Podcast Notes | From Fed Debt to AI-Driven Job Disruption: How Investors Can Seize the Golden Window in Capital Markets Over the Next 5 Years?
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Podcast Notes | From Fed Debt to AI-Driven Job Disruption: How Investors Can Seize the Golden Window in Capital Markets Over the Next 5 Years?
In the worst-case scenario, Bitcoin's year-end price could reach $250,000.
Navigating Web3 tides with focused insightsCompiled & Translated: TechFlow
Guests: Raoul Pal, CEO of Real Vision; James Connor, Managing Partner at BloorStreetCapital
Podcast Source: Raoul Pal The Journey Man
Original Title: Raoul Pal's 2025 Market Predictions ft. @BloorStreetCapital
Air Date: February 4, 2025
Background Information
In this episode, Raoul Pal from Real Vision engages in a deep conversation with James Connor from Bloor Street Capital, discussing the key trends shaping cryptocurrency, equities, AI, and the global economy in 2025. Can Bitcoin break through the $500,000 mark? Is AI replacing human labor faster than we anticipated? Where are interest rates, inflation, and the U.S. dollar headed next?
(TechFlow Note: Real Vision is a company focused on financial and investment education, providing high-quality financial content and analysis. Its mission is to help investors better understand market dynamics and opportunities.
Bloor Street Capital specializes in connecting companies with suitable investors. Through online webinars, one-on-one meetings, and lunch presentations, it facilitates connections between companies and investors.)
Topics Covered
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Bitcoin and cryptocurrency price predictions
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The future of AI and automation technologies
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Equity market outlook and S&P 500 trend
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Inflation, interest rates, and the Fed’s next moves
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Trump’s economic plans and global trade
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Why this is a "golden bull market" for investors
Bitcoin Market Outlook and Volatility Analysis
James Connor:
Regarding market performance, I know you're very bullish on Bitcoin long-term, but in one of your recent interviews, you mentioned that while Bitcoin will perform well this year, it will come with significant volatility. Could you elaborate on your view?
Raoul Pal:
Bitcoin’s performance is driven not only by global liquidity but also closely tied to the adoption of new technologies. This year is clearly a "loose liquidity" year, especially as countries need to roll over large amounts of debt—a condition typically favorable for crypto markets.
However, in recent months, global liquidity has tightened somewhat due to policy adjustments by the Federal Reserve and Treasury, along with a strong dollar. This shift has had a short-term negative impact on cryptocurrency performance. But this situation won’t last long—either in time or price terms. Once liquidity returns to the market, Bitcoin’s performance will improve accordingly.
Looking back at 2021, we saw the pandemic briefly halt the global economy before a rapid rebound, causing the business cycle to peak early in April. Normally, during presidential election years, the business cycle peaks toward year-end. Bitcoin’s behavior in 2021 was complex, but today’s environment more closely resembles the period following Trump’s election in 2017. Back then, sustained liquidity injections led the market to sharply correct by 25%–30% early in the year, only to quickly recover and maintain strong momentum throughout. That wave of liquidity wasn’t primarily driven by the U.S., but rather by China. I believe China could again play a pivotal role in global liquidity this year.
Therefore, I expect Bitcoin to perform stronger this year than many anticipate. Although many investors still remember the volatility of 2021—when Bitcoin surged, crashed, surged again, and crashed again—I believe this year’s pattern will resemble those of 2013 and 2017. So yes, I remain optimistic about all risk assets this year, including Bitcoin.
Future Bitcoin Price Predictions
James Connor: If Bitcoin reaches $100,000, do you think it willpull back 25% to $75,000 before continuing upward?
Raoul Pal:
I don't think Bitcoin will see a 25% drop. Markets are now more mature, and with the introduction of Bitcoin ETFs, volatility has decreased. If Bitcoin pulls back from $100,000 to $90,000, I consider that a reasonable adjustment range, likely stabilizing around that level.
In a worst-case scenario, I think Bitcoin could reach $250,000 by year-end; in a base case, it might rise to $350,000. If we see an explosive growth similar to 2017, Bitcoin could even surpass $500,000. Of course, these forecasts carry significant uncertainty, so I usually analyze different outcomes using a probability tree, assigning likelihoods to various price ranges.
Overview of Global Economic Conditions
James Connor: What’s your take on the current global economy? Do you have any concerns when looking at regions like Asia, Europe, or North America?
