The nature of the economic crisis
The economic crisis, or more precisely the crisis of the middle class and the poor, has a higher opportunity cost for the rich.
Most people think of the economic crisis as this:
The stock market and the property market collapsed, banks were run and closed, enterprises went bankrupt, bosses were busy selling assets to pay off debts, the middle and lower classes lost a lot of jobs, mortgages were cut off, credit defaults, and even "self-S forests" similar to Japan.
In fact, if a major economic crisis strikes and ordinary people get poorer, the rich may get richer.
If you don't understand the essence behind it, you're missing an opportunity to change your wealth upward.
Traditional economics believes that the essence of economic crises is a debt cycle. Take the famous Great Depression in the United States, for example, when the United States pursued laissez-faire, that is, the belief that the market economy could regulate itself without the intervention of another hand (executive).
As a result, because of the strong capital, the strong companies use their financial advantages to defeat one competitor after another, and one family is the largest, forming a situation in which a few people monopolize resources and most people eat chaff, and the gap between the rich and the poor is getting bigger and bigger.
But no matter how rich the rich are, the amount of mountain and sea delicacies they can eat in a day is also limited, and they can only sleep in one bed and live in one room. The group that can really drive the growth of consumption must be the ordinary but large number of middle and lower classes.
The poor want to consume, but they have no money at all, the economic cycle is interrupted, and the total economic volume cannot grow. At this time, the capitalists should be worried, everyone is too poor to eat, so how can I sell goods and make money?
If you want to promote consumption, you have to make everyone have money on hand, so loans and installments came into being. Future income can be advanced in advance, so buying a car and a house is as easy as buying vegetables, but there are also two hidden dangers buried here.
First, economic expansion does not gather the people, but flows to a small number of people, what should I do if social wealth is highly concentrated?
Second, the economy is overheated, the asset bubble is blown up and burst, the financial crisis breaks out, or other black swan markets are pressed the pause button, and ordinary people are unable to repay their debts for various reasons.
If household incomes have not kept pace, but debt and leverage have been expanding, will consumer demand begin to languish?
Once the demand is saturated, for example, whether the property market cuts interest rates or down payments, ordinary people still cannot afford to buy houses, and the society will fall into a vicious circle of real estate enterprise failure, bank bankruptcy, and a large number of workers in the upstream and downstream industrial chain losing their jobs, which is the debt cycle.
So whenever the economy is on the verge of crisis, policy begins to be regulated, otherwise there will be a depression similar to the Great Depression in the United States in 1930.
In the United States, for example, in March 2020, a whopping 32 million people lost their jobs and the economic system came to a near standstill. Why did the billionaires and wealth of the United States increase by $730 billion in half a year?
To copy high-quality assets, vision and courage are indispensable
Because when the economic crisis comes, in order to ensure the employment rate, the government will take various economic measures to save enterprises, such as reducing loan interest rates, providing low interest or even interest-free loan support, and so on.
Policy is like a rainfall from the sky, but it will not fall evenly on everyone's head.
The government's intentions are good, but in this way, they can get financial support regardless of the business situation.
Moreover, if you are rich at this time, you still have the money given to you by the government, and you still have the wealth you have accumulated before, what will you do in the face of a large number of high-quality assets being sold at a low price?
Of course, it is to use this idle funds to dig these high-quality assets, and when the economy recovers, the assets purchased at low prices return to the rising range, and they can become richer.
Just like the Asian financial crisis in 1997, when others panic sold assets, Li Ka-shing bought a large number of high-quality assets such as land and equity, and when the economic crisis passed, Li Ka-shing's value doubled and he became the richest man in Asia.
But for the unemployed ordinary people, there are few children in their hands, and the problem of survival needs to be solved urgently. When the economic crisis hit, you can only rely on selling high-quality assets such as real estate and stocks to survive.
What should ordinary people do
In essence, the economic crisis did not lead to a decrease in the wealth of society, but only completed the transfer of wealth between different groups of people.
When ordinary people lose these high-quality assets in the economic crisis, I am afraid that it will take another few decades to earn back what belonged to them before the economic crisis. So what should be done to make a big leap in wealth in the midst of an economic crisis?
If you have assets, you might as well invest in core assets in times of crisis with money other than rigid household spending. For example, real estate in the core areas of first- and second-tier cities, or equity in leading companies of listed companies, and risk-resistant gold.
But if you are still in the stage of capital accumulation and have not experienced the beating of society, at this time, work hard, do not consume ahead, let alone impulsively start a business, saving the first pot of gold is the most critical.
It is difficult to earn the first million in life, and it will be relatively easy to earn the second or even the ninth.
Of course, saving money does not mean lying silly in the bank, but choosing savings tools that can cross the economic cycle, can resist the long cycle of falling interest rates, and also have some flexibility.
At any time of need, you can quickly take out a part of the funds to dig down the low-valued assets under the crisis.