On 5 Nov 2021 The US Composite Wilshire peaked at 48809.39 trillion dollars. This was the 90th year of a US Great 90 year Third Fractal starting in 1932 and completing a 1807 maximum 36/90/90 year :: x/2.5x/2.5x self-assembly asset-debt macroeconomic fractal growth series. Since 1982 higher high equities valuations have been propelled by cascading lower interest rates and since 2008, by near zero prime rates and outright central bank money creation to monetize the 2005-2008 toxic-asset-debt bubble and to later monetize the 15-20 % unemployment rate created by the pandemic.
Global central banks’ policies have averted a 1930’s type of depression. Since 2020 too low of interest rates associated with mortgage backed securities for too long of time have created Western property and equity super bubbles with 30-40% housing appreciation over two year’s time, transient dr/dt record growth of equity valuations, and ongoing continuing higher and higher commodity inflation with a 60 percent relative divergence of lower equity prices and higher commodity prices since the November 2021 Wilshire high. The higher commodity prices are impactful and have left the majority of consumers on the thinest of viabilty edges. And in principally consumer-based economies, this inflation is resticting purchases and resulting in lower company profit margins and relatively high inventories – the opposite of what is expected in a supply-line limited system. In response to the historical increases in consumer inflation central banks have allowed market-based increases in interest rates of sovereign debt instruments which have far outpaced the central bank prime rate increases. The former rate increases have resulted in 30 year mortgages rates above peak rates for the last 12 years. These rates have reduced the population capable of buying an availble over-priced house to a historically small proportion.
Western countries are faced with the dual prospects of increasing commodity inflation and 15-20 trillion losses in equities. Increasing energy cost and grain shortages secondary to Russia’s illegal action will continue global inflationary pressures.
China, the world’s new manufacturing Hegemony, has unstable and mighty fraility in its 1989-equivalent Japan-like property supper bubble with a 40 times asset valuation to annual income ratio.
Evergrande’s valuation collapse and the Bank of Shanghai valuation collapse are congruent. Expect a transient nonlinear decline for a global equities and commodities at the x/2.5x :: March 2020 33/83 week first and second fractal time units.
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