Financial System Instability
History teaches us what happens when common sense gets pushed out of the share price trading markets when institutional money gets financialized.
This has happened before. At least twice.
The first time was The Gilded Age, when Market Makers seized control of insurance pools to fuel a share price trading boom that concentrated wealth and power in the hands of the trusts. That boom went bust in the Panics of 1893 and 1907, almost bankrupting the US Treasury, and requiring Teddy Roosevelt to ride in and bust up the trusts, while state legislatures made it illegal for insurance companies to speculate on share prices with policyholders’ premiums.
The second time was The Roaring Twenties, when Market Makers seized control of depository banking, fueling another boom that concentrated wealth and power in corporate conglomerators. That boom went bust in the Crash of ’29 and The Great Depression, requiring FDR to regulate both depository and investment banking, while creating worker pensions and a social safety net.
Now it is happening with Pensions fueling a boom that is concentrating wealth and power in the hands of Asset Managers.
That boom almost went bust in the Global Financial Crisis of 2008, until central bankers started printing money to stabilize the markets, and get the boom going again.
Now we are seeing rising inflation and rising interest rates. When will that bust the boom?