{"id":203589,"date":"2025-10-10T18:42:07","date_gmt":"2025-10-10T18:42:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/203589\/"},"modified":"2025-10-10T18:42:07","modified_gmt":"2025-10-10T18:42:07","slug":"the-guardian-view-on-an-ai-bubble-capitalism-still-hasnt-evolved-to-protect-itself-editorial","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/203589\/","title":{"rendered":"The Guardian view on an AI bubble: capitalism still hasn\u2019t evolved to protect itself | Editorial"},"content":{"rendered":"

The message from global <\/a>regulators this week was blunt: the AI boom is driving stocks to dotcom-bubble highs \u2013 and the world is finally listening. With so much cash riding on so few firms, any loss of faith<\/a> could send shares tumbling and drag down the wider economy. China\u2019s proposed export controls on rare earths<\/a> add a fresh threat: not just to sentiment, but to advanced chip supply chains themselves. It\u2019s a long way down from such dizzying heights if gravity reasserts itself.<\/p>\n

Warnings from the past abound in Charles Kindleberger\u2019s history of financial crises, Manias, Panics and Crashes<\/a>, which begins with tulip mania in 1636. What commonly happens, he wrote, is \u201cthat some event changes the economic outlook. New opportunities for profits are seized, and overdone.\u201d Once the mistake is realised, there\u2019s a panicked exit with a crash in the price of \u201cwhatever has been the subject of the mania\u201d. The pattern repeats itself so frequently that it seems investors never learn and central bankers learn too late.<\/p>\n

But why? Look to economist Hyman Minsky,<\/a> 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 \u2013 and danger \u2013 of capitalism is that it can\u2019t stop chasing another win. To prevent that, Minsky thought, required not moral restraint but institutional redesign.<\/p>\n

Minsky\u2019s insight<\/a> into capitalism was that it runs on belief. Firms invest today because they expect others to invest tomorrow, while lenders need high asset prices \u2013 and move to shore them up. This confidence loop keeps the economy humming until doubt creeps in, valuations slip and an inevitable and abrupt market crash looms. To avert this needed radical change. His plan<\/a> advocated a \u201cbig government\u201d not to prop up share prices, but to prop up society when share prices fall. Backing this was a \u201cbig bank\u201d, a monetary authority that would make it harder to buy risky assets on credit. Minsky thought cash should be guided toward productive uses, not asset inflation. He didn\u2019t want to stifle innovation but to make it safe for democracy.<\/p>\n

It\u2019s a warning worth hearing today. This summer, OpenAI\u2019s Sam Altman called some tech valuations \u201cinsane<\/a>\u201d. Amazon\u2019s Jeff Bezos says we\u2019re in a bubble<\/a>. The AI boom looks alarmingly like Minsky\u2019s Ponzi endgame<\/a> \u2013 with prices sustained purely by expectations of rising valuations and easy refinancing. Startups with no product raise billions; \u00a0index funds become dominated<\/a> by juiced\u00a0up stocks; capital chases fads rather than earnings. The ratio of the total market cap of all US stocks to US GDP is at a record<\/a> high. Sceptics<\/a>, however, point out in the year before the dotcom crash the Nasdaq rose 86%,<\/a> while it has only gone up 24%<\/a> in the last 12 months.<\/p>\n

AI may change the world. But perhaps not, if markets can\u2019t deal with the wave of speculation it has unleashed. A Minskyan approach would couple borrowing limits with fiscal and industrial policies that steer cash toward socially useful tech. Mr Altman warned<\/a> that AI startups with \u201cthree people and an idea\u201d are raising vast sums, adding \u201cthat\u2019s not rational behaviour. Someone\u2019s gonna get burned.\u201d He\u2019s right. The point isn\u2019t to scold risk-takers, but to build capitalism that can handle \u2013 and survive \u2013 their excesses.<\/p>\n

Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters<\/a> section, please click here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"The message from global regulators this week was blunt: the AI boom is driving stocks to dotcom-bubble highs…\n","protected":false},"author":2,"featured_media":203590,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[256,254,255,64,63,105],"class_list":{"0":"post-203589","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-artificialintelligence","11":"tag-au","12":"tag-australia","13":"tag-technology"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/203589","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=203589"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/203589\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/203590"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=203589"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=203589"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=203589"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}