This week, the S&P 500 entered what analysts call a bear market. The index is down about 22 percent from its most recent peak in January. Many growth stocks and cryptocurrencies have dropped by double or triple that amount.
New home sales dropped 17 percent in April, causing some analysts to argue that the housing market has peaked. And, in response to rising inflation, the Federal Reserve has just passed its biggest interest rate hike since 1994, which means asset prices could fall further.
To understand what’s happening in the stock market right now, you need to understand the era that preceded it. Rana Foroohar is a columnist for The Financial Times and the author of several books on economics, including “Makers and Takers” and “Don’t Be Evil”. His view is that more than a decade of loose monetary policy has been the economic equivalent of a “sugar boom,” which has kept prices of stocks, housing and other assets rising higher and higher, even as the fundamentals of the economy have climbed each time. time more. been eroding. This “everything bubble”, as she calls it, was about to burst – and that’s exactly what she thinks is happening right now.
So I wanted to have her on the show to discuss the economic choices – and lack thereof – that led to this point. We also discussed why the growing power of the financial sector has not resulted in a stronger economy, whether the housing market has really peaked, the huge missed opportunity for public investment while interest rates were low, why policymakers treat the asset price inflation so differently from other types of inflation, the true costs of the meat we eat and the clothes we wear, why cryptocurrency represents the apotheosis of hyper-financialized capitalism, why I am skeptical of the argument that we are moving us quickly towards a less globalized world and more.
You can listen to all of our conversation by following “The Ezra Klein Show” on Apple, Spotify, Google or wherever you get your podcasts. See a list of book recommendations from our guests here.
(A full transcript of the episode will be available at noon on the Times website.)
“The Ezra Klein Show” is produced by Annie Galvin, Jeff Geld and Rogé Karma; fact checking by Michelle Harris and Andrea López Cruzado; original music by Isaac Jones; mixing by Jeff Geld; Shannon Busta’s audience strategy. Our executive producer is Irene Noguchi. Special thanks to Kristin Lin and Kristina Samulewski.