For a long time, the stock market has been regarded as a place to promote wealth growth. So, in the past 12 months, which country has had the most stock market gains?
Relevant data show that since last year, despite the severe impact of the new crown pneumonia epidemic, the Dow Jones Industrial Index in the United States has achieved an increase of more than 50%, which is higher than its annual average of 9% from 1986 to 2018. Stock return rate; China’s stock market, from the Shanghai and Shenzhen 300 Index, has achieved a 25% increase from March 2020 to the present. This data is also higher than the average annual return rate of 15% since 2015; while Japan, from the epidemic Since its inception, it has also achieved a 50% increase, which is also higher than its average annual rate of return of 5% since the bubble burst in 1990. If you simply look at the stock markets of the United States, China, and Japan, the growth rates of the three countries are very alarming, and the growth rates since the epidemic have all been significantly higher than their historical averages.
But even so, they are not as good as the Republic of Zimbabwe, a landlocked country in southeastern Africa.
If you, as an investor, bought the Zimbabwe stock index in the past 12 months, then, now, you can get an investment return of 481%. Zimbabwe, an African country with only 16.9 million people, has surpassed China with 1.4 billion people, Japan with 126 million people, and the United States with 328 million people in terms of stock gains.
But such a data seems to be a warning at the same time that people are reveling in the stock market to make a lot of money.
Warning of tragedy in Zimbabwe
As early as 2000, Zimbabwe experienced hyperinflation.
Before 2000, Zimbabwe still had high-rise buildings far surpassing Beijing and Shanghai at that time, and these high-rise buildings were constructed as early as the 1980s and 1990s. Not only that, Zimbabwe is also one of the most educated countries in Africa, with about 90% of the population being educated. Harare (English: Harare), once known as “the world’s most livable”, is the capital and largest city of Zimbabwe, as well as the political, economic and cultural center of the Republic of Zimbabwe. It is located on the northeast plateau of the Republic of Zimbabwe, with an altitude of 1,480 meters, annual precipitation of about 1,000 millimeters, and an average annual temperature of only 18°C. It is cool like spring all year round, the four seasons are pleasant, and there are many magical balanced stone landscapes. It is called the “flower city” of Africa because of its excellent gardening.
It is such a prestigious place, but it has been completely ruined by inflation. Since 2000, Zimbabwe’s national currency has been depreciating continuously, and it has accelerated since 2009, with inflation reaching an unbearable 500 billion percent. Because of the high inflation rate, the Central Bank of Zimbabwe has taken an improvement measure in 2009, that is, it issued 100 trillion yuan of Zimbabwe banknotes, which is the banknote with the most “zeros” issued by a central bank in history.
In April 2009, the Zimbabwean government announced that it would no longer circulate its national currency and replaced it with foreign currencies such as the US dollar, South African rand, and renminbi. Prior to this, the Zimbabwean cash and bank deposits in the hands of the people could not be converted into US dollars. Later facts proved that such a measure did indeed have a certain effect on the ground. In the next four years, Zimbabwe has achieved a 15% annual GDP growth rate. Although economic development began to fall into low growth in 2014, Zimbabwe can still maintain an annual GDP growth of more than 3%. Until 2018, growth came to a halt due to the impact of global trade frictions.
2019 is a year of tragedy for Zimbabwe. After experiencing the impact of global trade frictions in 2018, in 2019, Zimbabwe suffered from severe food shortages due to drought and other natural disasters, and the economy once again experienced a severe recession. The Central Bank of Zimbabwe once again adopted the 2009 tactic, which is to continue to print more money. In fact, since 2020, nearly 70% of the currency has been printed out in order to save its economy. Although such an approach temporarily stabilized the economy, it brought about the consequences of rapid currency depreciation. In response to the new inflation, they issued a larger currency. The currency with the highest denomination turned out to be an astonishing 100 trillion. This has led to extremely high prices for various commodities in Zimbabwe. For example, taking a bus in Zimbabwe costs hundreds of millions of yuan.
And behind the surge in the Zimbabwe stock market, it is not because of how good the performance of listed companies is. The real driving force for the stock market to rise is mainly from its own fast-growing money supply.
