Over the weekend, the new First Family joined the crypto goldrush with the $TRUMP memecoin launch. In its first 36 hours of trading, the coin’s value rose 28,000%. Had you invested in the US stock market a half-century ago, you’d have still made less than you would have overnight on a collection of digits with no business model or cash flow and which, as a disclaimer on its website says, is not “intended to be, or to be the subject of, an investment opportunity, investment contract, or security of any type”.

Hours later, Donald Trump’s wife Melania joined the fray, launching her own memecoin. Despite being thrown together in a matter of hours, it rocketed just as fast. Similar launches are now reportedly being planned by some of the Trump children, and the money is flowing — with Binance offering clients margin loans amounting to 25 times their collateral to invest in crypto. Today, Bitcoin hit a record high of $109,241. You can now sell all you own, park it in crypto, and wait for the millennium.

In normal times this would raise red flags, bearing as it does the hallmark of a bubble at its peak. However, these are not normal times, since these get-rich-quick schemes are being pumped up by the incoming president of the world’s most powerful country. Although some market analysts are quietly expressing alarm, most — unwilling to abandon their faith that markets are rational — will instead produce a stream of verbiage about this being a new era of radical human transformation.

That storyline is anything but new, though. We hear it at the height of every speculative mania, most notably during the dotcom boom of the late-Nineties. Then, as web domains were registered and their prices soared, the airwaves filled with feverish talk about how the revolution underway, which would transform human productivity, justified the stratospheric share prices on the stock market.

But what few then noticed was that in the wake of the 1997 Asian Crisis, when panic spread across the developing world, the rich in the Global South were sending their money to the safe shelter of the US, thereby pumping hundreds of billions of dollars into US markets. With that sea of money washing over America, it took some doing not to make money.

However, when conditions began to stabilise in the periphery around 1999, money began flowing back out. The US market duly crashed. Today, a similar phenomenon is at work. With the European economy in a funk, foreign investors eschewing China, and the strong dollar — despite a tumble today — pulling money from developing countries, the only game in town is the US, which is sucking in money from around the world.

Yet that flow too will reverse, and it may not now be long in turning. Crypto in various forms has gone beyond orbit and anything connected to Trump personally, like his own media company or the shares of his close associates’ firms such as Tesla and Palantir, is doing the same. But the stock market rally has begun slowing and the bond market has been declining for months.

Since falling bond prices translate into rising yields, long-term interest rates are going up across the board. With mortgages consequently more costly, the housing market is flat, resulting in falling real prices. More Americans will feel that effect than the explosion of wealth experienced by a few tech bros. Oligarchs may be making off like bandits, but most ordinary folk are feeling the burn.

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John Rapley is an author and academic who divides his time between London, Johannesburg and Ottawa. His books include Why Empires Fall: Rome, America and the Future of the West (with Peter Heather, Penguin, 2023) and Twilight of the Money Gods: Economics as a religion (Simon & Schuster, 2017).

jarapley

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