Raoul Pal: For tracking the business cycle, I rely most on the ISM survey from the Institute for Supply Management in the U.S., which overall shows lackluster results. While equity markets appear strong, the broader economy remains sluggish. Typically, in a growing economy, the ISM index should be above 50. While GDP appears relatively healthy, the manufacturing sector continues to show weakness. Thus, the business cycle remains slow, creating a divergence between tech stocks and the traditional economy. Tech stocks aren’t driven by debt dynamics or real-world spending, but by highly independent cash flows. The global traditional economy remains weak—Europe hasn’t recovered, the UK is relatively chaotic, and Canada is slowing down.
China’s Economic Challenges and Debt Deflation
Raoul Pal:
China is currently facing severe debt deflation issues, with bond yields falling sharply. Due to a weak RMB, Chinese authorities struggle to implement effective stimulus without losing control of their currency. Meanwhile, there's a widespread global desire for the U.S. to weaken the dollar, as its current strength pressures many economies. Typically, a strong dollar slows the global economic cycle.
He also noted that Trump would likely adopt policies similar to his first term, aiming to weaken the dollar. The U.S. needs to balance its economy through exports, but a strong dollar undermines the competitiveness of American goods, worsening the trade deficit.
Currently, the global economy feels like a “no man’s land,” progressing slowly. However, based on liquidity injections and financial conditions over the past six months, many leading indicators suggest a notable global recovery this year.
Long-Term Impact of Demographic Changes on the Economy
Raoul Pal:
As previously mentioned, the dollar needs moderate depreciation, and China must create policy space for stimulus—otherwise, economic revival will be difficult. Currently, China’s debt deflation problem mirrors challenges faced globally: excessively high debt levels and agingdemographics mean GDP growth is insufficient to cover debt servicing costs.
This triggers serious consequences. China’s property market faces crises similar to the U.S. subprime crisis of 2008 and the European debt crisis of 2012. Additionally, China’s banking system suffers from similar structural weaknesses. Meanwhile, rapid demographic shifts worsen the situation—aging populations and declining birth rates lead to shrinking populations, increasing pressure on both economic growth and debt repayment capacity.
U.S. Economic Conditions & Impact of Interest Rates on Growth
James Connor: I’ve observed that the U.S. economy seems similar to Canada’s, showing signs of polarization. On one hand, some people are doing quite well; on the other, many face hardship. Despite official claims of 2.5%–3% GDP growth and controlled inflation, with S&P and NASDAQ near record highs, the economy doesn’t feel as strong as it appears. Do you have additional concerns about the U.S. economy? What’s your outlook for this year?
Raoul Pal:
Yes, I have concerns, particularly about the evident polarization. Indeed, some live in a prosperous “world,” while ordinary people face real pressures—especially small local business owners whose cash flow remains strained. This contrasts sharply with the booming large tech firms.
Additionally, although official inflation figures have declined, the cost of living remains high. For example, doubled restaurant prices vividly reflect inflation’s impact. This high-price environment creates significant financial strain for average households. Therefore, policies such as rate cuts are necessary to ease debt burdens and stimulate economic activity. Ultimately, we need economic growth to solve these fundamental issues.
To me, growth means: lowering interest rates, weakening the dollar, stimulating the U.S. economy, and deregulating.
Implementing these policies will inject more momentum into the future economy, even if GDP growth doesn’t significantly accelerate. Currently, trend GDP growth is around 2% or slightly below, but recent trends show some upward movement. Could the U.S. economy accelerate further? Could we see several quarters of 3.5% growth? It’s possible, especially under a new administration likely to introduce tax cuts and other stimuli. Given Trump’s focus on the economy, I’m optimistic about the outlook.
Europe, however, faces different challenges. It’s pursuing the opposite strategy of the U.S.—increasing regulation and taxation, which undeniably burdens citizens. Still, Europe’s social safety net differs from the U.S., affecting its economic structure.
China’s economic performance is also critical. As a major buyer of global goods and a key export market for the U.S., a downturn in China would reduce import demand, triggering ripple effects worldwide. Hence, we need a revitalized global economy.
On one hand, the U.S. must implement Trump’s proposed economic policies; on the other, China must resolve its own issues to promote global recovery and growth.
Outlook on Future Inflation Trends
James Connor: Some believe the biggest risk in 2025 is inflation accelerating again. I assume their concern stems from tax cuts, higher tariffs, deregulation, and immigration crackdowns potentially fueling inflation. What’s your view?
