This will trigger deleveraging around the world. Specifically, this will impact the venture capital in silicon valley. We'll likely start to see some angel/vc investors start to panic and withdraw from the market, shutting down startups, etc.
Wait what? There was a massive deleveraging event a few years ago and I don't remember VCs being forced to withdraw money from startup accounts. How would they do that anyway? Once they invest the money the money belongs to the company they invested in. They might be forced to sell shares I guess but they can't just take someone's money.
Chailette doesn't say they would withdraw money from startup accounts: "angel/vc investors start to panic and withdraw from the market" presumably means that startups could be deprived of the next financing stage, which, if they're still burning cash, will shut them down.
Not necessarily. For every dollar being pulled out there also a lot of lost value due to the declining prices. Many investors follow a "basket" strategy where if one market goes down they will allocate more money to buying there and pull it out of other areas such as private investments.
This _has_ been seen in prior US public market downturns - if a pension fund is allocating 90% to public market investments and 10% to private investments, and the public market drops 33%, their fund is now split 60/10 instead of 90/10. So to rebalance back to 90/10, they'll need to liquidate 33% of their private investment allocation and move it to public investments. (This is an oversimplification but you get the idea.)
Many Japanese investors will be pulling out of other countries' markets, by necessity. Of course this is too complex to be summed up in a few sentences, but obviously demand patterns will undergo a major shift.
