After the Fed Reserve hiked the interest rates to 3 to 3.25% on 22 Sep 2022, the following events happened very quickly :
- Bond bloodbath. We nearly saw a Lehman-like crisis in the UK. The UK pension funds were selling gilts frantically due to margin call on their leveraged bets. And the Bank of England had to reverse course of tightening and did quantitative easing to calm the markets while having the worst inflation in recent history. With the easy money policy that lasted for so long, we would assume that the cumulative lucrative leveraged bets over the years have grown to gargantuan proportions.
- Currency rout. The Bank of Japan had to sell treasuries to prop up the yen. The British pound was pounded negative 7.4% in 2 days. They are behind the US curve in hiking interest rates.
- Energy crisis. The Russian gas pipe lines Nord Stream 1 and 2 were sabotaged. Many EU economies are dependent on Russian gas. UK is already expecting utility rates to double or triple causing much economic hardship to the lower income groups.
- Housing price deceleration. This is expected as the US average mortgage rate has hit above 7%.
- Bear global stock markets. All major stock markets are in bear territory. The US stock markets had probably lost USD 8 trillion dollars in the slow train wreck in one year. Likewise for the rest of the western capitalism states. All previous market routs paled in comparison.
All economies are caught between the rock of increasing interest rates to fight inflation and the hard place of quantitative tightening in a period entering technical recession or rapidly slowing growth.
You can see the colossal losses in the stock markets just in the US. Due to media censorship, much hardship faced by the rest of the world is not reported.
The current crisis indeed followed the 7 year apocalypse since Sep 2001, Sep 2008 and Sep 2015 in term of severity of adverse market conditions. But will the whole financial system collapse soon ? Our Lord is sovereign and He alone decides when He will destroy all wealth in one hour. Rev 18:17-19. All glory and honor to our Lord.
I noticed the sudden intensity of famine, earthquakes and other natural disasters. The Horn of Africa faces the worst drought in history and requires grain relief or will face terrible famine. There were several earthquakes measuring Richter scale 7 happening within 2 weeks in various places around the world. The Hurricane Ian caused the worst economic damage to the state of Florida estimated at USD 260 billion. The Florida governor said it was the worst 500 year flooding event.