Raoul Pal:
I don’t see inflation becoming the main issue. Yes, as the business cycle recovers, some inflation may emerge—such as from rising oil prices—but overall, its impact is limited. The primary force we’re facing is currency depreciation, which drives up asset prices and continues to persist.
At the same time, I believe we’re entering a technological wave with strong deflationary effects (Deflationary Effect). We may not yet fully grasp its economic implications. Thus, while the business cycle may bring short-term inflation, I expect inflation to first fall below 2%, possibly rebound briefly to around 4%, and then decline again during this cycle.
Deflationary Effects of AI and Robotics & Automation’s Impact on Employment
Raoul Pal:
We are experiencing the most deflationary period in human history, closely tied to advances in robotics and artificial intelligence. We are creating infinite labor resources at nearly zero cost. Take Amazon, for instance—the number of robots it uses now exceeds its human workforce. As one of America’s largest employers (possibly second only to the postal service), Amazon’s robots work 24/7 without complaints or breaks.
Robots have no emotional issues, require no HR management, and eliminate additional overhead costs. From an economic standpoint, this incentivizes businesses to rely more on technology than human labor. This is already an undeniable reality. At Tesla’s factories, nearly all operations are robot-driven; modern factories generally follow the same model. Therefore, even if manufacturing reshoring occurs—a key theme promoted by the Trump administration—companies won’t hire large numbers of human workers. This isn’t the 1950s anymore. In today’s world, whenever technology proves cheaper and more efficient than labor, businesses will choose technology without hesitation.
Financial Conditions and the Debt Cycle
James Connor: What’s your view on the 10-year Treasury? Recently, the 10-year Treasury has performed strongly, with yields rising from 3.60% in September to the current 4.64%–4.70%. And this happened amid three consecutive Fed rate cuts. What does this signal? Are you concerned about rising 10-year yields?
Raoul Pal:
Yes, I am concerned because it indicates financial conditions are tightening. Moreover, the rise in 10-year yields has decoupled from inflation expectations, suggesting the issue isn’t inflation itself.
Every four years, major governments globally must refinance their debts—we’re in such a cycle now. I call this the “everything code cycle.” Looking back at 2008, the world experienced a “debt jubilee” as rates were cut close to zero. This low-rate environment allowed governments to pay almost no interest for a period, effectively giving debt a breathing room. In essence, the policy told governments: “Don’t worry about interest payments—focus on managing your debt.” Governments then restructured debt into three- to five-year maturities.
This means roughly every four years, we hit a critical debt refinancing juncture. Since 2008, this four-year cycle has become a regular pattern with profound global impacts.
But this time is different. Due to pandemic and inflation effects, the timing for rate cuts has been severely delayed. Normally, at this stage of the economic cycle, rates should fall close to GDP trend growth, say 2%. But they can’t achieve that now. The result is debt keeps piling up via new borrowing, as governments issue new debt to repay old obligations. This “debt rolling” model is brewing a debt crisis—and explains why lowering rates is so urgent.
This situation leads to massive debt issuance, and eventually, a breaking point will force government action. In fact, this isn’t just one country’s problem—it’s global. For example, UK rates have climbed to 30–40 year highs. In highly indebted economies like the UK, such elevated rates are unsustainable long-term, so governments must act.
One potential solution is implementing “yield curve control.” This means governments wouldn’t eliminate interest payments entirely but would cap governmentbond rates to manage debt costs. Alternatively, they may restart quantitative easing (QE) to inject more liquidity into markets. Current tight liquidity has reduced bond demand, explaining why large volumes of debt can’t be absorbed.
Another issue is that a strong dollar makes it much more expensive for countries like Japan, China, and Europe to buyU.S. Treasuries. Thus, the dollar’s high valuation exacerbates debt problems and forces actions to weaken the dollar and lower rates. I believe this will help relieve pressure on 10-year yields. Trump has publicly stated current rates are too high, and I believe Scott Besson’s top priority will be tackling this complex challenge.
Interest Rate Policy and Trump’s Economic Agenda
James Connor: So how do you see rates evolving? Will the 10-yearTreasury yield reach 5%? If so, what impact will that have on equities?
Raoul Pal:
If we discuss market divergence, I believe rising rates will barely affect companies like Google, Apple, Meta, and OpenAI. These firms enjoy 30% annual compound growth—so even at 5% rates, it’s not an issue. More importantly, these tech giants hold vast cash reserves, and higher rates actually allow them to earn more—a point often overlooked. So I’m not worried about them.
