U.Today – Nassim Nicholas Taleb, a risk analyst and author of books on uncertainty such as “Black Swan,” “Antifragile” and others, has offered his explanation of how exactly the Japanese market collapse unfolded, leading to last week’s plunge.
Taleb's analysis of the Japanese market crash
Taleb commented on the recent collapse of Japanese stocks witnessed by the global financial community and the army of cryptocurrency investors since that crash caused Bitcoin to plummet.
Recently, Japan’s major stock indices suffered a sharp drop after the Japanese central bank carried out an interest rate hike. Taleb commented that the BOJ (Bank of Japan) had kept interest rates at zero for almost 33 years and that during the 23 years so far it had injected quantitative easing measures into its economy. All of these measures, Taleb said, “come with a price that, at some point, has to be paid.”
He also pointed out that many experts have always pointed to Japan as the place where this quantitative easing strategy has been successful. Unlike Japan, the US has been frequently combining interest rate tightening and easing strategies. Still, the country has been facing high inflation in recent years.
As the Bank of Japan considers raising interest rates further, many experts around the world are criticizing the Japanese central bank for the ill-timed move. Mari Iwashita, chief market economist at Daiwa Securities Co., believes that before taking the next step, Japan needs to see which direction the U.S. economy will go: whether it will enter a recession or make a soft landing.
Japan makes Bitcoin crash
Following the Japanese stock market crash, the turmoil spread to the US markets, and Bitcoin and the rest of the cryptocurrencies followed suit. After the major US stock indices plummeted, Bitcoin lost 18% in a couple of days, falling from the $61,000 mark to the $49,750 area. Right now, Bitcoin is trading at $55,140.
El Salvador President Nayib Bukele's Bitcoin advisor Max Keiser has also commented on the recent situation in financial markets, referring primarily to the United States.
He said the damage had been minor and that if he were in the Fed's shoes he would leave interest rates unchanged to “let another 40% or more of the air out of these markets.”
This article was originally published on U.Today