Too big to fail
October 20, 1987, New York. The “stock gods” on Wall Street are recovering from a crash that they have never thought of. The Dow Jones Industrial Index fell nearly 20% that day. This is the first time that the stock market has seen such a situation since 1929. Both the media and the government are asking whether this will be another repetition of the Great Depression of 1929. Just when everyone was at a loss, Greenspan, then chairman of the US Federal Reserve, came up with an excellent idea: instead of letting these banks run out because of lack of liquid funds, it is better for the government to help them and take the initiative. Inject funds into these banks. This later became an action taken by the US Federal Reserve to prevent the market from falling sharply and continuously, including measures aimed at preventing the spread of panic in a short period of time, such as sharply lowering interest rates. This significant move is called the “Greenspan Strategy.” But this measure also has a side effect, that is: every time the Fed rescues the market, it will print a large amount of money to inject it into the market. The Fed sent a very bad signal to the market, that is: the government will use all means to prevent the crisis.
Although the stock market crash in 1987 took nearly two years to fully recover, the market knew that the Fed would rescue the market at all costs, which indirectly led to the financial crises of 2000 and 2008. In 2008, after experiencing the financial crisis, the Fed thought of a new method under the new chairman Bernanke’s takeover. That is: the Fed directly purchases non-performing assets when the credit market is frozen and other problems, so as to alleviate the market. At the same time, the Fed also sharply lowered interest rates to zero. This strategy did work for a period of time: the economy recovered, stocks rose, and company profits grew. However, in 2010, the Fed stopped printing money, which directly caused the Dow Jones Index to drop by 11% on the day the Fed withdrew its money in 2010. The reaction of the market made the Fed realize that because of Greenspan’s economic intervention in the past, the market has been highly dependent on the Fed’s monetary policy; if this problem is to be solved, it will inevitably experience the same results as the Great Depression in 1929.
Therefore, in order to prevent the economy from collapsing, the Fed chose to continue printing money on a large scale, causing the dollar to depreciate. This practice has been maintained for 8 years. In 2018, after the new Fed Chairman Powell took office, he adopted a tough attitude of raising interest rates. However, on the same day the Fed raised interest rates, the S&P 500 Index plummeted by nearly 17%. This makes people realize that not only is there a bubble in the current economy, but the bubble is so big that it cannot be pierced at all (the so-called “big but not falling”). Nowadays, global economies seem to have created a bubble market that is “big but not falling”, and a bubble era has arrived.
After a short trial, central banks around the world released quantitative easing over and over again. In 2021, stocks, virtual currencies, real estate, commodities, and even food, etc., will all begin to reach their peak prices. This increase scenario is actually under the background that all countries in the world are locked down because of the epidemic. The reason is naturally related to printing money!
In 2020, just in the United States, just in terms of stimulus measures taken because of the epidemic, four rounds of fiscal stimulus plans have been introduced, with a total fiscal stimulus of US$2.9 trillion, which is equivalent to 14% of the US GDP in 2019. The European Commission has also launched an economic stimulus package of 750 billion euros in 2020. Data for 2020 shows that by the end of the year, the total global debt reached 277 trillion US dollars, while the global GDP was only about 87 trillion US dollars, and debt was three times the GDP.
Therefore, the biggest and most difficult thing before us is how long can the quantitative easing policy be maintained? Once it’s time to squeeze the bubble, what will happen? In recent Fed meetings, Fed Chairman Powell has repeatedly stated that quantitative easing will continue, and people need not worry too much. But what will be the cost of doing so? The result is definitely at the cost of the depreciation of the dollar, and this is undoubtedly an overdraft of the fragile credit of the dollar.
On the other hand, the bad results that happened in Zimbabwe are all related to inflation. The Republican John Tamny, who holds the view of supply economics in the United States, stated in his recent article that from historical data, when the price of gold reaches $1,900 per ounce, it usually indicates a period of time. Prolonged economic collapse. Since June of this year, the price of gold futures has been as high as $1,870 per ounce; according to the latest data, due to a large number of currencies being printed, the dollar has depreciated to a new low in 25 years. As one of the most common currencies in the world today, since the “World War II”, the credit system with the US dollar as the credit settlement system has once again reached a fork in the road.
Whether this approach of the United States will give birth to a new global currency that will replace the US dollar, or whether it will replace paper money with digital currency to become the global currency is still unknown. But in any case, today’s excessive printing of money will definitely lead to hyperinflation, and hyperinflation will destroy the economy. Such a vicious circle, repeating itself again and again, has become the destiny of some countries.