Is the financial system crash upon us? Here’s what you need to know about the coming fiat currency and financial system apocalypse.
The global financial system today is showing signs of severe distress. But is it the beginning of a global financial system apocalypse?
Unlike the 2008 crisis, this time, the underlying issues are far deeper, and the usual remedies may not work.
Today’s alarming events may just be the beginning and the Federal Reserve’s usual tactics of cutting interest rates and pumping money into the financial economy might not be enough to save the Great Global Fiat Currency Debt System Experiment.
In This Article
- Market Downturn and Margin Calls
- Bear Market and Flight to Safety
- Federal Reserve Intervention and Quantitative Easing
The current global financial situation is precarious. While today’s events were not disastrous, they signal potential future dangers. The fundamental weaknesses from the 2008 financial crisis were never properly fixed, only temporarily covered up.
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So let’s take a look at the three phases that could certainly lead to a final global currency system apocalypse.
The Three Phases of the Financial System Apocalypse
(1) Market Downturn and Margin Calls
A sudden and significant drop in global markets can trigger Margin Calls. A Margin Call is a demand from a broker for an investor to deposit more money or securities to cover potential losses.
When this happens, large investment firms and hedge funds often sell assets like gold to cover their losses, which drives down the price of gold during market crashes.
For example, if the stock market plummets, investors who borrowed money to buy stocks (using leverage) must quickly provide additional funds or sell their assets to meet the broker’s requirements.
This forced selling can create a downward spiral, where falling asset prices lead to more Margin Calls and further selling, exacerbating the market downturn.
(2) Bear Market and Flight to Safety
Continued sell-offs can lead to a Bear Market, which is a prolonged period where investment prices fall significantly, typically 20% or more from recent highs.
During a Bear Market, investors look for safer places to put their money. This rush to safety causes the prices of gold, the US dollar, long-term US Treasury bonds, and even Bitcoin to rise, as these are seen as safe investments.
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A Bear Market reflects widespread pessimism and negative investor sentiment, where people expect prices to keep falling.
In such times, they often shift their investments to assets that are considered more stable and less risky. Gold is traditionally viewed as a safe haven because it maintains value better than most assets during economic downturns.
Similarly, the US dollar and US Treasury bonds are seen as secure because they are backed by the US government. Recently, Bitcoin has also been perceived as a hedge against traditional financial instability.
(3) Federal Reserve Intervention (Bringers of the Currency System Apocalypse)
If the markets keep falling, the Federal Reserve (the central bank of the United States) may step in.
They will cut interest rates and use Quantitative Easing (QE), which means buying long-term securities to inject money into the economy and encourage lending and investment.
However, this can lead to the debasement of fiat currencies (making money less valuable) and eventually freeze credit markets, where businesses borrow money.
During the 2008 financial crisis, the Federal Reserve used massive QE to stabilize the economy. By purchasing large amounts of government bonds and mortgage-backed securities, the Fed increased the money supply, making it cheaper to borrow money.
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While this helped to avert a deeper recession, it also set a precedent for relying on QE during crises. In today’s context, the effectiveness of QE is uncertain.
Further QE could lead to fast-rising inflation and erode the value of currencies. If banks, businesses and consumers lose additional confidence in the financial system, they might hoard cash instead of spending or lending, potentially leading to a freeze in the credit markets. It won’t take much.
The Bottom Line
Today’s financial troubles might be early warnings of a much larger crisis. The three phases—Market Downturn and Margin Calls, Bear Market and Flight to Safety, and Federal Reserve Intervention and Quantitative Easing—could lead to the collapse of the fiat financial system. It’s vital to stay aware and ready as these uncertain times unfold.
