From Sports to AI, America Is Awash in Speculative Fever. Washington Is Egging It On.
The Fed is lowering rates, the Trump administration is loosening regulations across the financial system and Trump’s own family is cashing in
By Greg Ip, The Wall Street Journal, Oct. 16, 2025
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The speculative fever has spread well beyond the usual stocks, bonds and property. Crypto, a brand new asset class, is now valued at some $4 trillion. Americans bet $150 billion on sports last year, up 24% from 2023, according to the American Gaming Association. Gold, a hedge against bubbles, is looking bubbly itself. Speculation has become woven into today’s political, economic and cultural psyche.
And official Washington, instead of leaning against the speculation, is egging it on: the Federal Reserve is lowering interest rates, the Trump administration is loosening regulations across the financial system, and President Trump’s own family is cashing in….
In its semiannual report on financial stability, the IMF wrote: “Risk asset prices are well above fundamentals, increasing the probability of disorderly corrections…Markets appear complacent as the ground shifts.” For an institution normally given to understatement, this is the equivalent of setting its hair on fire.
The IMF estimates the current ratio of the S&P 500 to future earnings* is in the 4% highest such readings since 1990. The market is less overvalued than at the peak of the dot-com bubble in 2000, but more concentrated in a handful of companies. Meanwhile, the global lender warns that climbing government debts and worries about the U.S. dollar menace bond and currency markets….
The sorts of linkages to the financial system that made the housing bust so destructive appear absent. (That may be changing: more data centers are being financed with debt. And banks recently took big losses on the surprise failures of two finance companies, one providing subprime auto loans.)…
Today, working-class investors are flocking to all these markets: stocks, betting and crypto. They are beneficiaries of a new age of democratic finance. Or the last invitees to a party that’s going to end. [end quote]
Recessions are a regular feature of capitalist business cycles. The arrival of an ordinary recession (such as 1990) doesn’t involve a bubble and isn’t a crisis.
The bursting of a bubble can cause speculators to lose a lot of money. This has happened many times in the past without causing a financial crisis. The bursting of the dot-com bubble in 2000 caused a mild recession but not a financial crisis.
METARs who are speculating in today’s bubble can lose money but they may not crash the economy.
A financial crisis results when the bubble is financed by debt that pulls down interlocking lenders. That’s what happened in 1929 and 2008.
Removing regulations and oversight and spiking the markets with lower interest rates will only inflate the bubble more.
Wendy
- @Kingran note that this is a ratio using future earnings, not the CAPE.
