The “Everything Bubble” Isn’t a Bubble—It’s Policy

When every asset class rises in unison, it's not speculation—it's a sign of currency destruction.

The financial establishment has diagnosed our era with an unprecedented pathology: the “everything bubble.” From media talking heads to central bankers, the consensus holds that elevated prices across equities, real estate, commodities, and alternatives reflect dangerous, irrational exuberance. What they fail to explain—and what their own framework cannot account for—is how all of these assets could rise together without coordination.

The answer is simple: they are coordinated—not by mania, but by math. What looks like a bubble is actually the rational repricing of a system that punishes savings with value destruction. Markets are not malfunctioning. They are doing their job.

The Logical Absurdity of a Universal Bubble

The very notion of an “everything bubble” collapses under scrutiny. Traditional bubble narratives rely on the idea that prudent investors should sidestep mania—reallocating to well-priced alternatives to hide capital while the speculative excess inevitably unwinds. But when everything is expensive, where is the capital supposed to go?

Take the pension fund managing $50 billion in obligations. Stocks might look expensive at 25x earnings. But where are the alternatives? Bonds yielding 4% in a world of 3% inflation, when they need 6-9% returns to meet future obligations? Holding cash that sheds purchasing power by the day? This is the reality facing every investor.

Calling it a bubble mistakes cause for effect. Markets are not irrationally pricing assets. They are rationally pricing money. This isn’t a failure of valuation models. It’s an indictment of the assumptions driving them.

The Mathematics of Debasement

What drives asset prices isn't delusion. It's discounted cash flow math. Investors compare what they could earn from a safe investment and demand higher returns to accept additional risk. In a stable monetary environment, this creates P/E multiples in the 10-15x range. But when the "risk-free" rate gets artificially suppressed—through fiscal deficits that require monetary accommodation—the entire pricing structure shifts.

Holding treasuries today means locking in low nominal returns against structural inflation pressures. As a result, capital flows into anything with yield, scarcity, or cash flow. Real estate cap rates compress. Commodities rise. Even collectibles appreciate—not because they’re speculative, but because they’re scarce. And the currency they’re priced in seemingly isn’t.

This is not irrational behavior. It’s capital preservation.

Debasement Is Structural, Not Cyclical

The deficits driving this debasement aren’t a temporary policy choice, they’re the new baseline. Aging populations, declining birth rates, shrinking tax bases, and ballooning entitlement promises make fiscal consolidation politically impossible. Cutting benefits or raising taxes enough to close the gap is electoral suicide. That leaves one option: fund the gap through monetary expansion—so, we make more dollars.

Central bank independence has become a polite fiction. When the political class demands cash, monetary authorities comply. Add in defense spending, reshoring costs, and nationalism-driven market inefficiencies, and the debasement-driven inflationary pressure becomes systemic and durable.

Markets see this clearly. They aren’t pricing in utopia. They’re pricing in Social Security.

How Prices Work

We generally denote price as a number. If the number is too high, it’s expensive. Too low, inexpensive. But this obfuscates the two core mechanics of pricing: the denomination, and the relativity.

Prices are, at their core, an abstraction on barter. I’ll give you five goats, for your cow. But in a market with too many goats, the same cow might cost eight goats. Or twenty. Cows haven’t gotten overpriced, goats have become worthless. This is the denomination mechanic of prices. But buyers also have options. They could get one cow, or 50 chickens. Value isn’t relative to the denomination, it’s relative to the available alternatives.

Our markets don’t price things in goats, they price in dollars. When there’s too many dollars floating around, and not enough cows, the price of cows goes up in dollars. Investors also compare assets based on relative value—how much a safe asset yields versus riskier alternatives. They demand higher returns in exchange for accepting additional risk. We know this intuitively. It’s why loans cost less for well-qualified (”safe”) borrowers, and interest rates skyrocket if you have a track-record of defaulting.

If you can earn 6% on your money without risk, and lose only 2% to inflation, you have a real, risk-free return of 4%. Imagine a landlord considering a new rental property. He won’t accept a 6% return while dealing with the responsibility of collecting rents, making repairs, and risking vacancy or missed payments. Not when he could get the same return without any of the hassle. So he’ll demand 8%, or 10%, or even 12% in order to make that investment worthwhile. This lowers the price, relative to what the property rents for. If the property generates $6,000 a year, he won’t pay $100k, he’ll offer $50k.

But when risk-free rates drop to 4%, with 2.5% inflation (yielding only 1.5% real returns), suddenly that 6% rental property looks pretty attractive. So prices rise.

When treasuries (the historical risk-free benchmark) offer low, or negative, real returns—as they do now—everything else must reprice higher. This isn’t speculative euphoria. It’s pricing. Instead of railing against phantom bubbles, policymakers should take a good, hard look at why investors are willing to accept such low returns in the first place. The answer: they’re comparing to cash and "risk-free" treasury returns.

There Is No Bubble. Only Escape.

The “everything bubble” is a myth. Markets are not drunk. They are soberly navigating a system built on systematic debasement and which shows no signs of stopping. There are no reasonably priced alternatives left. Only assets that might preserve value versus assets that guarantee its destruction.

As Graham said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” Investors have already voted. Now we’re seeing the weight of the dollar.

The bubble isn’t in equities, real estate, commodities, or alternatives. It’s in the delusion that money still represents a store of value.