MTL - Rebirth of Hong Kong 1981-Chapter 983 Friday
Chapter 983 Friday
In the blink of an eye, the time entered October.
During this period of time, Yang Chen had been running between his home and the New Territories High-tech Industrial Park, but after entering October, Yang Chen suddenly returned home and stayed out of the house.
No one knew a storm was about to break out.
In 1987, the famous Black Monday, an unprecedented stock market crash broke out in the financial history of the United States and the world. The impact and loss of this stock market crash on countries around the world far exceeded the two world wars. .
Since the end of World War II, the world has undergone post-war recovery one after another. Over the past few decades, except for some regional wars, the world has generally tended to be peaceful.
Even the Cold War between the US and the Soviet Union did not affect the economic development of all countries.
October 16th (Friday)
Yang Chen, as usual, was eating breakfast while looking at the newspapers organized by his aunt at home. During this time, Yang Chen had to read the major economic daily newspapers of various countries carefully.
To say that he is not curious about black swan events such as Black Monday in history is absolutely false.
Anything happens for a reason.
For a big event like Black Monday, it should be said that there should be more clues that can be found, but, of course, Yang Chen, like many people in later generations, could not find any specific basis.
The only reason why he thinks that the U.S. stock market fell in 1987 and the global stock market followed suit, there are two possible reasons.
First, the current huge fiscal and trade deficits in the United States.
Second, the bubble economy.
Let's talk about the two major deficits first. In Yang Chen's view, these two major deficits are the cause of the whole thing.
In 1986, the US fiscal deficit was as high as 220 billion US dollars, and the trade deficit was as high as 150 billion US dollars, both of which were the highest on record in the previous US fiscal deficit and trade deficit.
You know, the United States was the largest creditor country in the world during World War II. After the end of the war, all European countries owed the United States a lot of debt. From war to economic recovery, European countries depended on Americans for blood transfusions for them to survive. of.
But things are getting better now. The situation has suddenly reversed. The United States has inexplicably become the largest debtor country in the world. The huge fiscal deficit, coupled with the ever-increasing trade deficit, makes international capital generally less interested in investing in the US market.
Some people may say that this deficit is not even a fraction of the huge debt owed by the US government decades later. How can it affect the confidence of international capital in the US.
Regarding this issue, we need to see two things clearly.
There are two reasons why the United States in later generations has not been affected by debt.
First, a strong military force.
Since the end of the Cold War, the United States has become the only superpower in the world, both in terms of economic strength and military strength. the confrontation.
Second, petrodollars.
The United States has controlled the world's largest oil exporting country through several Middle East wars. Oil resources affect the development of the world economy. This has been fully reflected from the two oil crises.
The United States uses various means, including war, to bind oil and US dollars. If countries in the world want to import oil, they must pay in US dollars. As a result, countries become dependent on US dollars.
The trade of all countries in the world is inseparable from the U.S. dollar. The U.S. government is naturally not affected by debt. No matter how large the number is, it is only a number.
But in 1987, that is, now, the United States is only one of the superpowers, the Soviet Union has not fallen, and the United States is better than the Soviet Union economically, and the military does not have much advantage.
Not to mention the US dollar. Although the United States made European countries dependent on it before and after World War II, European countries have recovered from the war over the past few decades.
In addition to militarily uniting with the United States to resist the Soviet Union, these countries have begun to constantly compete with the United States economically. Even the island country, known as the number one younger brother of the United States, is also trying to buy out the United States and occupy the United States peacefully, not to mention other European countries.
Under such circumstances, the huge fiscal deficit and trade deficit in the United States make investors less confident in the United States. This is a normal thing.
Why is the U.S. economy not very different from other countries at this stage, but after the fall of the Soviet Union, it has soared into the sky, far behind other countries, and even requires all the countries in Europe to add up to be worth the United States.
The reason is here. At this time, the United States is strong, but it is not strong enough to cover the sky with one hand.
Fiscal deficit and trade deficit were one of the factors that caused the US stock market crash in 1987, and also the cause of the second factor.
The second reason for the stock market crash in 1987 is undoubtedly the bubble economy, which is the same as the subsequent real estate bubble in the island countries.
How did the bubble economy in the United States form?
The reason lies in the two major deficits. Under the pressure of huge debts, if the United States wants to continue to promote domestic economic development, it must absorb foreign funds to make up for the lack of domestic funds.
To attract foreign investment, it is necessary to maintain a high level of interest rates.
Under the slowdown of the global economy, the United States maintains high interest rates, which naturally attracts countless foreign capital to enter the United States, and the industrial investment environment is not good under the de-industrialization of the United States.
Since high interest rates have a direct impact on stock market prices, a large amount of foreign capital has entered the US stock market, and driven by foreign capital, the false prosperity of the US stock market has been promoted.
From 1982 to 1987, in just five years, the Dow Jones index of the United States more than tripled, the Italian stock market more than tripled, the Japanese stock market more than tripled, and the Federal German stock market more than doubled.
As we all know, finance and economy complement each other. No country in the world can support the endless rise of the stock market. When the economic development cannot keep up with the pace of the financial market, the collapse of the financial market is the inevitable result.
The U.S. stock market has been rising for a long time, but the economy is stagnant or even regressing. This is like building a tall building. The foundation is not well laid. The higher the building is, the worse it will be when it collapses.
When a stock cannot rise, it will naturally fall. The so-called prosperity must decline. This is the truth.
Couldn't find a specific incentive, Yang Chen could only attribute the stock market crash to the above two reasons, as to why it happened at this point in time.
From Yang Chen's point of view, this is like buying a house by yourself. Originally a house worth 1 million, you have already sold 1.2 million, and you have reached the bottom line. Once the price of the house rises, even if it only rises by 100,000 yuan. Thousands of dollars, you won't buy it again.
Similarly, when the stock market has risen to a certain level, everyone has spent almost all their money, and some people are even ready to take it when they are ready, then the problem will come.
The stock market crash in October is not an inevitable event, but it happened at that point in time, so everyone couldn’t find the specific reason and felt baffled.
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(end of this chapter)
