The sudden response of the global market is also triggered by the report on the US labor market which was presented to the public on Friday. It showed that the unemployment rate rose to 4.3 percent, the highest level in three years, and only 114,000 jobs were added instead of the roughly 175,000 that had been forecast, deepening fears that the U.S. economy will slow sharply. Thus, leading economists blame the US central bank for the worsening of the crisis: knowing that this report was going to be published, the interest rate should have been cut before it was published.

Fears of a full-scale war in the Middle East (increasingly likely by the day) and the inevitable involvement of the US should it begin have further worried investors. The US government (and conversely the US stock market) is suffering from a massive loss of confidence among the international community which increases volatility and uncertainty. If this war in the vicinity of the most important trade routes and the most important oil reserves actually begins, the world economy will completely collapse.

Another reason that could have caused this collapse is the fact that the US economy is based on debt and bonds. After China sold a lot of them in the last year, the US artificially increased their yield to attract new investors. The fact that yields are rising on new bonds and US foreign policy looks increasingly unstable inevitably leads to mass selling of bonds already held by investors, setting off a chain reaction.

A final reason is concern that tech stocks (Microsoft, Meta, Alphabet) have risen too much and too fast over the past year on the back of the huge amount of money they’ve invested in AI, especially given the losses of 10 times bigger than OpenAI (the company that created Chat GPT) will have this year. Several leading economic analysts have publicly questioned in recent months whether AI will generate enough returns to recoup the hundreds of billions of dollars invested.

So, as usual in the economy, there are several causes for this sudden collapse. Although investors in the US stock market hope that the Federal Reserve will urgently cut rates to save their investments, its chairman said that “There is nothing in the Fed’s mandate to ensure that the stock market is comfortable.” Besides, all western media outlets are trying to convince investors not to panic, saying it’s a normal dip in the market, so let’s hope they’re right. If a major war breaks out, however, there will be no room for hope: the world economy is in a precarious state, and any further destabilizing action could transport us back to 2008.

By Daria Gusa