• Fri. Sep 22nd, 2023



Come in a year: an artificially created crisis will lead to a long correction of markets


Dec 2, 2022

Come in a year: an artificially created crisis will lead to a long correction of markets

The crisis created by the authorities of different countries and the dominant of political interests over economic feasibility will lead to recession and, as a result, to reduce quotations in the stock and cryptocurrency markets. How long the fall can last and how strong it will be?

The fall of the economy, the growth of inflation, depression in the markets and the late measures of the Central Bannies of different countries in attempts to correct the situation can lead to a rather long crisis. Politicians only exacerbate the situation by taking populist and irresponsible measures from the point of view of economists like distributing money and subsidies, as well as inciting geopolitical conflicts.

  • The world is included in the era of stagflation. Economic growth will be low (and in certain countries and negative), inflation – high.
  • The authorities of different countries do not take the necessary measures to correct the situation.
  • Stock and cryptocurrency markets will decline in the next year.

Stagflation: why is it serious?

Everyone knows about cyclicality in the economy, when the growth stage, accompanied by a serious increase in inflation, is replaced by cooling, recession or even an economic crisis.

Such changes in the economic seasons are quite normal, known and well predictable. Central Banks and monetary authorities of different countries know what to do with the “ordinary” crisis (change in interest rate, maintaining individual sectors of the economy, investment from the state, etc.D.).

But now, as a member of the British parliament Ian Maclaud said, we again “have the worst of the two worlds – not just inflation on the one hand or stagnation – on the other, but both together. We have a kind of situation of “stagflation” ”.

Typically, these two processes do not intersect with each other: inflation accompanies economic growth, and the period of a slight increase in prices coincides with weak positive dynamics in the economy.

Now these two unfavorable factors have come together. As a result, analysts all reduce forecasts for the growth of global GDP (according to Moody’s estimates, the indicator will grow by 2.5% in 2022, by 2 What is a crypto .1% – in 2023), plus data on high inflation are regularly released.

It turns out that, on the one hand, the economy falls into depression, the production of goods and services is reduced, jobs are becoming less. On the other hand, due to rising prices, real income falls. And it can be for a long time, the economists and cryptocurrency experts.

It is worth expecting further weakening of the economy in the USA and Europe, said Natalya Malykh FG Analysis Head. In the United States, GDP already in the first half of the year fell in a row, although the authorities do not recognize the recession. This is really not confirmed by other indicators, – the labor market remains strong, the head of the BCS Investment World Experts department Albert Koroev supplemented.

“It is much more obvious that a number of European countries are already in a recession or on its brink. And here the situation is even more complicated, since high inflation forces the ECB to raise rates, and the economy is already cooling. At the same time, it is fragmented by countries, which complicates the task, ”Koroeva explained.

Cryptocurrency market experts are in solidarity with economists.

“The global recession is likely to last until one of the two conditions for the American economy is fulfilled: a change in the inflation trend, or a decrease in the consumption index to the necessary marks. Most likely, one of two will happen no earlier than through the calendar year, ”said Dmitry Machikhin, CEO Bitok.

The founder of Encry Foundation Roman Nekrasov agreed with him. According to him, problems will last at least 12 months. Moreover, 2023 will become the most difficult.

“This is due to the consequences of the economic policy pursued by regulators in developed countries that provoked high inflation, as well as geopolitical tension with problems in the energy market, food market and in logistics,” he said.

The situation is extremely serious and requires decisive measures by the authorities. All because we are dealing with an unusual crisis, and in some way man-made with a military component, said small. In her opinion, a lot will depend on politicians, the expert believes.

Now the whole world is at a complex intersection, said the managing partner of PFL Advisors Fedor Naumov. In developed countries, perennial “quiet harbors” – inflation under 10%. And the politicians are faced with the question – what to choose: raising bets to the detriment of the economy. Or the fight against the depreciation of money only in words.

Building drunk at a lamppost

Politicians often use the economy as a drunk – lamppost: to support, not for lighting. This is stated in his article by an economist, former Vice-chairman of the Fed and Former Member of the Council of Economic Consultants for US President Bill Clinton Alan Drive.

According to him, politicians and economists are like creatures from two different civilization. They have a completely different logic, the language of communication and the calculation methodology. The economists have Aristotelian, that is, the classical system of logic based on syllogisms, consequences and deductive reasoning. With politicians, everything is different.

