The volatility index, $VIX, is now trading above 65, a level only seen 2 previous times in history: the 2020 pandemic, and the 2008 Global Financial Crisis

2 comments

1. The context provided by u/nationalcollapse

   needs to be posted into every single one of these threads about the current downturn in markets.

   It will once again be a result of shortsighted strategy from the titans of industry that has created this mess and current instability.

   They will try to tell you it’s your fault, or the FED’s fault, or Trump’s fault, or Biden’s fault….but the reason this keeps happening, is that the long-term health of our economy is completely absent from modern decision making processes in every c-suite and boardroom across the globe.

   If you want this to stop, we gotta find a way to get a handle on that. Any other step you try to take, will be leveraged by those c-suites and boardrooms to make ever increasingly risky and shortsighted decisions to maximize profit now and keep their fingers crossed that they can buy some headlines and get bailouts later.

   We gotta stop this shit, it’s crazy.

   Anyway, some insight from u/nationalcollapse

   > For people who are looking at global markets right now and thinking “hmmm, what the heck is going on?”
   >
   > I’ll explain it as I understand, but if I’m a bit wrong please correct me in the comments:
   >
   > Japan has a massive (over 200%) public debt to GDP ratio.
   >
   > In 2010, the Bank of Japan reduced its headline interest rates to zero:
   >
   > https://tradingeconomics.com/japan/interest-rate
   >
   > From early 2016 to the beginning of this year, they were actually below zero.
   >
   > This has allowed individuals and institutions to borrow trillions of USD worth of yen, convert it to dollars, and buy assets (stocks ect.) They owe the debt in yen with extremely low (or possibly negative) interest rates. It’s free money! Estimates vary hugely, but I’ve seen guesses of around $20 trillion plus entering global markets from this inflow of “free” money.
   >
   > But wait.
   >
   > Then inflation got bad in Japan.
   >
   > Bank of Japan raised rates to 0.25% a few days ago.
   >
   > This caused the yen to rapidly strengthen.
   >
   > Now all the yen-denominated debt is very very toxic. Institutions that borrowed yen to buy dollars (or other national currencies) and then stocks, bonds, ect. under the assumption that yen only goes down are forced to sell as the yen appreciates.
   >
   > An especially interesting scenario: let’s say markets continue crashing badly and the US Federal Reserve does an emergency rate cut in response. That normally helps, right?
   >
   > Usually, yes.
   >
   > But this time a US rate cut would almost certainly further strengthen the yen against the dollar, causing this cycle to exacerbate even further.

2. So much for the “strong economy” most people here were gaslighting others about.