Black Monday is brought to you by Bidenomics, Japan, and the Kamala factor

Why is your portfolio crashing? The Dossier has some answers.

The global economy is having the worst case of the Mondays that some of us have ever witnessed. Countless portfolios are rapidly becoming “unburdened by what has been.”

So what exactly is going on, and how did this happen?

We’ve honed in on several major economic and political factors for what the world is witnessing.

---

Ever wish you could turn back time and invest in Amazon's early days? Well, buckle up because the AI revolution is offering a second chance.

In The Motley Fool's latest report, dive into the world of AI-powered innovation. Discover why experts are calling it "the rocket fuel of AI" and predicting a market cap 41 times larger than Amazon's. Take charge of your future and capitalize on the AI wave with The Motley Fool's exclusive free report.

---

The $20 trillion Yen Carry Trade reversal

This one carries perhaps the most significant weight.

For quite some time, institutional investors have been leveraging Japanese markets to borrow Japanese yen at an interest-free rate, and reinvesting the loan to buy higher-yielding assets in other markets.

For Japan, this isn’t an ideal status quo, to put it mildly. The yen carry trade, a $20 trillion trading vehicle (to understand the significance, it’s about half the value of the S&P 500), has harmed the Japanese economy and it has made investing in Japan an unattractive proposal. As a free-floating currency, the yen has been used to benefit foreigners at the expense of the Japanese people. The country also faces a shrinking economy, caused by their fiscal woes and their ongoing depopulation crisis.

So Kazuo Ueda, the governor of the Bank of Japan, decided it was time to hike rates, and imposed several additional aggressive steps to bolster the yen.

Instead of letting the yen carry trade unwind, and thereby, blowing up at least $20 trillion in global wealth, Western interests will probably start to put massive pressure on Japan. They may start by leveraging the U.S. protectorate status and other means to convince the Japanese to lower interest rates back to near zero.

The Federal Reserve

The Fed has received a lot of criticism for its interest rate policies, with many arguing that the institution (which should be abolished) is historically out of touch with the state of the U.S. economy.

Some Wall Street analysts say The Fed didn’t act quickly enough to hike rates, and likewise, didn’t act quickly enough to lower rates.

Those of us who believe in free markets would contend that it’s utterly ridiculous that a group of economic “oracles” has a mandate to dictate American economic conditions and interest rates, because a free market can do a much better job determining these inputs.

The Kamala Factor

You can get away with economic incompetence when sentiment is bullish, because Americans are fortunate to live in a country that possesses the strong, resilient, and reliable engine that is the U.S. economy.

But when sentiment is bearish, markets suddenly stomach the possibility that a braindead, anti-human progressive called Kamala Harris may assume the presidency.

The vice president has had significant tailwinds following her ascension to the Democrat throne, and her campaign has wisely hidden her from scrutiny, so that the corporate media could rebrand and remake the longtime politician into something new.

Here’s a reminder of what we could potentially be dealing with if Trump doesn’t pull off a victory in November:

Interestingly enough, if Trump starts to get more momentum on the campaign trail, it will almost certainly help markets rebound at a faster pace.

Too much spending, Bidenomics & Congress

The United States government has authorized the spending of tens of trillions of dollars in recent years, running up the national debt to well over $35 trillion. The federal government spent over $6 trillion alone in fiscal year 2023. With Covid hysteria came an entirely new economic environment of “emergency spending,” and governments have insisted upon making those spending levels a permanent fixture.

“Bidenomics” has been an unmitigated disaster, with boondoggles like the American Rescue Plan and the Inflation Reduction Act adding trillions of dollars of waste to the country’s balance sheet.

Congress has been complicit in normalizing the soaring budgets, rubber stamping massive spending, massive deficits, and the permanent, exponential growth of government every step of the way. This has imposed massive harm upon the U.S. economy and global markets.

Global turmoil

The Russia-Ukraine war continues with no end in sight and the Middle East is an increasingly flammable tinderbox. The global economy is also dealing with the transition from a unipolar world dominated by American interests, to a multipolar world with many rising power players. This has greatly impacted global trade, as sea lanes are constantly threatened by powers that seek to secure land grabs and impose protectionist economic and military measures to bolster their respective sovereigns.

Now, it’s possible that everything could turn around tomorrow. It’s also possible that we are at the beginning stages of a global economic meltdown. Stay tuned.