Wind Rises 2005

Chapter 624 A cry of mourning

On Monday, September 9, chaos on Wall Street triggered shocks in the U.S. stock market.

Lehman Brothers filed for bankruptcy and American International Group was in trouble. Investors were worried that consumers and companies would have difficulty obtaining loans. They were also worried that a financial crisis might shake up the entire economy.

As a result, the stock index fell nearly 5% on Monday.

On Tuesday, September 9, the government launched emergency rescue measures. The Federal Reserve agreed to implement an $16 billion rescue plan to allow the government to take over the troubled insurance giant American International Group.

However, things did not get better, but the panic became more and more intense.

On September 9, the financial crisis entered a new stage.

Many credit markets have stopped functioning as investors around the world frantically pour money into the safest assets, such as U.S. Treasuries.

The stock markets of many countries have collapsed, and many Wall Street investment banks have announced that they are about to go bankrupt.

On September 9, in order to save the capital market, the U.S. Securities and Exchange Commission issued an order banning short selling transactions in 18 stocks. The short selling ban was eventually extended to October 799.

However, the 20-day protective policy did not prevent the stock market from falling, but instead plunged the capital market into a new round of panic.

This ban is announcing to the world that the liberal economy believed in by some American politicians and economists is a lie, and it will only plunge the American economy into an abyss when it collapses.

Keynesianism and Hayekism have always had their loyal supporters, and even countless people argue about it every year in an attempt to prove that their respective theories are the truth.

Although the West has always advocated its own market economy, in actual operation, Keynesianism has become popular.

This is almost a consensus that managers around the world have already reached. Hayekism is pursued at the micro level, but Keynesianism must continue to be wielded at the macro level.

Especially when a major economic crisis occurs, almost all governments will find ways to rescue the market.

In addition to stabilizing the financial market, rescue measures will inevitably involve state-owned assets to acquire non-performing and bad debt assets and take over those giant companies that are on the verge of bankruptcy and have great influence.

If we don't do this, countless people will be displaced, and many people will even choose to jump off buildings.

But economic crises are often like an avalanche. Once a huge disaster breaks out, it is beyond human power to stop it.

On September 9, the U.S. government came up with a 20-page proposal, referred to as the Troubled Asset Relief Plan, calling on the government to invest US$3 billion to purchase related mortgage assets.

This proposal is so simple that it only requires money and nothing else.

As a result, the U.S. Congress remained unmoved, because many people felt that why should ordinary people pay for the trouble caused by Wall Street.

But the situation was pressing, and soon Washington Mutual was taken over by the Federal Deposit Insurance Corporation, becoming the largest bank failure in U.S. history. Then JPMorgan Chase once again acquired some of the assets of Mutual Bank for US$19 billion, and then JPMorgan Chase rescued Wachovia Bank.

At this time, the U.S. Congress finally stopped bickering and finally began to face reality.

U.S. Treasury Secretary Paulson announced that the $7000 billion bailout bill was about to be passed; but he was slapped in the face and the bill unexpectedly failed to pass.

This unexpected move caused the U.S. stock market to plummet 8.8%, which was the largest one-day decline in the U.S. stock market since the 1987 stock market crash. It has to be said that most people sometimes have narrow-minded ideas and always want to punish bankers. However, they do not know that after the bank collapses, their savings and wealth will also be wiped out, and in the end they will die together.

As we all know, financial capital markets do not create wealth.

Wealth in the capital market will neither be created nor disappear out of thin air. It is nothing more than a zero-sum game.

Some people lose while others gain. Naturally, some people benefit from the collapse of the financial market caused by the subprime mortgage crisis, and Ma Liang is one of them.

Different from the previous small-scale troubles, in just a few days, he mobilized all the funds he could mobilize to short U.S. stocks, especially those stocks with the most exaggerated declines in memory, and he made a heavy bet.

As a result, Ma Liang's income has exceeded the total of the past year.

After careful calculation, I actually made more than 3 million US dollars in profit. Although it is not comparable to those big short sellers, it can be said to be the most profitable time for him.

And all this is far from over. Although the Securities and Exchange Commission issued a ban on short selling of 799 stocks, it did not prevent him from continuing to make money.

After all, the impact of the subprime mortgage crisis will not fade until next year.

In the days that followed, the global market was still in panic. All hot money poured into safe-haven assets, and operational financial support almost stagnated.

After all, on the day after the collapse of Lehman Brothers, the newly issued US Treasury bonds with an interest rate of less than 310% were worth hundreds of billions of dollars. The commercial papers of the real enterprise giant General Electric were ignored in the market. Small and medium-sized enterprises are even more struggling, and the credit crisis has spread to the real economy.

Investors began to flee frantically from the capital market, from any investment institution similar to Lehman, and from any company.

Companies cannot raise money and have to lay off workers. Those who were laid off lost their income and had to live frugally. After being unable to repay their mortgages and losing their homes, they became more cautious about spending money, further reducing consumption and investment. The economy fell into a vicious cycle.

In October, there was a run on Wachovia Bank, the fourth largest bank in the United States. This was a situation that only occurred during the Great Depression. At this time, the United States was on the verge of economic depression.

The stock market also plummeted 18% from the beginning, and the automobile industry also experienced a cold winter, with automobile stocks falling hugely.

Since then, U.S. stocks have fallen nearly 50% from their highs.

The unemployment rate in the United States is close to 10%, and other countries are not much better. The European country Iceland directly declared bankruptcy.

The whole world fell into mourning, as if there was no hope.

After all, companies are laying off workers, people are unemployed, they are afraid to consume and invest, banks are afraid to lend money, and the scale of companies is declining and they are continuing to lay off people, and the economy has fallen into a stagnant water.

Coupled with the decline in U.S. consumption and foreign trade, the disaster in the financial system quickly spread the crisis to the world.

From London to Madrid, from Dublin to Bern, housing prices are plummeting. Even China, where real estate is just about to take off, has been affected to varying degrees.

Stock markets around the world have fluctuated and fallen like the U.S. stock market, with no survivors.

People say this is the most serious crisis in history. The coldest winter in the world has surpassed the one in 1929 and the one in 2000. People are shivering in the cold wind and scared out of their wits, as if the end of the world is coming. advent.
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PS: I have been inspired in the past few days, so I have been catching up on the progress of the new book, which has delayed the update of the old book. I am sorry.

(End of this chapter)