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The writer is the chairman of Rockefeller International. His last book is’What went wrong with capitalism‘
The mystery of this moment is why angry speculation lasts in the all -American bull market, despite the apparent end of a slight money. Bust was understandable when the money was almost free, but it was the last decade. Federal reserves 2022 began to increase interest rates from almost zero to almost 5 percent. Yet, after a short break, the speculative activity has increased in many American assets, and are led by games of artificial intelligence and meme coins.
One answer is that the era of light money ended only in part. It has always been resting on the increasing network of government and central banks, including saving markets, corporate and banking members, permanent stimuli and, of course, to record low rates. Only very low rates are gone. The rest of the culture continues to stop the basic faith of market speculators that nothing will be allowed to go wrong.
Today, most explanations for unwavering faith in the US market are focused on the resistance of their economy-rated the main role of innovators in AI and protected by the current business president. But Speculants were wild before AI Mania took away US markets in 2023, and long before Donald Trump returned the Presidency. Slightly deeper than Trump and Ai is at work. Social media records speculative fervor as Btfd: “Buy F *** Ing Urna”.
The longer the bull running, the more investors feel reinforced to buy any fall. Over the past month, the market has suffered short news failures of serious Chinese challenge to American AI dominance and Trump’s tariffs. Then the retailers in retail rushed to buy supplies as never before. Of the five biggest days for retail, buying this decade, four have erupted in the last five weeks.
Maybe what Trump loves more than tariffs is shares, so investors assume that his administration, even more than his predecessors, will not allow shares to fall. The BTFD party therefore rests on the same basis as the US economy: state support.
In order to keep the growth alive during pandemic, the Fed has inserted huge amounts of liquidity into the system. Some measures a lot still passes through market. The government consumption remained raised after Coid had passed, leaving more money in the hands of households and corporations. They in turn invested in a large extent in stock (or stock rallies), convinced that the state would alleviate losses.
Rescue culture dates back to the first rescue of a large US bank in 1984, and the first explicit Fed A vow to support the stock market in 1987. Since then, the rescuers have become more generous and automatically, stimulating larger speculative rabies and constantly growing market estimates. Investors saw risks as asymmetrical, with a state limit of losses and without a limit to profit.
Short sellers who bet that problematic shares would fall, the dying breeds on the market that the Government allows for movement in just one direction: above. Since the economy is strong and supported by the state, the bankruptcy rate in the US is close to the record lowest (outside the pandemic). With the default settings so unlikely, lenders charge only any premium to loans to companies, troubles or not.
During the pandemic, unprecedented monetary infusions were flowing into the hands of consumer who, stuck at home, began to invest as a game, treating markets as an adventurous park. This search for excitement paused when the return of inflation forced Fed to increase the rates of 2022, but only briefly. Next year, the Government responded to running on the Bank Silicon Valley, guaranteeing all its deposits. He then put an additional $ 400 billion into the banking system to ensure that fear would not expand. Next summer, when the supplies fell for a few days and investors did their best to reduce the large rate, the FED delivered one despite the adhesive inflation. Once again the game was included.
Far from worrying about high borrowing costs, Americans accept risk vehicles such as an ETF lever, which now even offer small investors the opportunity to take advantage of individual stocks, including the hottest name, Nvidia. Cryptocurrency with names like Fartcoin have been on tears in recent months.
So how does the assumption of leading assumptions change – state support for speculation risk? One way is the price of money to grow further, driven by perhaps greater inflation. Second is that a fiscal crisis or other shock leaves the government to afford such generous rescue and rescue. Until then, BTFD will remain a mantra for most investors.