Certainly, if inflation rebounds, we may need to reassess discounted cash flow valuations, but rising rates alone won’t be problematic. The real victims are the broader economy, creating market divergence. I expect 10-year yields could climb to 5% or even 5.5%. Hence, I believe Trump may intervene to ease this situation promptly.
Another complex factor is Trump’s desire to renegotiate trade deals with Canada, China, and Europe. A strong dollar is his main tool to pressure others. Since these nations also carry substantial dollar-denominated debt, a strong dollar increases their repayment burden. Trump may leverage this pressure while offering concessions—for instance, if they agree to adjust tariffs or reduce trade deficits, the U.S. could lower the dollar’s value as compensation. This strategy strengthens U.S. negotiation power while easing domestic economic pressure.
Dollar Movement and Its Impact on Trade Agreements
James Connor:
I truly can’t understand why the dollar is so strong, especially compared to the Canadian dollar. The loonie is at a 22-year low, down 10% in 2024 alone. How exactly can the U.S. weaken the dollar?
Raoul Pal:
In practice, if the U.S. clearly signals its desire for a weaker dollar, it usually works. Another method is providing “swap lines” to inject liquidity into countries like China and Japan that hold large amounts of dollar debt. This directly supports them with dollars, enabling them to repurchase U.S. Treasuries. The mechanism operates by the U.S. Federal Reserve lending dollars into the global financial system to ease dollar shortages in these countries. Eventually, these nations reinvest the dollars into U.S. Treasuries, creating a win-win outcome.
You might ask, if such mechanisms exist, why doesn’t the U.S. push for them? Why is the dollar still so strong? The answer is, the U.S. currently wants to maintain a strong dollar. Its primary purpose is to gain leverage in trade negotiations, especially when renegotiating trade terms with other nations.
Trump’s Economic Policies & Inflation Risks
James Connor:
I assumed that once Trump takes office, he’d do everything possible to keep economic growth between 2.5% and 3%, push the S&P 500 and Nasdaq toward record highs, and stimulate the real estate market. Yet he also plans tax cuts, higher tariffs, and deregulation—policies that theoretically could generate inflationary pressure. Suppose these policies are indeed inflationary, they might lead to higher rates and a stronger dollar. But Trump also wants a weaker dollar to attract manufacturing back to the U.S. and further boost growth. These goals seem contradictory. What’s your take?
Raoul Pal:
One core aspect of Trump’s policy involves energy relations with Canada, which ties directly to oil. Trump understands that Scott Besson’s strategy is working. While current oil prices aren’t high, low oil prices are vital for economic functioning. They want Canada to maximize oil production, including advancing key projects like the Keystone pipeline. These energy policies support U.S. economic growth and help mitigate pressure from a strong dollar.
First, the economy contains many variables. Some factors may cause inflation, some problems take time to resolve, while others can be addressed easily. For example, injecting liquidity via the Fed or Treasury to stimulate asset markets is a direct and controllable solution.
The government may deregulate to boost growth but also avoid excessive inflation. To achieve this, they might attempt commodity price controls.
As the business cycle revives, inflation’s return seems inevitable. The key question is: Will inflation appear in a non-cyclical, structural form (like the persistent high inflation of the 1970s), or simply as normal cyclical fluctuation—rising temporarily before gradually falling?
Notably, previous tariff implementations didn’t trigger clear inflation, suggesting tariffs don’t necessarily cause broad price increases, as exchange rate movements can offset tariff effects. Thus, the situation isn’t as straightforward as it appears.
Recalling similar policies under Trump’s prior term, the dollar dropped sharply in the second week of January, while bond yields rose for the same reason. These were inflationary signs, but yields then gradually declined over the next 18 months. This shows markets often misjudge due to premature policy anticipation.
A key point you raised: when will large-scale tariff policies actually take effect? Typically, implementation takes time—18 months to two years. Thus, tariff hikes are usually gradual, not immediate. Though many assume instant impact, reality often differs.
Market Liquidity and Stock Market Trends
James Connor: 2023 and 2024 were outstanding years, with the S&P 500 rising 25%–30% each year. Your investments returned an incredible 150% in 2024. Do you think the S&P 500 could see a third remarkable year?
Raoul Pal:
I believe the answer lies in Nasdaq’s behavior. Nasdaq’s movement has a 97.5% correlation with liquidity, indicating that the core driver is policy action by the Fed and Treasury—such as the Treasury General Account, reverse repos, and balance sheet adjustments. National government policies are equally crucial. Thus, global liquidity is the key market driver.
