Toward a New 1929? The Illusion of Wealth in Global Financial Markets

The Euphoria Before the Storm

In 1928, Wall Street was a celebration.
Stocks were soaring, banks offered easy credit, and confidence in America’s future seemed limitless. Then, in October 1929, the music stopped: the financial markets collapsed, dragging the real economy into the most severe crisis of modern capitalism.

Nearly a century later, many analysts wonder whether the world is experiencing a modern version of that pre-catastrophe euphoria.
Global stock markets — despite wars, inflation, inequality, and stagnation — continue to hit record highs.
Real economies are slowing, but indices shine. Families struggle, yet equity markets soar.

We face apparent wealth, a form of “fictitious income” that supports consumption and confidence without reflecting real productive growth.
It is precisely this asymmetry between finance and reality that raises fears of a recurrence of 1929.

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1. The Paradox of Financial Wealth in a Troubled World

1.1. Rising Markets, Struggling Economies

From the United States to Asia, through Europe, stock indices are posting historic gains.
The Nasdaq has surpassed pre-pandemic levels, the S&P 500 has reached new records, while India and Japan attract investments like never before.

Yet the macroeconomic picture tells a different story:

• sluggish growth in Europe;

• persistent inflation;

• sovereign debt crises in emerging markets;

• declining productivity in advanced economies;

• stagnating real wages.

It is a precarious world, where markets exist in a parallel reality.
A “confidence bubble” fueled by liquidity, expectations, and, above all, exceptionally accommodative monetary policies.

1.2. The Rise of “Fictitious Income”

Economists such as Hyman Minsky and Nouriel Roubini have described this phenomenon as the “financialization of hope.”
Rising perceived wealth through stock and real estate markets creates a psychological sense of prosperity, sustaining consumption even without real income growth.

It is a powerful but fragile mechanism: inflated portfolios push households to spend, businesses to invest, and governments to postpone reforms.
When the bubble bursts, the effect reverses — just as it did in 1929.

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2. The Ghost of 1929: What History Really Teaches Us

2.1. The Bubble Born from Optimism

By 1929, the Dow Jones had risen 400% in less than a decade.
Everyone was investing: workers, clerks, homemakers. Banks extended loans to buy stocks.
People believed technology — electricity, automobiles, radios — had ushered in a new era of infinite growth.

When the first shares began to fall, confidence evaporated.
Within days, selling turned into panic.
The “wealth” of millions vanished, along with credit, consumption, and employment.

2.2. 2025 Is Not 1929 — But the Mechanism Is Similar

Today, central banks are stronger, regulation more complex, and digital tools allow better oversight.
Yet the psychological and structural core of the bubble remains the same:

• collective euphoria;

• limitless faith in technology;

• financial growth decoupled from productive reality.

Artificial intelligence, the green economy, and fintech today play the same role that automobiles and radios did then: promises of a bright future attracting capital, often beyond reason.

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3. Finance as a Theatre of Trust

3.1. The Market as a Permanent Show

In a hyperconnected world, financial markets are no longer just economic instruments: they are continuous spectacles of collective trust.
Every day, investors “vote” with their clicks and apps, generating movements driven more by emotion than fundamentals.

The real economy — factories, wages, productivity — remains in the background.
“New wealth” arises from virtual capital: stocks, derivatives, cryptocurrencies, ETFs.
These tools multiply liquidity but rarely produce tangible value.

3.2. Fictitious Income and Artificial Consumption

This virtual wealth generates what economists call the wealth effect:
those who feel richer tend to spend more.
But if wealth exists only on paper, consumption becomes fragile.

In many countries, especially the U.S., post-pandemic consumer growth was driven more by portfolio gains than by real income.
It is a mechanism that works while markets rise, but risks collapse at the first shock.

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4. The New Bubbles: Technology, Debt, and Hope

4.1. The Artificial Intelligence Bubble

AI is the new “gold of the present.”
Companies that reference AI in strategies see stock prices soar.
History of bubbles follows this pattern: massive expectations, immediate gains, followed by systemic disappointments.

Euphoria around AI has already produced valuations disproportionate to real profits.
The risk is repeating the dot-com bubble of 2000, when the Internet promised everything — until the crash came.

