Why Gold Can Fall When the Next Crisis Begins | Steve Keen

Private debt levels and their role in triggering economic crises remain the primary drivers of financial instability, far outweighing concerns over government debt. Professor Steve Keen argues that the current AI investment boom mirrors 19th-century railway bubbles, with excessive leverage fueling unsustainable growth that will likely lead to a significant market correction within a year. Unlike mainstream economic models that treat banks as mere intermediaries, the reality is that banks function as money-creation systems, where lending directly expands the money supply. This systemic fragility is exacerbated by a disconnect between financial claims and the physical economy, particularly as supply chain disruptions and climate-related factors threaten productive capacity. Ultimately, the economy faces a potential debt-deflation trap where simultaneous attempts to liquidate assets and repay debt will shrink GDP faster than debt can be reduced, rendering traditional stress tests insufficient.