Thursday, November 24, 2011

Forecasting the Next Crash of the Stock Market

Timeline for the 2010s

For the wordly investor, the main event of 2011 so far has been the crash of the stock market in the U.S. and elsewhere, along with the bedlam in kindred fields such as commodities and currencies. As is often the case, the mayhem caused by the actors – be they part-time amateurs or full-time professionals – was for the most part a premature and avoidable ordeal for the entire community.

The smashup of the markets was prompted by the specter of a full-blown recession in the global economy in the near future. One reason for the jitters stemmed from the fitful progress of the industrial nations such as the United States, Britain and Japan. Another factor lay in the brouhaha over the debt crisis in Europe, along with widespread fears of a breakup of the euro plus the collapse of the regional economy.

For a number of years, the politicians in the developed world went out of their way to prop up the distortions in the marketplace that emerged during the run-up to the financial crisis of 2008. Instead of prolonging the malady, the politicos should have allowed the economy to heal itself. Better yet, public policy could have helped to undo the damage throughout the entire meshwork of production and distribution. Thanks to the counterproductive moves of the pols, however, the economy was doomed to struggle and flounder.

On a positive note, the crash of the stock market this year popped up in sync with the long-range schedule of meltdowns. As a result, the sequence of bombshells appears to be back on track despite the partial derailing linked to financial crisis of 2008. As things stand, the next crackup of the bourse is likely to occur around 2017 in line with the running sequence of flaps in the modern era.

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