5 Predictions of How the Next “Unpredictable” Stock-Market Drop Will Occur
The one thing we can predict with absolute certainty is that when the stock market does its next major correction, everyone will say “how could that possibly have been predicted?” After all, who could imagine a global, airborne virus. Or a thing called credit default swaps. Or a tech bubble. The interesting thing is that Covid didn’t even cause a market plummet of significance, just some inflation… where the market proved how much more people would pay for certain items. Let’s consider some scenarios, from the silly to the laughably real.
- The fires in California, or some other global warming catastrophe finally puts a string of insurance companies over the edge and even the reinsurance market (insurance for the insurance companies) fails, so they default. And they default not just on their policy claims — that would be mere child’s play — but they default on all the annuity payments they hold for senior citizens. This in turn causes an economic tsunami that draws down the stock market like a big wave sucking the water out of a swimming pool.
- Or perhaps you like this one better. As the younger generation who grew up entirely during the time of ecommerce becomes the major cash holders of the country (and world), another, deeper round of retail contraction occurs. These are folks who, for instance, NEVER read a paper news medium, hardly ever felt they had to jump in their cars because of some last-minute purchase emergency, and frankly get much better satisfaction from online purchasing. When the remaining department stores and even lots of big-box discounters fold, the economic tailspin could turn into a vortex. Maybe by that time, the only three people with money, Bezos, Musk, and the Zuck will move to Utah and create a new nation/cryptocurrency. They can call it Americon.
- Or there’s the tried-and-true virus angle. You thought airborne was the be-all-and-end-all (is that a pun?) disease mechanism… how about water-borne??? What if the new fish flu is resistant to heat so it can’t even be boiled off? Your choice is to dehydrate or risk getting fish flu, which is like a cross between flesh-eating bacteria and the hemorrhagic fevers (Ebola, etc.). In case you never read the book The Hot Zone, hemorrhagic fevers make your insides “bleed out” through any hole they can find. 20 million people died from Covid. Mother Nature is serious about reducing our gluttonous smothering of the planet. How many names will she call next time?
- Or perhaps a corona mass ejection is more your speed. A CME is a sort of massive sunspot that genuinely disrupts electrical and electronic things on Earth. Maybe a big CME could knock out just enough of the so-called ‘democratized’ Bitcoin miner world, that Bitcoin didn’t actually fail, but the marketplace became so unresponsive that it might as well have collapsed. After all, a market that has no activity ceases to be a market. The small portion of corporate holdings in crypto isn’t a risk in-and-of-itself, but the stress on investments creates a lot of liquidating, which in turn starts the spiral.
- One last possibility. A very small chunk of Greenland or Iceland or one of those other hunks of ice in the freezer falls off and floats away. It floats all the way into the Chesapeake Bay! It might be a small piece relative to Greenland, but it’s big enough to totally clog up the Potomac. Commerce goes into a lockdown, not to mention no crabs, and the economy grinds to a halt…
With any of the scenarios above, it’s not the direct effect of any calamity, but the psychological reactions that cause the real trouble. Whether you like to hear this or not, our entire monetary system — just like Bitcoin — relies on simple faith that a dollar is worth something…. that you can trade it for a loaf of bread for instance. Once that faith is in question, the system is at risk of an implosion.