The Fed Can't Ignore Its Role in GameStop Saga
Negative real interest rates are the chief source of today’s excessive speculation because it means holding cash is a losing strategy.
Wall Street is blowing bubbles again.
Photographer: Johannes Eisele/AFP via Getty Images
I have very specific memories of the dot-com bubble. Working as a clerk on the Pacific Options Exchange in San Francisco some two decades ago, I can recall normal yellow taxicabs that suddenly became Yahoo! taxicabs. They were painted purple and provided internet access for passengers. It seemed like every billboard was for some startup internet company. A reporter from the San Francisco Chronicle found his way to the trading floor one wild day and got one of the traders on the record saying, “I can’t believe how much money I’m making!” Nothing captured the zeitgeist of the moment better.
It may be a cliché, but it’s generally true that the more things change, the more they stay the same. Today, again, it seems like everyone is getting rich, whether it be in Special Purpose Acquisition Vehicles (SPACs), whatever Chamath Palihapitiya is touting, the latest stock-of-the-day in Reddit’s WallStreetBets forum, or digital currencies. And similar to 2000, there is a group of people now who are questioning the mania, deciding to stay invested in stocks with actual revenues and earnings instead of those built on hopes and prayers.