Global Economy on Edge: Will October Bring a Crash?

Will We Reach October? Debt, Inflation, and Bubbles Point to a Crash

Is the economic system on the brink of collapse or is this just another false alarm? The question echoes through markets as tension signals pile up: a US debt crisis, soaring inflation, an industrial Germany in distress, and a growing stock market bubble. The calendar points to October, historically the month of major crashes, leading many analysts to wonder if this time will be different.

The American Debt Crisis and Loss of Confidence in the Dollar

The US deficit is at record highs, partly due to the Big Beautiful Bill, a spending package approved by the Trump administration. Additionally, the dollar is severely overvalued, making wages appear high compared to Europe, yet reality reflects an affordability crisis: inflation is Americans' top concern. Investors, it is argued, have lost faith in debt and currency value. The more money printed, the worse inflation and the dollar crisis become.

Germany and the Industrial Crisis: Volkswagen as a Thermometer

Germany is mired in a severe industrial crisis. Volkswagen, the largest industrial producer in the eurozone, is critically wounded. This is not a local issue: the German industrial engine is the heart of the European economy, and its weakness drags down the entire continent. The question remains whether this crisis is cyclical or structural, and if the German industrial model can survive the energy transition and Asian competition.

The Stock Bubble and Tech Companies' Circular Debt

Talk centers on the largest stock bubble in history, driven by circular debt among tech firms. This means companies lend to each other to inflate valuations, creating a house of cards that could collapse with a simple profit warning from a major player. As noted, the black swan event could be an earnings guidance update from a large corporation.

The Debate on Solutions: Print Money or Not

Some argue that the only way to dilute debt is through inflation, predicting central banks will print money aggressively. This would trigger hyperinflation, destroying the middle class and leaving only the rich and poor. Others believe the ammunition is spent, arguing that the yen crisis and Western hyperdebt cannot be solved by further issuance. For some, the solution lies in painful measures like those applied by Milei in Argentina, effective but bitter.

The Precedents of 1987 and 2008: Does It Always Recover?

Historical memory works against the doomsayers. In 1987, the crash was brutal, but recovery was swift. In 2008, banks took the hit, but stocks rebounded. However, critics note that while markets recover quickly, unemployment, per capita income, and productive capacity suffer long-term damage. Since March 11, 2020, we live in a perpetual October: the crisis never left, it just changed form.

Meanwhile, those waiting for the great October continue buying canned goods. Perhaps this year, as in previous ones, the only thing falling will be the calendar.