The idea that government should "stay out of" markets is a flawed model. The government is an inherent economic actor, and choosing deregulation or non-intervention is an active policy choice, not a neutral stance. This view acknowledges politics and government are inseparable from market outcomes.
Market participants are conditioned to expect a dramatic "Minsky moment." However, the more probable reality is a slow, grinding decline characterized by a decade of flat equity prices, compressing multiples, and degrading returns—a "death by a thousand cuts" rather than one catastrophic event.
The classic model is an entrepreneur raising equity, then seeking debt. Today, the market is flooded with capital mandated to provide debt, while equity providers are scarce. This inversion distorts economic development by prioritizing lending over genuine entrepreneurial risk-taking.
The primary benefit of a robust domestic manufacturing base isn't just job creation. It's the innovation that arises when diverse industries physically coexist and their technologies cross-pollinate, leading to unexpected breakthroughs and real productivity gains.
Credit spreads are becoming an unreliable economic signal. The shift of issuance to private markets reduces the public supply, while the Federal Reserve's 2020 intervention in corporate debt markets permanently altered how investors price default probability.
Traditional finance is stabilized by diverse capital pools with varying time horizons, like pension funds. DeFi lacks these long-duration "savers," creating a market where borrowers and lenders operate on hyper-short time frames, causing yields to spike and collapse with extreme volatility.
Public markets favor asset-light models, creating a void for capital-intensive businesses. Private credit fills this gap with an "asset capture" model where they either receive high returns or seize valuable underlying assets upon default, securing a win either way.
A significant amount of capital is earmarked in funds designed to deploy only when credit spreads widen past a specific threshold (e.g., 650 bps). This creates a powerful, self-reflexive floor, causing spreads to snap back quickly after a spike and preventing sustained market dislocations.