“[…] They use what I call political logic – what will work best with voters or with other politicians with whom they negotiate,” he wrote.

During the Pandemia, policies of different countries expectedly extinguished fires of economic problems with money. This is understandable: it was necessary to support people in a difficult situation. However, the distribution of money led to a surge of inflation.

Now they do exactly the same. It turns out that the new stage of the disease of the global economy (energy crisis, high inflation, reduction of income) is trying to treat with old methods. More precisely, we are not talking about treatment, but about sorting symptoms, like a patient with a high temperature. And this, in turn, only exacerbates the disease.

In Europe, where the prices for utilities due to the energy crisis have grown greatly, and inflation beats perennial records, the authorities of different countries did not take a strict recovery of the economy (a sharp increase in interest rates, reduction of budget expenditures, cutting social payments)-and distribution of money and subsidies.

In Germany, pensioners will receive a one -time payment of € 300 on December 1 (students – € 200), plus the authorities expanded the list of those who will pay benefits for utility bills. In Italy, they raise pensions and subsidize the poor payment of housing and communal services. In Poland, the state has already given € 640 families who are heated by coal.

Politics take care of their voters – they want those to come to the sites and express their confidence. If they begin to follow the principles of economic expediency and begin to tighten nuts, people will love them less, Naumov stated.

“In their souls, they may understand that inflation has got out of control and you need to urgently do something. But they prefer to think about it “Tomorrow”. Now they will work for the voter. But when they re -elect, they can already decide to launch a global recession to repay inflation, ”the expert said.

The main question: will it be too late? There have already been cases in history when the authorities completely lost control over prices-this is Germany in the 1930s (in 1923, monthly inflation amounted to 3.25 million percent) or Israel in 1979.

The flywheel of worldwide inflation is already promoted and it will not be easy to stop it. Due to increased state and private borrowing, as well as huge unsecured distribution systems of social support, central banks fell into a “debt trap”.

The Jouriel Rubini, Honorary Professor of the 2008 World Crisis of the 2008 Crisis, Nuriel Rubini writes in his article that an attempt by regulators to normalize monetary policy increases the burden of servicing obligations, leading to mass bankruptcy and state financial crises. He explained that governments occupying in their own currency will increasingly use the “inflation tax” to depreciate debts.

“Debasement (impairment) of currencies occurs. Let’s remember the “zero” in Russia. In response to inflation, the authorities gave the people money, and inflation continued to grow. Exactly the same thing is happening now in the USA and the eurozone. This is the way either to very high inflation (if they continue to do this), or to the recession, if they want to cool this boom, ”Naumov said.

What consequences will such an economic policy lead to?

The results of populism: what will happen to the markets?

Since the beginning of the year, the key American index s&P 500 decreased by 24% by mid -June. So much the US shares market have not fallen since 1970 (then s&P 500 lost 21%). The NASDAQ technology companies index for the same period sank by 26.8%, and the industrial download Jones – by 13.9%.

Then there was a rebound from the bottom and the indices returned to the “green zone” again. Cryptocurrency quotes, which almost completely correlate with the value of S&P 500, also pushed away from the minimum values ​​of the summer and somewhat increased. How long?

Forecasts in the stock market are disappointing. There are also rebounds in the bear market, reminded small. In her opinion, you should not consider growth in the latest sessions, and it makes sense to reduce the positions on the rebounds.

Until now, many companies in the United States have been overestimated according to the coefficient P/E (the ratio of the market value of the share to the annual profit received for the action), Naumov said. And the market “may well form in half”, the expert added.

“I expect further weakening of the economy in the United States and Europe, and at the same time as an increase in interest rates, and this will inevitably exert pressure on the stock markets of these regions, especially the European one, which loses more in this crisis than the United States,” said small ones. -The United States, in fact, can even win somewhat by taking customers and a market share from European competitors, while they are reducing production due to energy criticism ”.

You should not expect miracles on crypto. Crypton Crypto Crypt with American indices is now almost one hundred percent. The reason, oddly enough, is in their popularity and in distrust of traditional assets.

“Partly due to the situation that the world financial system has encountered, cryptocurrencies received a powerful influx of new users,” Nekrasov said.

Naumov agreed with his opinion. According to him, there were many institutional investors (and in general investors) who consider cryptocurrencies as one of the classes of assets, and not as an anonymous means of payment. Therefore, cryptocurrency courses and began to “walk” along with American actions, he added.

