The recent surge in tech stocks is causing concern among regulators and economists, who warn that the AI boom may be fueling a speculative bubble that could lead to a market crash. As the world’s largest economies rely on just a few major firms, any loss of confidence could have far-reaching consequences for the global economy. Historian Charles Kindleberger notes that similar bubbles have occurred throughout history, with devastating consequences.
Economist Hyman Minsky’s insights provide valuable lessons for today’s situation. According to Minsky, capitalism relies heavily on faith and speculation, which can be self-perpetuating but also unstable. His solution was to redesign the financial system to prevent excessive risk-taking and ensure that innovation is guided toward socially useful goals.
The AI boom has indeed fueled speculation, with startups raising vast sums without a proven product or earnings. This phenomenon echoes Minsky’s “Ponzi endgame,” where prices are sustained by expectations of rising valuations rather than underlying fundamentals. The warning signs from experts like Sam Altman and Jeff Bezos are clear: the market is at risk of crashing if it can’t deal with the wave of speculation.
To mitigate this risk, a Minskyan approach could involve limiting borrowing, steering cash toward socially useful tech, and implementing fiscal and industrial policies that promote sustainable innovation. The goal is not to stifle risk-taking but to build a capitalism that can handle excesses and ensure long-term stability. As the AI boom continues to shape the global economy, it’s essential to heed these warnings and take steps to prevent a market crash.
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Source: https://www.theguardian.com/commentisfree/2025/oct/10/the-guardian-view-on-an-ai-bubble-capitalism-still-hasnt-evolved-to-protect-itself