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Yves here. Richard Murphy contends that stock prices could fall by 50%. That may seem a bit extreme until you look at how badly overvalued AI shares are. From a recent post, Bank of International Settlements Warns That AI Crash Could Produce Investment Drought, Economic Contraction and Even a Crisis:

We have embedded the germane section of the BIS Annual Economic Report at the end of this post. The Financial Times made it their lead story:

And the money chart from their write-up:

Note this graphic plots only tech-related bubbles and not real estate ones, which are represent a very large component of collective wealth and are levered on top of that, so that a big fall in value is deflationary. Even so, note how tame the dot-com bubble looks even thought, at the time, its magnitude compared to post-Depression levels was worrisome, even before getting to proof-of-mania practices like valuing companies based on eyeballs. But as you can see, the 1920 boom was even worse. In addition to its its much greater severity, its use of leverage was the reason the bust blew back so hard to the economy. High levels of margin debt wound up generating large losses to banks. The stock market then also had leveraged structures, such as trust of trusts and trust of trusts of trust, that were a lot like the crisis-era collateralized debt obligations.

Even though strict securities laws limit margin debt, the current level is flashing red:

There hasn’t been a better time in a long while to review the quality of your portfolio.

History offers a clear verdict on rising margin debt.

Don’t let FOMO sway you. https://t.co/plx60LYayI pic.twitter.com/q0JXa7VvVE

— Thierry from arvy 🇨🇭 (@ThierryBorgeat) June 27, 2026

The fact that the AI mania makes the dot-com era look tame should focus some minds.

By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and a director of Tax Research LLP. Originally published at Funding the Future

Stock markets in the United States and the United Kingdom are flashing increasingly serious warning signs. Share prices are at extreme valuations, confidence is weakening, and the artificial intelligence boom is beginning to look much less convincing than investors expected.

In this video, I explain why these risks are reinforcing each other and why the consequences could extend far beyond those who directly own shares.

Robert Shiller’s cyclically adjusted price-to-earnings ratio, commonly known as the CAPE ratio, is now close to levels previously associated with the Wall Street crash of 1929 and the dot-com bubble of 2000. History does not tell us exactly when markets will fall, but it does tell us that valuations of this kind cannot be assumed to continue indefinitely.

The danger is not confined to the stock market. Banks and shadow banks have lent vast sums against inflated financial assets. A sharp fall in share prices could therefore spread through the financial system, threaten pensions, undermine lending and create a wider economic crisis.

AI may provide the trigger. The technology is expensive, unreliable and taking longer to implement than many forecasts assumed. If expected profits fail to materialise, the companies supporting today’s extraordinary market valuations could fall sharply.

Is Andy Burnham’s government prepared for that possibility? There is little evidence that it is.

This is the audio version:

The Debate Ammunition for this video is available here.

This is the transcript:

I know I keep on saying that stock markets in the UK and in the USA might crash sometime soon, and I’m going to say it again in this video. Sometime soon I think we’re going to see them topple over the edge, and the value of stock markets is going to tumble. By how much? Well, if we follow the precedents, by up to 50%. That’s what the data tells me, but this video is about more...