sort of crisis that tanked the stock market followed. That\u2019s around 84% of the time.<\/p>\n<p>You can see some of the more prominent examples in the chart below.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-6115\" src=\"https:\/\/internationalman.com\/wp-content\/uploads\/2018\/11\/Fed-Funds-Rate.png\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" srcset=\"https:\/\/internationalman.com\/wp-content\/uploads\/2018\/11\/Fed-Funds-Rate.png 550w, https:\/\/internationalman.com\/wp-content\/uploads\/2018\/11\/Fed-Funds-Rate-300x167.png 300w\" alt=\"\" width=\"550\" height=\"306\" \/><\/p>\n<p>\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>This Is How the \u201cEverything Bubble\u201d Will End Subscribe to International Man FacebookTwitterGoogle+ I think there\u2019s a very high chance of a stock market crash of historic proportions before the end of Trump\u2019s first term. That\u2019s because the Federal Reserve\u2019s current rate-hiking cycle, which started in 2015, is set to pop \u201cthe everything bubble.\u201d I\u2019ll [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[17853,303,431,6228,500,501,534,11725,3650],"class_list":["post-41115","post","type-post","status-publish","format-standard","hentry","category-economics","tag-everything-bubble","tag-fed","tag-interest-rates","tag-international-man","tag-market-collapse","tag-market-crash","tag-monetary-policy","tag-nick-giambruno","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/41115","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=41115"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/41115\/revisions"}],"predecessor-version":[{"id":41116,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/41115\/revisions\/41116"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=41115"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=41115"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=41115"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}