Why speculators are still running wild when money is no longer free
https://www.ft.com/content/ec452f8e-f2ad-4c98-a150-9eff84b0c692
Ruchir Sharma notes:
The mystery of the moment is why rampant speculation persists in the all-American bull market despite the apparent end of easy money. The exuberance was understandable when money was virtually free, but that was last decade. In 2022, the Federal Reserve began raising interest rates from near zero to almost 5 per cent. And yet, after a brief pause, speculative activity has surged anew across many US asset classes, led by artificial intelligence plays and meme coins.
One answer is that the easy money era ended only in part. It had always rested on a growing web of government and central bank support including market rescues, corporate and bank bailouts, constant stimulus and, of course, record low rates. Only very low rates have gone away. The rest of the culture continues to backstop the basic faith of market speculators that nothing will be allowed to go wrong.
https://www.ft.com/content/ec452f8e-f2ad-4c98-a150-9eff84b0c692
Ruchir Sharma notes:
The mystery of the moment is why rampant speculation persists in the all-American bull market despite the apparent end of easy money. The exuberance was understandable when money was virtually free, but that was last decade. In 2022, the Federal Reserve began raising interest rates from near zero to almost 5 per cent. And yet, after a brief pause, speculative activity has surged anew across many US asset classes, led by artificial intelligence plays and meme coins.
One answer is that the easy money era ended only in part. It had always rested on a growing web of government and central bank support including market rescues, corporate and bank bailouts, constant stimulus and, of course, record low rates. Only very low rates have gone away. The rest of the culture continues to backstop the basic faith of market speculators that nothing will be allowed to go wrong.