About the recent crash

This week, stock markets fell (and crypto market with it) as speculators grappled with the latest employment data coming out of the US. The data doesn’t seem all that alarming, stocks and crypto have recovered… for now. But the markets are right to be concerned. The markets were thrown into a panic as funds started selling off risky shares such as tech stocks and cryptocurrencies and bonds and buying safe ones. The VIX volatility index, which is supposed to measure the mood on ‘Wall Street’, is at its highest since the first weeks of the pandemic, which in turn was the highest since 2008. Crypto Fear and greed index was also set on 31 out of 100 which meant fear on the market. The Japanese stock market plunged further than the others, with a 12% fall. This was because the Bank of Japan has just decided to raise interest rates for the second time this year, and announced the beginning of the end of quantitative easing. The trigger was the release of employment figures in the US. They showed that the unemployment rate is up 0.2 percentage points (in early 2023 it was 3.4% and now it is 4.3%). These are signs of a slowing down in the economy, but it is not an earth shattering news. Commentators were expecting a recession last year, either a hard landing or a soft landing. However the economy is a chaotic system which, like the weather, doesn’t lend itself to precise predictions. In spite of these obstacles, including interest rates which are at a 23-year high, the US economy powered on with exceptional growth levels. It kept the rest of the world economy from sinking into recession. But now this appears to be coming to an end. This is what is making the markets so jittery. It’s not the data in itself that is alarming. But everyone knows that the economy is very fragile, and this is a sign that it could be about to break. Should we panic? Maybe. Sadly cryptocurrencies are not the solution for the crisis even tho bitcoin was specially made for this after the 2008 crash. But government and central bank control isn’t a solution either because you can’t come out of a crisis with some clever policy, if this was possible they would do it after the 2008 crash.