The Bank for International Settlements’ warnings are worth heeding, even if they are written in dry economic terms. It was the BIS, particularly Willam White and Claudio Borio, who identified that house prices were rising dangerously in many markets. Alan Greenspan’s Winnie the Pooh aired their concerns. More qualified economists similarly dismissed Mr. White and Mr. Borio. All they had were empirical discoveries, no theories or models.
We have embedded the German section of the BIS Annual Economic Report at the end of this post. The Financial Times made this the lead article:
And here’s the money chart from their article:
Note that this figure only plots tech-related bubbles, not real estate bubbles. Real estate bubbles represent such a large component of collective wealth that they are smoothed over, so any significant decline in value is deflationary. Still, notice how tame the dot-com bubble seems, even before we got to the evidence of mania such as valuing companies by eyeballs, even though its size was considered frightening compared to post-Great Depression levels. But as you can see, the economy was even worse in 1920. In addition to its much higher severity, the reason the bankruptcy hit back so hard on the economy was its use of leverage. The high level of margin obligations resulted in large losses for banks. Stock markets at the time also included leveraged structures such as trusts of trust and trusts of trust, much like the collateralized debt securities of the crisis era.
Current levels are flashing red, even though strict securities laws limit margin debt.
There’s never been a better time to review the quality of your portfolio.
History provides a clear verdict on increased margin debt.
Don’t let FOMO control you. https://t.co/plx60LYayI pic.twitter.com/q0JXa7VvVE
— Thierry by arvy 🇨🇭 (@ThierryBorgeat) June 27, 2026
And it’s not hard to find other reasons to suspend ratings.
🚨 Warren Buffett warned about this twice.
2000:
“There is nothing more calming to rationality than the acquisition of large amounts of money without much effort.”
2026:
“People have never been in a gambling mood like they are now.”
And now the NASDAQ-M2 ratio has exceeded the peak of the dot-com bubble itself.
AI is… pic.twitter.com/JoC2AR6S1Y
— Crypto Rover (@cryptorover) June 28, 2026
and:
🚨 South Korea just issued a major warning signal for AI stocks
Today, KOSPI has erased about 100 trillion won.
KOSDAQ rose +7.5% and added ~150 trillion won.
At first glance, it seems normal, but it’s not.
Funds are circulating from Korea’s biggest AI/memory winner… pic.twitter.com/2o7NezaHUz
— Limitless Finance (@trylimitlessfin) June 29, 2026
AI also has circular finance, which is more opaque than the trusts of the 1920s, but has created hyper-interconnections that are similarly influential and prone to crisis. Additionally, hyperscalers have such an insatiable need for capital that they are unable to raise capital through equity and are increasingly reliant on debt. High interest rates and a slow and tight private bond market mean that suitable funding is unlikely to be available.
Read more about the Financial Times’ take on the BIS report below.
The Bank for International Settlements has warned that Big Tech companies’ surge in AI spending risks leading to a prolonged “investment recession” that could disrupt financial markets and damage the global economy.
The Basel-based organization, which advises the world’s central banks, said investors could quickly curb lending to AI companies as the tech sector expected worse-than-expected returns, with the five biggest “hyperscalers” expected to invest more than $1 trillion between 2025 and the end of 2026.
The warning comes amid growing concerns about the scale of stock and bond issuance that is fueling the AI revolution and the disruption it is creating in global markets. Technology groups have flooded global credit markets, taking advantage of corporate credit spreads near the lowest of the century to raise hundreds of billions of dollars to fund AI projects…
Leading investors have warned that this rush to issue bonds could test investor appetite, especially if investments in AI do not yield sufficient returns.
Allianz’s investment chief warned this week that SpaceX’s decision to launch a $25 billion bond sale immediately after its IPO is a sign the market has entered “bubble territory.”
BIS added that a larger AI-related stock market correction could have a broader impact now than in the past, as households have greater exposure to equities relative to their assets and income.
It warned that financial stability could also be at risk, given that AI companies are selling large amounts of debt to finance investments.
However, readers of the Pink Paper responded to this article with many positive comments about AI. Therefore, many true believers are still not dissuaded.
In a characteristically lively talk, Ed Zitron explains how delays in OpenAI and Anthropic’s IPOs won’t improve the investor or funding situation, and how the sector is likely to be unable to live up to the ominous-looking combo of yawning money cravings with zero prospects for decent returns.
Again, it looks like there’s a very bad ending built in, but the incentive to keep the party going is huge.
00 Annual Economic Report 2026 – ar2026e
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