"The message from global regulators this week was blunt: the AI boom is driving stocks to dotcom-bubble highs and the world is finally listening. With so much cash riding on so few firms, any loss of faith could send shares tumbling and drag down the wider economy. China's proposed export controls on rare earths add a fresh threat: not just to sentiment, but to advanced chip supply chains themselves."
"Look to economist Hyman Minsky, from whom Kindleberger borrowed much. Minsky addressed the deeper conundrum that is being sidestepped today: how to stabilise financial innovations before they destabilise the system? He thought that the longer markets remain calm, the more risk they take. The genius and danger of capitalism is that it can't stop chasing another win. To prevent that, Minsky thought, required not moral restraint but institutional redesign."
Global regulatory warnings highlight AI-driven stock valuations reaching dotcom-bubble levels, with investment concentrated in a few firms and high systemic risk if investor confidence erodes. Proposed Chinese export controls on rare earths threaten advanced chip supply chains and amplify downside risk. Historical patterns from tulip mania onward show episodes where profit opportunities become overdone, triggering panicked exits and crashes. Hyman Minsky’s framework links prolonged calm with rising risk-taking and views capitalism as dependent on collective belief. Minsky recommended institutional redesign and robust public backstops—large government support and a central stabilizing bank—to protect society when asset prices collapse.
Read at www.theguardian.com
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