12
Aug
11

Big Stock Market Crash Coming?

The Dow Jones has been volatile of late with 5 of the last 6 trading sessions in the top 20 of all-time in terms of point up/down.  Going back to 2008 (which held many of the records for all-time points up/down) there seems to be some strong similarities. With the Europe debt crisis contagion now spreading to the most powerful of European economies like Italy, Spain, France, UK and Germany, it has been over a year and a half since this crisis was first reported and it seems to be getting worse. With the US debt being downgraded for the first time in history, the debt crisis is making itself global.

The only solution for governments to contain their deficits is to cut spending. If you look back in history, each time governments have cut back spending a recession has commenced. In fact most if not all economic booms have heavily relied on heavy governments spending. Take a walk down history to the Great Depression. Contrary to Ben Bernanke’s opinion, in the early 20’s there was a depression and the governments turned on their monetary policy taps making credit very easy causing the roaring 20’s. Once the 1930’s hit, the debt hangover caused the government to make cut backs as well as the markets to further collapse after their violent rally after the initial 1929 crash.

Does this sound all but too familiar? Mutual funds and hedge funds are closing at a record pace due to lack of retail investors/subscribers, trading and investment firms are losing revenues and some generating big losses (run by big names such as the likes of James Paulson), overall volume is drying up and financing for non-big boy companies as well as IPO’s drying up. With the governments over-extended from the 2008 crisis, how can they protect from a crash to happen (especially with their pockets as empty as they are right now in terms of finances).  Is the recent volatility setting the stage for the biggest crash in the history of the stock market to occur?

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