Is there a potential risk of a financial crisis in the recent period (e.g., during the COVID-19 pandemic)?

Okay, here's my take on this question:

Was there a potential risk of a financial crisis during the COVID-19 pandemic?

The answer is: Absolutely, and the risk was extremely high at one point.

We can imagine the COVID-19 pandemic as a massive boulder suddenly crashing into the intricate machinery of the global economy, almost causing the entire system to collapse. This is not an exaggeration; the situation at the time was indeed very precarious.

The main risks manifested in several ways, which I'll explain in plain language:

1. The Economy's Sudden 'Shock'

• Imagine factories shutting down, planes grounded, shops closed, everyone staying home... virtually all economic activity was put on 'pause' overnight. This was unprecedented in modern history. The economy was like a car speeding down the highway that suddenly slammed on the brakes; everything inside would be thrown forward, a very dangerous situation.

2. Corporate Cash Flow Disruption (The First Domino)

• This was the most direct trigger. For example, if you owned a restaurant and were suddenly not allowed to operate, your income would instantly drop to zero. But you'd still have to pay rent, employee salaries, and bank loans every month. This is cash flow disruption.
• When thousands of businesses faced this problem, they began massive layoffs and couldn't repay their bank loans. Widespread corporate bankruptcies would lead to a surge in bad debts for banks. If banks couldn't withstand this and failed, a financial crisis would ensue. The 2008 financial crisis started from one point and fell like a series of dominoes.

3. Extreme Panic in Financial Markets

• You might recall the frantic global stock market crash in March 2020, with the US stock market even experiencing four 'circuit breakers' (meaning trading was halted due to sharp declines) in just 10 days.
• Behind this was immense panic. Investors didn't know how severe or prolonged the pandemic would be, so they frantically sold off stocks, bonds, and all other assets, wanting only cash. This behavior was like a 'bank run' where everyone rushes to withdraw money, emptying the bank. When everyone in the financial market wants to sell and no one wants to buy, the entire market's liquidity dries up, and the system grinds to a halt.

4. The Debt Bomb Was Ready to Explode

• Even before the pandemic, many countries and corporations already had very high debt levels, essentially 'piled high with debt.' The pandemic caused their incomes to plummet, sharply increasing the pressure to repay debts.
• Once a large corporation or even a country declared, 'I can't pay my debts' (a debt default), it could trigger a chain reaction, igniting a global debt crisis.

So why didn't it escalate into a full-blown financial crisis like in 2008?

Simply put: Governments and central banks worldwide forcefully extinguished the fire with unprecedented measures.

1. Massive 'Money Printing': Major central banks globally, led by the US Federal Reserve, initiated unlimited quantitative easing, injecting vast amounts of capital into the market and lowering interest rates to near zero. The goal was to ensure ample liquidity flowed through the financial system, preventing any segment from 'clogging up' due to a lack of funds.
2. Direct Government 'Handouts': Governments worldwide launched massive fiscal stimulus packages. This included direct subsidies to residents (like the multiple rounds of stimulus checks in the US) and providing substantial low-interest loans and grants to businesses to help them cover payroll and rent, essentially 'keeping businesses and households alive' by force.

In summary:

We essentially walked along the edge of a cliff. The reason a full-scale financial crisis didn't erupt wasn't because the risk was absent, but because governments and central banks acted swiftly and decisively, temporarily 'drowning' the crisis with an immense amount of capital.

Of course, the side effects of this 'strong medicine' were also very apparent: the high inflation we later experienced globally. Too much money was injected into the bailout, while the production of goods and services didn't keep pace, naturally causing prices to soar. But that's another topic.