Warning: The AI Gold Rush Might Be Masking a Looming Economic Crisis – Here’s Why
The stock market’s relentless climb has investors feeling both exhilarated and uneasy. But beneath the surface, there’s a troubling question: Are we riding a wave of innovation, or barreling toward another historic crash? Andrew Ross Sorkin, one of America’s most respected financial journalists, isn’t just asking—he’s sounding the alarm.
A Roaring '20s Redux?
After President Trump’s recent tariff threats sent stocks tumbling (source: CBS News), Sorkin’s insights feel eerily timely. His new book, 1929, examines the parallels between today’s market euphoria and the speculative frenzy that preceded the Great Depression. But here’s where it gets controversial: Sorkin argues we’re in our own "roaring '20s"—the 2020s—with stocks soaring just as they did before the 1929 collapse.
"From 1928 to September 1929, the market surged 90%," he notes. "Sound familiar?" Today, the AI boom is fueling a similar frenzy, with hundreds of billions pouring into unproven technologies. Is this sustainable growth, or a sugar rush? Sorkin admits he’s anxious: "We’re either in a remarkable boom or everything’s overpriced."
Bubbles, Guardrails, and the Ghost of 1929
The hallmarks of a bubble are here: sky-high valuations, a disconnect from the real economy, and speculative mania. And this is the part most people miss: Sorkin believes the economy is being "artificially propped up" by AI investments. Is it a gold rush or a time bomb? We might not know for years.
In 1929, reckless credit and speculation fueled the crash. Wall Street lured ordinary Americans into buying stocks on margin (putting down just 10% and borrowing the rest). "Credit was once considered a sin," Sorkin explains. "But then General Motors convinced people to borrow for cars—and bankers followed suit for stocks." When the bubble burst, those debts crushed families.
Post-1929, safeguards like the SEC and consumer protections were enacted. But now, those guardrails are crumbling. The SEC has relaxed rules, the Consumer Protection Bureau is weakened, and private markets—once reserved for the wealthy—are being pitched to everyday investors. "It’s not about tomorrow’s cliff," Sorkin warns. "It’s about speculation and debt rising while protections vanish."
Democratizing Finance—or Risk?
Here’s the debate: Should retirement funds like 401(k)s be allowed to invest in risky private startups, including AI ventures? Larry Fink, CEO of BlackRock ($12.5 trillion in assets), argues yes—calling it "democratizing investing." But critics see danger. "These are gambles," Sorkin counters. "And private companies lack the transparency of public ones."
Even crypto isn’t immune. Fink, who once called Bitcoin "for criminals," now sees it as a diversification tool—but Sorkin points to meme coins (like the bizarre "Sorkin Coin" that briefly hit $170 million) as proof of 1929-style manipulation. "Pump-and-dump schemes are back," he says.
The Big Question: Are We Headed for Disaster?
Sorkin’s answer is grim: "We *will have a crash—I just don’t know when or how deep."* Some economists argue Trump’s pro-market stance might prevent a 1929 repeat, but Sorkin isn’t convinced. "When confidence vanishes, it happens fast."
What do you think? Is AI propping up the economy—or hiding its cracks? Should 401(k)s dabble in startups, or is that playing with fire? Share your take in the comments.
Produced by Shachar Bar-On. Associate producer, Jinsol Jung. Broadcast associate, Aria Een. Edited by Sean Kelly.