4.2. The Global Debt Bubble

If the 1920s were defined by private credit, today’s bubble is global and public.
World debt exceeds 330% of global GDP (IMF, 2025).
Governments, businesses, and households operate on mountains of liabilities sustained by artificially managed interest rates.

The paradox: debt has become a growth engine.
More debt means more demand, more consumption, more apparent stability.
Yet, as in 1929, the sustainability of this mechanism is psychological before it is economic.

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5. Central Banks: Firefighters or Arsonists?

5.1. From Quantitative Easing to “Whatever It Takes”

After the 2008 crisis, central banks injected trillions of dollars and euros into markets to sustain liquidity.
What began as emergency support ended up fueling the next bubble.

Zero (or negative) interest rates made borrowing and speculation attractive.
When inflation returned, rate hikes created tension in the financial system, raising the risk of recession.

5.2. Market Dependence

Today, every market tremor triggers expectations of rescue.
It is as if the economic system has become dependent on financial expectations: markets expect intervention, institutions comply, creating a vicious circle.

The result is a liquidity-addicted capitalism, where trust is the primary asset.
And when trust falters, reality returns harshly.

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6. Inequality as a Social Detonator

6.1. Wealth Concentration

Financialization has sharply increased wealth polarization.
According to Oxfam, the richest 1% owns over half of global wealth.

Middle classes live a schizophrenic reality: seeing property or fund values rise, while wages stagnate.
This “paper prosperity” does not translate into real security, only vulnerability.

6.2. Political Fracture Risk

Inequality plus financial illusions fosters political instability.
Citizens see the gap between market profits and daily life.
Trust in the economic system falters, and social anger rises.

This mirrors the climate of the 1930s, which fueled populism and nationalism.
History may not repeat itself, but it often rhymes.

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7. The Economy of Appearance: Keeping Consumption Afloat

7.1. GDP of Confidence

Modern capitalism relies on perceived prosperity.
Rising indices encourage spending; falling ones curb it.
The stock market has become an undeclared economic policy tool.

Governments and central banks know that a market crash would devastate confidence and consumption.
Hence, they prefer managed optimism, even at the cost of distorting reality.

7.2. Virtual Wealth as Social Anesthetic

In a world of stagnation and precarity, financial wealth acts as collective anesthesia.
As long as apps display growing portfolios, crises feel less severe.

But the illusion is fragile: a 20% drop is enough to turn trust into panic — just like in 1929.

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8. Is a New 1929 Possible?

8.1. Structural Differences

The system today is more complex and interconnected.
Intervention tools, such as stability funds or interest rate controls, dilute crises but cannot eliminate them.
A 1929-style “Black Thursday” is unlikely.

Yet a slow, systemic crisis — progressive erosion of confidence and growth — could still occur, leading to a prolonged global recession.

8.2. Warning Signs

Risk indicators multiply:

• record public debt;

• peak equity valuations;

• Chinese slowdown;

• war and energy instability;

• labor crises and Western demographic decline.

These combined factors could transform a confidence crisis into a systemic breakdown.
And when trust is the only glue holding the system, it takes little to unravel everything.

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9. The Future of Finance and Society

9.1. From Illusory Growth to Real Sustainability

The key challenge ahead: reconnect finance with the real economy.
That means investing in productivity, research, labor, and infrastructure.
In other words, creating tangible value, not just market value.

The system faces two choices:

• continue to sustain “virtual wealth” as a confidence source;

• or accept a corrective phase to return to reality.

9.2. The Lesson of 1929

1929 was not only an economic crisis — it was a crisis of truth.
The world realized that paper wealth alone was insufficient.
The most important lesson today:

no society can thrive long on the illusion of prosperity.

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Conclusion: Between Illusion and Awakening

Financial markets reflect collective hope.
They mirror desires for growth, stability, and confidence — until reality intrudes.

The idea of a new 1929 is not prophecy; it is a warning.
Every era of euphoria believed it had overcome history.
Every time, reality collected the bill.

Financial capitalism can survive — but only by producing real value, not illusions of well-being.
Because trust, like fictitious wealth, lasts only as long as someone believes in it.

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