Why did the Global Markets collapse?
1. Interest Rate Hike by Bank of Japan #BOJ:
- The BOJ raised interest rates by 0.25%, the second time since 2007. This ended the era of cheap loans in yen.
2. What is the Yen Carry Trade?
- Investors borrowed yen at low rates, converted it to other currencies, and invested it for profit.
3. Impact of the Rate Hike:
- The higher interest rates make these loans expensive.
- Investors now face "margin calls," forcing them to sell off investments to repay loans, causing market crashes.
