“Remember the word “bubble”, you heard it here first…”
Donald Trump, December 19th 2015.
Love him or hate him there is one thing nobody can deny:
Donald Trump knows a lot about the US economy!
He is part of the top 1% running this country and has built a multi-billion dollar fortune
So is the Republican frontrunner full of hot air again?
Or is this a slip of the tongue from somebody who knows more than he is willing to share with the rest of us?
The answer to this question will shock even hardcore liberals.
Here what Trump had to say about this “bubble” on December 19th 2015.
“We could be in bubble and that bubble could crash and it’s not going to be a pretty picture. You know the market is going down big league the last couple of weeks. But we could be in a big fat bubble and if that bubble crashes it’s a problem. The word bubble, remember the word bubble… you heard it here first… I don’t want to sound rude but I hope that if it explodes it’s going to explode now rather than 2 months into another administration.”
If you too are feeling scared or confused, than this presentation will shed light on what’s really happening right now.
If give me just 10 minutes of your time,
I promise that by the end of this short video you will understand more about the economy than many Harvard graduates.
My name is Charles Hayek and I am a retired economics Professor.
For most of my life I have studied macroeconomics and the cycles of boom and bust in the global economy.
In my research I have uncovered a strange pattern that has been going on for the past 20 years.
A BIZARRE ECONOMIC CYCLE INTIMATELY LİNKED TO EVERY US ELECTION SINCE THEN
Right now, I will show you the hard facts that lead me to this conclusion in plain and simple English
So that by the end of this video you can make your own choice
And be better prepared for what’s to come.
But to understand how this bizarre pattern works, we need to take a short look back at 1999.
It seemed like a totally different America than the one we are living in today.
The stock market was booming thanks to the internet companies, affectionately called “the dot coms”.
For many Americans, investing in the internet companies seemed like the quickest way to become rich.
More and more people put their savings into the stock market driving it higher and higher.
They gambled their money on the hope that they could sell these stocks for 2 to 3 times their value.
And everybody was praising the Clinton administration for creating the biggest economic growth in US history.
FOR A TIME IT WORKED. TO MANY, IT SEEMED LIKE THE PARTY WOULD NEVER END
Even the Chairman of the Federal Reserve, Alan Greenspan said:
“Technology is creating a new economy, one where the old rules no longer applied”.
The FED was so confident that in February 2000 it began raising the interest rates to their highest level since 1995.
At the same time, bad economic data started to come in.
The previous holiday season that was supposed to bring big profits to internet based companies was a major disappointment.
And it was not just online shopping… ordinary Americans bought less and consumption was dropping.
While the nation was preparing the next election, the house of cards built around the stock market started to collapse.
ON THE 12TH OF APRIL 2000, THE NASDAQ DROPPED BY 386 POINTS
It was the largest drop ever recorded and by the end of the next week, Wall Street had lost almost a quarter of its value.
The long economic boom of the late 90s became a gigantic bust.
Bush was entering at a time when the NASDAQ had lost 60% of its value, erasing 7 trillion dollars of American wealth.
Clinton’s economy grew on the back of the dot com bubble. And now, everybody was looking to Bush to get the economy going again.
But before going any further, let’s take a short step back and see what we can learn from this.
An economic bubble grows around an asset that becomes very attractive to investors.
In the 90s this asset was the internet company stock.
Greed attracts more and more people who gamble their money hoping that prices will go up and they will sell for a profit later.
When people are blinded by the bubble they think that growth will never end.
This delusion is fueled by the media, economic experts and even the FED.
At this point something very interesting happened: as the economy showed signs of slowing down the FED raised the interest rate.
And, curiously, some months before the next US election, the bubble bursts crating massive economic pain.
We now have a theory that we can put to the test:
- A bubble emerges and grows on low interest rates.
- Investors and speculators are “all in” as the experts say everything is fine and growth will continue.
- The FED raises interest rates before the next Presidential election.
- The economy begins to slow down.
- The bubble bursts and the next President has to deal with the aftermath.
IF THIS SOUNDS CRAZY TO YOU RIGHT NOW, LET’S PUT THE THEORY TO THE TEST
Before the 2008 election another bubble burst.
The asset this time was houses.
The Federal Reserve had cut interest rates from 6% in 2001 to 1% in 2003.
Rock bottom interest rates created a huge demand for mortgages as they were cheaper to pay off. Everybody wanted a house and that pushed prices up. You could get rich just by becoming a homeowner as the price kept going up!
Soon, even people who could not afford to make a down payment or could not provide proof of a steady income and collateral were given loans to purchase new homes.
If these people defaulted on their payments, the bankers didn’t care. They would be left with the house, an asset that was rising in price. These no down payment, no collateral mortgage loans called subprime mortgages were given to millions of low income families.
Now, the bankers had a brilliant idea… bundle up the normal mortgages with the subprime ones and sell them to other banks, pension funds, hedge funds and sovereign funds. Mortgage payments generated huge profits and demand was high for this new type of speculative contract now called Collateralized Debt Obligations or CDO’s. No one thought a mass default on mortgage payments was possible.
Banks Big and small gambled on CDOs thinking that prices will continue to rise.
SO HOW DOES OUR THEORY STAND:
- We have a new housing and subprime mortgage bubble created by low interest rates. Many Americans thought housing was a secure investment. The banks gambled huge sums of money on CDOs.
- The “experts”, again, said everything was fine.
- The economy started to weaken in late 2007.
- The Fed increased the interest rates.
- The bubble violently burst just as Americans were preparing to vote the 44th President of the United States.
Everything that happened in 2000 happened again in 2008.
Only this time the bubble was bigger and the damage was global and massive.
The theory is proven correct.
So… what about right now?
THE ONLY THING THAT’S MISSING IS THE BUBBLE THAT TRUMP WARNED WILL BURST BEFORE THE NOVEMBER ELECTIONS
Does he know something we don’t?
Well, to understand exactly what a bubble is, we need to look back at the dot com and the mortgage/CDO bubbles.
In both cases, people thought they had something that would never stop growing, something too big to fail.
In both cases, socks and housing attracted huge sums of money, driving their prices way beyond the actual value. This is just like gambling… buyers get the asset hoping they will sell it in the future for a profit. When the bubble bursts, those who are left with the asset suffer huge loses.An economic collapse is a scenario at which local, regional, or economy that dramatic downturn as negative effects of people’s capability undergoes.A collapse will make it hard for people to survive, the opportunity to survival is greater than in the case of a nuclear war.
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