On Monday, Warren Buffett's Berkshire Hathaway Inc. experienced an unusual drop in stock price, plummeting from $620,000 per share to just $185.5, which was nothing short of a massive crash.

In response, the New York Stock Exchange (NYSE) has stated that this was purely a data error issue and has already voided the trades that occurred during the period of the data error.

Honestly, it's a relief that this was just a "data error"; otherwise, the world might have been in for a big shock.

Not to mention, Buffett himself might have ended up in the emergency room.

Although the NYSE has labeled this stock crash as a "glitch," temporarily stabilizing the nerves of American investors, it remains an unknown how long the hollowed-out U.S. economy, both in terms of industry and the dollar, can support the high stock market in the U.S.

Advertisement

It's really hard to say whether U.S. stock prices will plunge 99.99% like Berkshire Hathaway did on Monday during the "glitch."

Objectively speaking, the U.S., hollowed out in terms of industry, simply cannot generate enough labor wealth to maintain the paper wealth of the country.

What's propping up the paper wealth of the U.S. now is the international purchasing power of the dollar, which is currently sustained by its past value inertia.

In other words, once the inertia of the dollar's value is exhausted, its international purchasing power will plummet dramatically, and the issue of industrial hollowing out in the U.S. will be exposed.

At that time, the U.S. will inevitably have to withstand a tsunami-like impact, so it's not impossible for the U.S. stock market to plummet drastically.

Of course, as Buffett said at Berkshire Hathaway's annual meeting last month, there are no substitutes for the dollar or U.S. Treasury bonds internationally, so this kind of situation is unlikely to happen so quickly.

After all, in this world, the price of any item is determined by the wealthy.

When many of the world's rich view the dollar and U.S. Treasury bonds as wealth anchors, they indeed won't undergo serious qualitative changes.

However, nothing in this world is eternal, especially when it comes to wealth anchors, which change with the times.

The anchors of human wealth have changed several times, from early shells to gold and silver, and after the dollar became dominant, even gold and silver were marginalized.

Gold and silver were able to replace the early shells because they are divisible and can be preserved indefinitely without loss.

The dollar was able to marginalize gold and silver because it is easy to produce and can provide the necessary supply according to the needs of economic development.

In addition, it has a highly reliable systemic management that not only provides security for everyone's wealth but also facilitates transactions.

It can be said that any wealth anchor will be replaced with the development of the times, and the dollar is no exception.

One day, a new anchor will replace it.

Buffett is confident that there are no substitutes for the dollar and U.S. Treasury bonds in today's world.

Seeing that U.S. stock prices are artificially high, he boldly reduces his equity assets and directly invests the reduced dollars into U.S. Treasury bonds.

According to data disclosed by JPMorgan Chase in the U.S., Berkshire Hathaway currently holds 3% of U.S. Treasury bonds.

The total amount of U.S. debt held abroad is $34 trillion, which means that Berkshire Hathaway has purchased approximately $100 billion worth of U.S. Treasury bonds.

The yield of U.S. Treasury bonds is closely related to the Federal Reserve's interest rate policy.

When the Fed raises interest rates, it increases the yield of U.S. Treasury bonds.

Conversely, when the Fed lowers interest rates, it decreases the yield of U.S. Treasury bonds.

The higher the yield of U.S. Treasury bonds, the less they are wanted, and Fed rate hikes will cause more people to abandon U.S. Treasury bonds.

With Berkshire Hathaway holding so many U.S. Treasury bonds, if the Fed raises interest rates, then their $100 billion in funds will be tied up in U.S. Treasury bonds.

If this happens, people will definitely not be optimistic about Berkshire Hathaway's stock price, and selling would be normal.

Therefore, if the Fed aggressively raises interest rates, it's not impossible for Berkshire Hathaway to experience a major stock price crash.