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  • A few years ago, if you would say, let's print money to make everyone rich, no one would

  • take you seriously!

  • Yes, We can print money, but we should do that responsibly.

  • We cant randomly print money and just give everyone some cash.

  • That's not how the economy works, leave alone capitalism.

  • Remember when Andrew Yang proposed the UBI Universal basic income, and people bombarded

  • him with billions of arguments why that's never going to work, but then 2020 is like

  • - let me prove all of these people wrong.

  • The fed literally pumped over 3 trillion dollars into the economy.

  • The government distributed cash to ordinary people.

  • Everyone got their stimulus checks, which they ended up spending on amazon buying useless

  • stuff.

  • Well, not everyone, at the end of the day, most people had to put food on the table one

  • way or another.

  • That suppose to cause huge inflation, right?

  • But it didn't, at least for now.

  • The fed has been around for over 100 years, and it has created a lot of money since then.

  • However, 1 in every 5 dollars was created last year.

  • Throwing that much money into the economy suppose to create not just inflation but hyperinflation.

  • Have you seen pictures of people carrying bags of money just to buy bread or kids using

  • cash to play around in Zimbabwe?

  • That's what hyperinflation is.

  • So why was inflation just a little over 2 percent last year?

  • Why does the fed keep printing even though it knows it can cause high inflation?

  • How the fed created the biggest financial bubble in history?

  • When is this bubble going to crash?

  • And how is that going to impact the stock market?

  • We will answer all of these questions and many more, but before we do that, give this

  • video a thumbs and let the algorithm know that you enjoy our videos, and make sure to

  • comment.

  • And now, let's get right into it!

  • the biggest financial bubble in history

  • We have already explored how the economy works in previous videos, but let's just have a

  • quick recap.

  • The economy follows a cycle where it expands for a few years, then it peaks and slowly

  • starts falling into a recession, and the job of the federal reserve is to make sure that

  • inflation doesn't rise too fast when the economy is booming by cutting the supply of money

  • through high-interest rates for example, and when it falls into a recession, it makes sure

  • that the recession isn't too painful by flooding the market with cheap money to stimulate growth.

  • When interest rates are low, everyone jumps in to borrow money like in 2020.

  • Mortgage rates were so low that everyone who saved enough for the downpayment did take

  • a montage to the point where economists are warning us of another housing bubble.

  • So, in the middle of a pandemic, when many people lost their jobs, struggled to pay bills,

  • house prices are rising.

  • Why?

  • Because when too much money chases too little goods, prices increase, or the value of existing

  • dollars fall.

  • The number of houses in the market didn't change much, but since so many more people

  • decided to take a mortgage, the demand increased, which is why prices increased as well.

  • But why is that a problem?

  • Every time we had a crisis, the fed stepped in and saved the economy by pumping trillions

  • of dollars into the economy or lowering interest rates to the bare minimum.

  • It did that last year.

  • It pumped trillions more back in 2008 to prevent the economy from collapsing and the crises

  • before that.

  • So some experts believe that we are living in a bubble that will sooner or later burst

  • and takedown with it the entire economy.

  • Take a look at this chart.

  • Since we have abandoned the gold standard in 1971, inflation has been rising through

  • the roof.

  • It's rising as if there is no tomorrow, and with more stimulus bills, that chart will

  • rise faster, especially when the fed pumped into the economy over 3 trillion dollars this

  • year.

  • A single US dollar today worth just 4 percent of a dollar in 1914.

  • $100 in 1914 is equivalent in purchasing power to about $2,615.82 today, an increase of $2,515.82

  • over 107 years.

  • This means that today's prices are 26.16 times higher than average prices since 1914.

  • Will that bubble burst this year, next year, ten years from now!

  • I don't know, and no one knows.

  • It might just never happen.

  • The fed successfully kept the inflation at around 2 to 3 percent.

  • It might be able to do that for another 100 years, and what happens 100 years from now

  • isn't something we should be too worried about now.

  • But let's find out if the stock market is overvalued today because if it, it's going

  • to crash, or at least we will witness a correction?

  • Will the stock market crash?

  • When the stock market crashed last year, why it suddenly jumped back and started rising?

  • Because the federal reserve lowered interest to 0 and started buying bonds.

  • A bond is basically a piece of paper that a government or a company issues that says

  • if you buy this paper, I will owe this much money plus interest.

  • What if the interest is 0%?

  • I guess everyone would want to get that kind of a loan.

  • The fed usually buys government bonds to help the government raise money, but in march 2020,

  • the fed indirectly started buying corporate bonds.

  • This means companies could suddenly borrow billions of dollars at almost 0 percent, so

  • no matter how bad the crisis is, these companies could borrow money for free to survive.

  • The problem with that was that the fed even bought junk bonds, which means that it started

  • loaning money to companies that suppose to go bankrupt but survived because the fed gave

  • them a lot of money.

  • Think about what happens when the fed stops giving them money.

  • They will go bankrupt or at least be less profitable, which will drive investors away,

  • which will push their stock price to fall.

  • In other words, the stock market is filled with overvalued stocks right now.

  • But that's not all.

  • The fed even purchased bonds of the largest companies in the market, such as Apple, Microsoft,

  • The home depot, and so on.

  • That's one of the main reasons why the stock market rose dramatically.

  • You don't have to be a genius to understand what happens when the fed stopps buying corporate

  • bonds or raises interest rates.

  • Of course, that's causing inflation, but the fed is comfortable with inflation even higher

  • than 2 percent because if it did not step in to save the economy, the recession could

  • have easily turned into a depression.

  • It would have taken us much longer to get out of the crisis.

  • Inflation is bad, but what you know, what's more devastating than inflation is deflation.

  • When prices start going down, that looks like a good thing, right?

  • Your money starts becoming more valuable!

  • Why spend your money today when it's going to be more valuable tomorrow?

  • And that's the problem.

  • In that case, everyone will start saving.

  • When no one spends, the economy will further get into a crisis, that's why it was very

  • important for the FED to step in and flood the market with cheap money because, during

  • crises, people are afraid to spend since no one is certain about tomorrow.

  • At the time of writing this script, interest rates are still between 0-0.25 percent, but

  • that's not going to be forever.

  • Once everyone gets back to work, and we reach herd immunity, the fed will slowly raise interest

  • rates, and the stock market will probably crumble.

  • I wouldn't be supposed if all the companies that survived just because the fed purchased

  • their worthless bonds to go bankrupt one after another, and the top 10 companies that make

  • almost 1/3 of the sp500 to slow down.

  • Its really difficult to predict whats going to happen tomorrow, leave alone a few months

  • from now, but the current administration is focused on another stimulus bill, so the market

  • will probably keep rising at least until the summer.

  • If a correction would happen, it will probably be in the second part of the year, or maybe

  • not this year, because the market doesn't follow any logic.

  • Even if I bring up a thousand logical arguments why the market is overvalued, the market might

  • take an entirely different direction.

  • But it doesn't hurt to be ready for such a crash.

  • Meanwhile, you can get at least 2 free stocks from Webull if you use the link in the description.

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A few years ago, if you would say, let's print money to make everyone rich, no one would

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The Next Market Crash - 5 Signs

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    Summer posted on 2021/03/02
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