In 2009, the balance sheet total of the European Central Bank (ECB) was 1.8 trillion euros, in 2018 it was already 4.7 trillion, and in 2021 it was almost 9 trillion. This was money for cheap loans to banks and companies, or for the purchase of government bonds.² These loans were intended to stimulate production. However, due to stagnating sales markets, lower profits were envisaged. As a result, the majority of the money ended up in increasingly rampant speculation with stocks and other financial investments. This made it possible to make maximum profits. In 2009, the value of the global stock portfolio was only 35.8 trillion, by the end of 2023 it was 113.9 trillion.³
In fact, the large international monopolies have continued to make high profits since 2018 despite stagnation or decline in industrial production. The 40 DAX companies reported at least 117 billion euros in profits last year.
Digitalization and so-called artificial intelligence (AI) have been the major drivers of share prices recently. For example, within about half a year, the price of shares in Nvidia, a chip producer and market leader in AI, has tripled. With a market capitalization of around 3 trillion euros⁴, the group became the most valuable company in the world. However, expectations of constantly increasing profits were increasingly shaken. Hopes for investments in “artificial intelligence” gave way to disillusionment in the face of the ongoing global economic crisis. And at Nvidia, profits rose significantly more slowly than the share price.
Added to this was the fear of an economic downturn in the USA and a growing uncertainty that the increasing number of wars could have a negative impact on economic development.
As a result, the share prices of the seven largest tech companies in particular came under pressure. This led to an increasing sale of shares in order to realize profits or to avoid losses as far as possible before the value of the shares plummeted. But that was exactly the result of these sales. A trillion dollars in market value was wiped out in three days – the so-called “Magnificent Seven” tech stocks alone lost 650 billion dollars in value. The biggest gap from their all-time highs was for the six most valuable technology companies: Meta: -9%, Apple: -13%, Microsoft: -15%, Alphabet: -18%, Amazon: -19%, Nvidia: -26%.⁵
The Nikkei in Japan plummeted by over 15 percent within three days, the technology index Nasdaq by 13 percent, the DAX in Germany and the global MSCI by 7 percent, the EURO STOXX 50 by 8 percent, and the American indices S&P 500 by 7 percent and the Dow Jones by 6 percent. The Hang Seng from Hong Kong and the FTSE China A50 have been on the downward trend for some time, losing 9 and 6 percent respectively in the last three weeks.
Despite everything, the price drops were relatively small compared to the previously pushed-up prices. The DAX, for example, is still about 75 percent higher today than it was in March 2020; the S&P 500 is still twice as high as it was then, and so is the Nikkei.
Share prices recovered relatively quickly and stabilized at a level well above the low point. Speculators’ nerves calmed down because tech companies are still reporting high profits – unlike the dotcom bubble crash in 2000.
That is why the collapse in prices was not yet a deep stock market crash. It was more of a kind of “foreshock” before a deep stock market crash that is still to be expected. The fundamental problems of the global economy are tending to worsen. The gap between the development of share prices and industrial production is still huge. An upturn is not to be expected with or without interest rate cuts. Instead, many signs point to a deepening of the global economic and financial crisis. World trade is stagnating, cross-border investments have fallen sharply, as have cross-border mergers and acquisitions. High-tech armaments and AI can certainly still ensure high profits for a while. But there is an end in sight.