If we know 8–10 trillion dollars in debt needs rolling over this year, and bond markets already show stress, governments must inject liquidity to stabilize the situation. Probabilistically, we’re likely to see massive liquidity enter the market. Moreover, Trump consistently favors high asset prices, making strong equity performance this year highly probable. Of course, markets may be volatile—even more than last year—but as long as governments continue rolling debt, this trend won’t change. Europe, China, and Japan face similar debt pressures and will also need liquidity injections.
For governments, the top priority is rolling over debt—this is key to market stability. Ifbondmarkets collapse, the entire financial system faces crisis. To prevent this, governments will inject more liquidity, pushing up asset prices and improving their public image.
NVIDIA and Market Valuation
James Connor: What’s your take on valuations? Take NVIDIA, a flagship company today. I know it surged 170% in 2024. Are you concerned about NVIDIA or other companies being overvalued?
Raoul Pal:
Overall, P/E ratios keep rising. The main reason is currency depreciation. While prices increase, corporate earnings growth is usually capped by GDP trends. For example, if currency depreciates at 8% annually but GDP grows only 2%, earnings might grow just 2% or less—assuming nominal GDP growth of 5%. Thus, currency depreciation outpaces earnings growth, driving P/E ratios higher. So relying solely on P/E to assess markets may be misleading.
Additionally, there may be excessive expectations about how AI and other technologies will impact corporate revenues. Ten years ago, Amazon traded at 600x P/E, yet proved an excellent investment. The key is growth speed, not isolated valuation metrics.
Overall, I believe this year will be solid. Market valuations may rise significantly. However, after debt rollover completes, liquidity typically tightens as inflation risks resurface. This tightening often triggers market pullbacks.
In such cases, markets may undergo some correction before re-entering a growth phase. I expect valuations in this cycle to reach high levels—not necessarily a major correction, but markets may consolidate sideways or pull back about 15%.
In the next cycle, frontier technologies like AI, robotics, autonomous vehicles, and Mars missions will gradually demonstrate their potential. These will drive the next market boom, ushering in a full bubble cycle. Then we can consider how markets evolve post-bubble. I believe this “golden bull market” will last at least until the end of this century.
Analysis of Gold Market Trends
James Connor: What’s your view on gold?
Raoul Pal:
Gold also benefits from currency depreciation. But unlike other assets, gold lacks a technology adoption curve, so its gains typically aren’t as dramatic as risk assets. However, in the current liquidity cycle, countries need currency depreciation to service debt—this favors gold.
Thus, I’m optimistic about gold’s outlook. I believe gold will continue performing well in the coming cycle. Especially when the dollar begins weakening, gold prices will receive further upside momentum. Overall, I see not only a strong environment for gold, but also a favorable backdrop for most risk assets.
Investment and Financial Opportunities Over the Next Five Years
James Connor:
In many online interviews, you’ve said we have a five-year golden window to seize profit opportunities. I recall you mentioned this when discussing AI and robotics. What exactly did you mean?
Raoul Pal:
As a macro investor and analyst, my job is to look ahead and forecast where the world is heading. Since 2000, I’ve used a framework focusing on debt, deflation, and demographics. This framework kept me on track during the financial crisis and European debt crisis, helping me better understand global economic mechanics.
Yet early on, I missed the tech revolution. Upon reflection, I realized our economic model has long been driven by “scarcity.” As the economy shifted from manufacturing to services, specialized knowledge became increasingly valuable. That’s why lawyers, accountants, financial advisors, doctors, etc., command high salaries—their supply is limited while demand remains strong.
Disruptive Transformation of Traditional Industries by AI
Raoul Pal:
But AI is changing all that. AI development is drastically reducing the marginal value of knowledge. Many haven’t realized it yet, but knowledge itself is becoming cheaper. For example, as a content creator, building a media company once required significant resources—but now it’s unnecessary. Similarly, movie production costs might drop from $100 million to $5 million or even $2 million—an example of AI cutting production costs.
In manufacturing, robotics is replacing human labor. The most expensive component in manufacturing is labor. Will humans be fully replaced? While AI will eliminate many jobs, global aging may balance labor supply and demand.
A bigger concern: when AI starts replacing us, what does that mean for your business or mine? If artificial superintelligence (ASI) emerges, how will it reshape financial markets? As investors, if AI becomes more efficient and accurate than us, will we be replaced? Will markets remain driven by human emotions, or taken over by machine logic and algorithms?
