The mother of bubbles – but what is the basis?

The economic journalist Andreas Cervenka accurately points to the risk of a Mother of Bubbles in 2025 after the US AI fever in 2024. The stock market is driven by a few companies such as Apple and Nvidia. The “mother of all bubbles” is beginning to be warned about, and history teaches us that bubbles burst sooner or later. Often every eight years in recent decades. But crashes do not come from government debt as Cervenka suggests in the article – at least not in countries that have control over their currency . The real danger lies in private debt and austerity policies.

When governments cut back on investment , households are forced to borrow to keep the economy afloat. As long as the debt bubble grows, everything looks good, but when households reach their limits, consumption decreases . It is not just a financial crisis that threatens, but a downward spiral in the real economy – production, wages and tax revenues fall.

Trumponomics – growth on steroids?

Cervenka describes Trump's policies: trade tariffs against China, deportations and tax cuts for the already wealthy. The effect? A short-term boost for the big companies and rising inflation for ordinary people. At the same time, Trump himself is heavily in debt, which reflects America's economic paradox – huge profits at the top, but insecurity at the bottom.

Trade tariffs against Europe also risk hitting Germany, Sweden's most important trading partner. Europe, already weakened by the euro and austerity, now finds it difficult to withstand new economic shocks. Europe could respond by targeting sales to and production for its own internal market, which is one of the world's largest. Many of the problems with the EU's lack of consumption are due to the austerity policy giving too little purchasing power.

Inflation

Many worry that punitive tariffs and Trump's plans to deport millions of undocumented immigrants could increase costs and once again push up inflation.

The price shock of 2022 and 2023 impoverished more people in a short period of time than any other economic event in modern times, as inflation affects large sections of society.

Although the pace of price increases has slowed in both the US and Europe, there is growing concern that the fight against inflation is not over. In November, inflation was 2,7 percent in the United States and 2,3 percent in the euro zone. In Sweden, it was 1,6 percent, but adjusted for the interest rate effect, prices rose by 1,8 percent – ​​slightly below the Riksbank's target of 2 percent.

China is slowing down like the world's locomotive

Cervenka suggests that the reason is that sovereign debt does not work. China's economy has lost momentum, and the reasons are several but not for large government investments. For a long time, real estate has driven China's growth. But when people and companies reach their debt ceiling, both consumption and the will to invest decrease. At the same time, China is dependent on exports, and when global demand falters, the economy is further squeezed.

The state's reduced investment in infrastructure has also played a role. When public projects are scaled back, an important engine for growth is missing. In addition, China's demographics, with an aging population and low birth rates, negatively affect both labor and consumption.

Add in trade disputes and technological restrictions, and the picture becomes clearer: China's economy is being held back by both domestic imbalances and global challenges. Solutions require a more balanced policy that strengthens consumption and reduces dependence on debt-driven growth.

The Euro and the Fall of Germany

Germany, Europe's former powerhouse, is struggling under high energy prices and competition from China. But the eurozone's regulatory framework is making things worse. Countries that cannot create their own currency are dependent on borrowing on the market , often at high cost. Debt is seen as a problem, but without government investment the economy becomes even more vulnerable.

The euro was created to break with Keynesianism , where the state invests to boost the economy. The result? A continent stuck in austerity, where even Germany can't cope. If you dig a hole for others, you easily fall into it yourself.

Austerity affects people and the environment

Cervenka also addresses the demographic challenges as a risk to the Mother of Bubbles. Europe's population is aging, and birth rates are falling. But why are fewer children being born? Yes, financial uncertainty. Austerity policies make it harder for families to make ends meet. The public sector is shrinking, working conditions are deteriorating and security systems are being dismantled.

Class divisions pave the way for crisis

At the same time, the gaps are widening. In 2023, Sweden had 575,000 dollar millionaires , a figure that has grown sharply since tax cuts and austerity measures began in 2006. The consumption of the richest is barely affected by crises, while ordinary people are forced to cut back on everything from food to housing. At the same time, the millionaires' yield requirements drain production and consumption of resources, which eats into the real economy. Consumption will decrease further in October 2025 when the unemployment insurance fund for the long-term unemployed is reduced to 5600 after tax per month. This will crush wage growth in many professions. The millionaires who have retired to play golf full-time are also not stimulating the real economy with their work.

Globalization does not stimulate the economy and destroys the environment

Globalization's transportation and low-wage competition also continue to threaten the environment. The waste of resources is not only economically unsustainable – it damages nature, which is our most important real resource.

War zones and environmental destruction risk factors

There are war zones in Ukraine, Israel, Palestine and the Middle East, Yemen, Sudan, Ethiopia and the Democratic Republic of Congo. The ongoing wars in the world and the growing environmental destruction create major risks for the global economy. War destroys infrastructure, disrupts trade routes and reduces the availability of labour, affecting both production and consumption. At the same time, environmental destruction leads to extreme weather and depletion of natural resources, making it more expensive and difficult to produce goods and services.

All right-wing or authoritarian governments

There are a growing number of countries with far-right rule or authoritarian leaders, such as the United States, Sweden, Israel, Russia, Argentina, Hungary, North Korea, Belarus, Turkey and China. France has become more dependent on the Le Pen family's far-right party Rassemblement national. All this tendency towards right-wing extremism can be due to all the austerity policies that tend to favor fascism and right-wing extremism historically according to Clara E Mattei who wrote The capital order . These countries are worsening the world's financial situation by prioritizing power concentration and short-term profit over long-term investments in sustainability, democracy, human rights and peace. The increased polarization and oppression in these societies also inhibit innovation and cooperation, further undermining the stability of the global economy.

Full employment requires investment

Cervenka is right about the mother of bubbles: consumption is weak, and interest rates are a burden on households. But the solution is not more cuts, as hostility to government debt might suggest, but investments that create security and work. If we want full employment, we must expand education, healthcare, culture, many other necessary welfare services, housing construction and infrastructure.

During the welfare years of the 1930s–70s, Sweden managed the productivity requirements through public investments and security systems. Even then there were long-term sick leaves, because people get worn out from work. In the 1800s, when social insurance was lacking, the outcasts became "tramps" - people who wandered from place to place without hope or shelter.

A new economic direction

Should we continue on the current path, where austerity increases private indebtedness and creates insecurity? Or should we invest in people and society?

Sovereign debt is not the main risk seed The mother of bubbles in countries that create their own currency. It is the lack of investment that leads to crises. An economy built on security, sustainability and full employment can give us both stability and faith in the future.