In the coming year, bear mood will be edited on crypto, continued Nekrasov. However, a return to the growth of digital assets in the industry, the expert will begin, will begin earlier than in the stock markets-somewhere in the late 2023 or early 2024, on the eve of the halving on the Bitcoin network.

CEO Indefibank Sergey Mendeleev is more pessimistic:

“Unfortunately, I do not consider the crypt at this stage a protective asset. For the past five years, she behaved exclusively as a highly spectacular tool (and evil tongues say that it was since the founding of bitcoin), so if everything will fall, then this will make it faster and deeper than others. But buy bitcoin for the entire cutlet just before dawn a very promising investment. Just how to guess and not get a second bottom as a gift?””.

Users should expect the fall of the main cryptocurrencies, agreed by the head of the VIABTC mining pool in Europe and the CIS, an expert on financial technologies Alexander Lozben. The cryptocurrency market moves synchronously with American actions, promotion owners and crypts are the same investors and stakeholders, he explained.

“Now quite a lot of cryptocurrency assets are concentrated in the hands of Wall Street and other financial institutions that work according to the same methods, and when there is a lack of liquidity, many sell their assets (no cryptocurrency or stocks) in order to enter the cache”, – added the expert.

It is difficult to predict the duration of the fall of the crypto, but most likely the next two years will definitely be difficult. Lozben expects the main financial shock in 2023 and the recovery of the market in a year or two. According to him, cryptocurrencies will show good dynamics after Bitcoin halving, to which 18 months left.

But crypto -novels “will not be blown away”. In this situation, as usual, investors are worried and talks about the great bladder of cryptocurrencies begin again, which can burst. This is refuted even by representatives of traditional financial institutions.

Increasing the scale of the use of bitcoin accelerates the process of forming a new financial system. We became witnesses to the global evolution of payment infrastructure, in early March, the strategist of Credit Suisse, Zultan Poster. It is still difficult to say in which direction the world economy will develop, the strategist noted, but Bitcoin has very good chances of obtaining the status of the main payment instrument.

The increased usefulness of cryptocurrencies is confirmed by new studies. Visa recently conducted a survey and found out that almost a quarter of small enterprises in nine countries plan to accept payments in digital assets.

Thus, cryptocurrencies can turn from class of investment assets into an everyday tool for calculations between consumers.

“As for the population, I think its essential part is already ready to translate their savings into cryptocurrency, since the understanding gradually appears that cryptocurrency is the technology of the future, regardless of whether it is used as a hedge-active or not,” Lozben emphasized.

What to do investors

All experts agree that it is too early to buy and it is worth waiting for the development of the situation – perhaps soon we will see the second bottom in the markets.

According to Mendeleev, to shift the assets now – it is ungrateful, excess vanity leads only to big losses.

“Moreover, the markets are now behaving illogical, for example, gold is falling. But if you look globally, then I would invest in manufacturers of agricultural products and food products. Even in the worst layings, people will not stop, ”the expert said.

There are other ideas. Now the fall is headed by the technological sector that reacts to the resumed growth of interest rates in the debt market. It is too early to buy, but it is worth holding a list of shares and ETFS for a purchase with long -term growth stories, says small.

The situation intense in all markets continued Nekrasov. Some investors will turn to the usual protective instruments, such as US Treasury Paper (especially the profitability of them has grown after the key bet) and gold. And part of the capital will flow into fiat currencies, such as the US dollar, but not the euro. According to the expert, someone uses cryptocurrencies like bitcoin and Ethereum to diversify the portfolio. And someone will invest in real estate, and the increase in prices for it confirms this trend.

“But none of these assets are now fully considered protective, everywhere there are risks. Russian investors have a small choice. There are high risks of freezing assets, blocking foreign accounts, and real estate arrest. Russian investors most likely use the usual tools-foreign fiat money, real estate, someone will invest in gold, ”Nekrasov suggested.

Naumov said that much depends on the economic course that will choose the monetary authorities of different countries.

“If inflation gets out of control, then you need to choose assets that can show themselves well at this time – these are expensive oil and gas. So, it is worth buying the papers of these companies, ”he said. – If a rigid struggle with prices begins, then it makes sense to consider short deposits, since the rates on them will be high. “.

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