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Three Bubbles, One Risk
The American economy faces three significant financial bubbles simultaneously: real estate, equity markets, and credit markets. Real estate prices are at an all-time high relative to income, equity market capitalization almost doubles the GDP, and record levels of corporate, consumer, and private debt are prevalent. The unique aspect of this situation is that these bubbles are interconnected, as individuals often own assets across all three areas. This cross-contamination increases systemic risk, as the concentration of asset ownership among hedge funds, pension funds, and the wealthy means that politicians are likely unable to let these bubbles burst, given the potential for widespread economic destruction.