The awkward factor is that we could have avoided this sort of bubble on a broader scale by sticking to more traditional pension rules.
When everyone gets a 401(k), and everyone gets the cookie-cutter advice that index funds are cheap and tend to outperform active management on the long term, it couples WAY more of the American public to the stock market than was conventional.
If the market fizzled in 1980, it would bankrupt some rich traders and a few over-margined firms, but the aspects of the economy that actually made and sold useful things would soldier on. People with guaranteed pensions and secured debts would make it out (relatively) whole.
Today, a proper reckoning would be political suicide. We're now forced to deal with the political consequences of "NVDA retreating to $10 per share means a bunch of grandpas (who vote) are evicted from their retirement homes."
I expect we'll see a lot of elaborate Rube Goldberg schemes to keep stock prices afloat. We'll insist there's an AI gap with China to unlock endless federal grift, much as the missile gap with the USSR made it of vital national interest that we showered Lockheed and Raytheon with trillions. I wonder if we'd eventually see the equivalent of 'capital controls'-- limiting the ability of institutional investors to sell their shares to prevent price deflation if there's a "market-spooking" event.
Of course, this bleeds actual productive assets, and when the bottom finally falls out-- when there's no amount of state intervention that will hold back the obvious-- it's going to burn far worse. Maybe the final endgame is that we end up nationalizing part of the market-- swallowing everyone's IRAs/401(k)s/ESAs and converting them to funny-money that can be marked at whatever price is necessary to keep Grandpa from losing his shirt.
When everyone gets a 401(k), and everyone gets the cookie-cutter advice that index funds are cheap and tend to outperform active management on the long term, it couples WAY more of the American public to the stock market than was conventional.
If the market fizzled in 1980, it would bankrupt some rich traders and a few over-margined firms, but the aspects of the economy that actually made and sold useful things would soldier on. People with guaranteed pensions and secured debts would make it out (relatively) whole.
Today, a proper reckoning would be political suicide. We're now forced to deal with the political consequences of "NVDA retreating to $10 per share means a bunch of grandpas (who vote) are evicted from their retirement homes."
I expect we'll see a lot of elaborate Rube Goldberg schemes to keep stock prices afloat. We'll insist there's an AI gap with China to unlock endless federal grift, much as the missile gap with the USSR made it of vital national interest that we showered Lockheed and Raytheon with trillions. I wonder if we'd eventually see the equivalent of 'capital controls'-- limiting the ability of institutional investors to sell their shares to prevent price deflation if there's a "market-spooking" event.
Of course, this bleeds actual productive assets, and when the bottom finally falls out-- when there's no amount of state intervention that will hold back the obvious-- it's going to burn far worse. Maybe the final endgame is that we end up nationalizing part of the market-- swallowing everyone's IRAs/401(k)s/ESAs and converting them to funny-money that can be marked at whatever price is necessary to keep Grandpa from losing his shirt.