Waiting for bubble to burst: Decoding next American financial crisis

Sonipat, Dec 4 (360info) For much of the last century, financial logic was governed by a simple, foundational rule: equities for growth, representing a bet on a prosperous future, and gold as a safe-haven, serving as insurance against a disastrous one. This essential dichotomy dictated global capital flows.

In 2025, this logic has dissolved. We observe a profound and counterintuitive anomaly in American markets, an “everything rally” where both risk assets and safe havens are simultaneously hitting record highs.

The sheer volume of global liquidity has overpowered traditional fundamentals, leading to a structural breakdown in market pricing. The puzzle is that everyone is buying both the “speedboat” for sunny weather and the “lifeboat” for the storm at the same time.

The data confirms how gold futures have seen a jump of 50 per cent year-to-date in 2025. Simultaneously, equity markets are at record valuations, with the S&P 500’s forward price-to-earnings ratio pushing above US dollar 25, a level that rivals the 1999 tech euphoria.

This signals that a universal tide of capital is lifting all boats. When both fear-assets and growth-assets rally, the crisis is located in the plumbing of liquidity itself, the channels through which central bank reserves flow into asset markets.

Where did this ocean of liquidity come from? The pandemic era unleashed a staggering monetary and fiscal response. The US Federal Reserve alone expanded its balance sheet (thus adding liquidity) by more than 1 trillion dollars between late 2020 and September 2021.

Put together, central banks of the G4 countries – Brazil, India, Germany and Japan – expanded their balance sheets by about 20 per cent of GDP over just three months, compared to 6 per cent in the first year of the global financial crisis.

Much of that surge remains unabsorbed, with over 7 trillion US dollars in cash now sitting on the sidelines in US money-market funds (a kind of mutual fund) alone, a mountain of dry tinder ready to fuel speculative flows. (360info.org) SKS SKS