Moreover, we’re living in the midst of a revolution where software is eating the world. With SaaS proliferation, this trend is nearly complete. For example, if you build a perfect platform for financial advice, I could clone it in minutes and adapt it for India’s regulatory environment. This convenience and efficiency are transforming industries.
Profound Economic Impact of AI Advancement
Raoul Pal:
What business models do we have? How do we get paid for knowledge? These models are scalable everywhere. So humans will always find new ways to make a living. I think online communities might be one avenue, since humans are inherently social beings who need interaction.
Yet the world is undergoing fundamental changes beyond imagination. In truth, we’ve never been at the top of the intelligence pyramid. Observe AI: last year, AI IQ rose from 90 to 157—nearly doubling. If it doubles again next year, it’ll reach 300, surpassing any human record. In the following years, it could double to 600, 1200, and beyond.
We don’t fully grasp how these changes will reshape the world. Entering this era of intense transformation, society may face upheaval. But at the same time, it will unlock enormous opportunities—though they may arrive in forms we haven’t yet imagined.
Wealth Accumulation Strategy Before 2030
Raoul Pal:
In my view, if the global economy continues relying on debt rollover, currency depreciation, and rising asset prices, we should seize this window to accumulate wealth aggressively. By the early 2030s, the world will transform in ways we can’t comprehend—traditional economic frameworks may no longer apply. Then, we’ll need sufficient wealth and security to face unknown business environments, as we can’t even predict future business models.
This extreme uncertainty may stress many, but we’re in the greatest macro investing opportunity in history. Especially in tech and crypto, these fields are at a critical point on the technology adoption curve, closely linked to AI replacing humans. In a way, we’re investing in our own obsolescence—but it creates massive wealth opportunities. Despite cyclical fluctuations and risks, this prepares us better for what’s coming.
How Should College Students Plan Their Careers? How to Navigate Industry Shifts When Choosing a Career?
James Connor: What advice would you give college students?
Raoul Pal:
First, when choosing a career, aim for industries riding tailwinds, not headwinds. I entered banking in the 90s, focusing on hedge funds. That was the peak of the financial bubble and a golden era for hedge funds. I caught two major long-term trends, shaping my career. Today, choosing finance or consulting means facing headwinds, as many roles may be replaced by AI. I recommend sectors with long-term growth potential—like AI, robotics, and crypto.
Also, I advise young people to travel more, explore different cultures and communities to face future uncertainty. In a machine-dominated world, the most important skill is “humanity.” Such experiences deepen understanding of human relationships, a skill that will be critical. I believe those who best express human qualities will find their place in fast-changing environments, as future business models will transform dramatically.
If you aim high in business, choose industries growing 100% annually. These offer immense opportunities worth pursuing. Stagnant industries should be avoided. Of course, opening a restaurant is fine—it’s part of the human experience. Likewise, travel and tourism embody core values of human experience.
In summary, either choose industries tied to human experience, or dive into technology. Avoid the middle ground—those lacking growth potential and human value—because their prospects are no longer clear.
Potential Risks to Global Financial Stability
James Connor: Overall, you’re very bullish on the U.S. economy, U.S. markets, and Bitcoin. But if you had to name one overlooked risk, what would it be? After all, 25%–30% market drawdowns usually stem from unexpected factors. If such a risk exists, what might it be?
Raoul Pal:
I believe the potential disintegration of Europe’s political system could be a neglected major risk. We’re seeing many nations’ political systems gradually reject traditional figures—a trend emerging even in Canada. Could this force structural changes within the EU itself? And how would that affect global trade? This is a critical question few deeply consider. In contrast, frequently cited risks are “known risks”—not my primary concern.
In reality, governments and central banks respond to crises by printing massive amounts of money. Whether it’s a Chinese economic collapse, China invading Taiwan, another global pandemic, or European chaos, the solution always seems to be injecting liquidity and reducing extreme negative events (“left-tail risks”). Recall the most shocking event: the global shutdown for two to three months during the pandemic. How did markets react? Though they plunged initially, they quickly rebounded due to massive government funding. This pattern proved effective during the 2008 financial crisis and 2012 European debt crisis.
Thus, we now live in a new financial environment. Here, investors are forced into risk assets because governments, through liquidity injections, effectively eliminate prolonged downside risks. Of course, this doesn’t mean markets won’t fluctuate. In low-liquidity years, Nasdaq might drop 30%, long-duration assets even more. But such pullbacks don’t last—they’re followed by renewed liquidity injections and market recovery.
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