The size of global finance relative to the “real” economy

 

Real assets — like houses — were being used to secure debt that was then rehypothecated multiple times, partly with derivatives

That financial cloud looked impressive. But, like candyfloss, the value of its “real” assets was small — as we discovered when finance imploded.

Global household wealth has risen more than fourfold since 2000, dramatically faster than the “real” economy, amid asset-price inflation. 

America accounts for $175tn of this; China $75tn.

One issue, the Bank for International Settlements said recently, 

https://www.bis.org/publ/arpdf/ar2026e1.htm

is that wealth is now so dependent on US stock markets — and US AI exuberance — that “a major equity market correction could have larger macroeconomic consequences today than in the past”.

Gillian Tett Financial Times 24 Juy 2026

https://www.ft.com/content/7bcf8215-fd76-4620-bdc3-8c1b0ea13bba?syn-25a6b1a6=1

Cognitive blind spots are undermining our ability to see the world as it is, rather than as we would like it to be.

https://englundmacro.blogspot.com/2026/01/cognitive-blind-spots.html