Are we partying like it’s 1929?
We’re in a new age of financialization and innovation, the boldest transformation in money and investing since the 1920s, says Andrew Ross Sorkin, a longtime New York Times business reporter and author, in The New York Times Magazine.
As in the 1920s, it’s driven by the idea of expanding access to markets. Private equity, venture capital and private credit, once the preserve of institutions and wealthy individuals, are now about to be repackaged for the masses and even included in 401(k) retirement plans. Crypto tokens are being sold as a way to buy parts of private firms such as SpaceX and OpenAI, “in the gray zone of securities law,” Sorkin says.
“It all comes amid a new stock boom, fueled by a mania for AI, and with a new administration in Washington that is determined to loosen rules — creating a permissive spirit similar to the one that passed for innovation in the 1920s,” Sorkin says. “The Trump administration is working on rolling back key provisions of the Dodd-Frank Act, easing capital requirements for midsize banks and sidelining the Consumer Financial Protection Bureau — an agency born after [the financial crisis of] 2008 to police predatory lending. Congress, for its part, has advanced measures like the Genius Act and, more recently, the so-called Financial Innovation and Technology for the 21st Century Act — billed as modernization and, in practice, opening the gates for crypto and other speculative products.”
“When transformation comes this quickly, it rarely benefits everyone unless it is paired with transparency, oversight and regulation,” Sorkin says.
In private markets, individual investors “may never really know what their holdings are worth until the day they try to sell them,” Sorkin says. “And for the system as a whole, it means trillions of dollars could be sitting on balance sheets at values that are, depending on the day, aspirational.”
“Every great panic in modern finance has started the same way: too much borrowed money,” he says. And this time it’s private credit: direct loans to companies, not made by traditional banks but by firms such as Apollo and KKR that have created new funds from which they make loans.
The bottom line: “The newest frontier of finance is designed to skirt the very guardrails that were created in the aftermath of the [1929] crash and helped keep calamity at bay for nearly a century,” Sorkin says.
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