Generational Dynamics

From the point of view of Generational Dynamics, a major global financial crisis is coming, and something will trigger it. China's stock market bubble is imploding. Global trade is slowing significantly. The S&P 500 price/earnings ratio is at an astronomically high 21.69, indicating a major Wall Street stock market bubble.

At some point, something will trigger the global financial crisis. Maybe the China devaluation will be the trigger, by creating a domino effect of some kind. Or, maybe the central banks of the world will find a way to increase the tsunami of money still further, flooding the problems for a while longer. They're certainly going to try -- though of course that's exactly what would create a currency war. All we can do is watch to see what happens next. 

The "China dream" is for China to replace the United States militarily, by taking control of the Pacific and Indian Oceans, and also to do so financially, by replacing the dollar with the Chinese yuan as the global reserve currency. This is the second disastrous setback to the "China dream" within the last month. 

First, in order to prove that it can replace the United States economically, China has to prove that it can provide a world-class stock market that can operate free of government intervention. And that objective is completely in shreds, after the multi-trillion dollar tsunami of money that was used to intervene in the Shanghai stock market, almost completely destroying it as a market. 

And now China has its second disaster with the surprise yuan devaluation, effectively declaring war on other countries' currencies. 

The humiliating devaluation was a move of almost complete desperation. China's economy is in serious trouble, and that's not the worst of it. China has a history of massive "people's rebellions" against an oppressive government, the last one being Mao's Communist Revolution that ended in 1949. From the point of view of Generational Dynamics, China is now overdue for the next one, and a Chinese financial crisis could be the trigger.

China stuns financial markets by devaluing yuan for second day running

The move sent fresh shockwaves through global markets, pushing shares sharply lower and sending commodity prices further into reverse as traders feared the move could ignite a currency war that would destabilise the world economy. 

There were widespread losses in Asia, and in Europe stock markets suffered falls of about 1%, with the FTSE 100 tumbling almost 2% at one stage.

6 Disastrous Economic Bubbles

Economic bubbles form when rampant speculation and overconfidence in the marketplace cause the price of a commodity to soar to dizzying heights. The sudden surge of financial hysteria allows people to strike it rich in the short term, but the fallout when the bubble inevitably bursts can be enough to ruin investors and bring whole economies to their knees. From a 17th century Dutch tulip craze to the infamous 1929 stock market crash, learn the stories behind six historical booms that eventually went bust.

DYI