Editor's Note: This article starts from a post that went viral on Reddit and was subsequently deleted, discussing a growingly attractive argument in the current U.S. stock market: amidst soaring U.S. debt, expanding fiscal deficits, and continual dilution of currency purchasing power, has the stock market entered a new state where it "can't truly drop"?
The logic from the Reddit post is simple: the scale of U.S. debt has become excessively large, and the government can only ultimately dilute the debt through money printing and inflation; and when the currency devalues, USD-denominated stocks and hard assets also rise. Therefore, stocks are no longer just a risk asset but more like a refuge against currency devaluation.
The author places this argument into the framework of a "Melt-up," which refers to an end-stage accelerated rise in asset prices detached from fundamentals, driven by liquidity, momentum, and FOMO. Similar moments have occurred in history, such as the dot-com bubble and the Japanese asset bubble: new technology or real growth initially provides a narrative basis, followed by leverage and emotions taking over the market, where investors start to believe that old valuation rules are no longer valid.
The key reminder in the article is that in a high-debt world, assets are indeed favored over cash, but this does not mean that stocks are "mathematically unable to drop." Inflation can push up the nominal prices of assets, but it does not necessarily bring real wealth growth; and while the stock market may hit long-term highs, it does not prevent mid-term corrections of 30%, 40%, or even deeper. Historically, in cases of extreme inflation such as in Germany, Zimbabwe, and Venezuela, a rising stock market does not equate to investors actually becoming wealthier, as many people are forced to sell even before asset prices recover to pay for living costs.
The author's final judgment is not extreme: the U.S. is more likely to experience not debt default or hyperinflation, but a prolonged period of financial repression — slightly higher inflation than interest rates, debt gradually diluted, cash purchasing power continuously eroded, asset prices continuing to rise nominally, but real returns may be lower than what investors have been accustomed to over the past decade.
For investors currently enticed by narratives of AI, U.S. tech stocks, and the belief that "every dip will be bought back," this article is not really about whether to be bullish on the U.S. stock market, but about how to avoid putting the entire financial future into a overly smooth upward trajectory story. Assets will rise, but risks do not disappear; markets will be bailed out, but not everyone can hold on until the next new high.
The original article is as follows:
This may sound crazy, but what if I told you that mathematically, the stock market might never drop again?
Last week, a post on Reddit suddenly went viral, presenting a rather compelling argument. Although the post was deleted after gaining popularity, its essence was this: "stocks can only go up" is no longer just a meme; it's a law. Like gravity, but in the opposite direction, and acting on money.
The U.S. now has a $40 trillion debt. Our interest payments will soon exceed the GDP. This means that the only way for the government to pay the interest is to print enough money.
This will lead to hyperinflation. But if you hold Palantir or Tesla stock, what does it matter? These stocks will also inflate proportionally. In other words, from now on, stocks are mathematically impossible to drop. Once they drop, the entire world economy will collapse.
This is why you see any "crash" quickly recover within half a trading day. The stock market, quite literally, can no longer drop. This is not a dying boast, but a new market rule.
This is not the first time such a viewpoint has emerged, but this time, the economic environment does warrant serious consideration. So we need to clarify: What is happening now, why is the government now forced to print money at an unimaginable scale, and what consequences it would bring if this theory is correct.
Because if this theory is correct, we may witness the largest wealth transfer in history. If it's wrong, it will be a harvest.
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The Great Melt-up
The statement "stocks can only go up" is built on the foundation of what economists call "The Great Melt-up" theory.
The logic of this theory is: every bull market cycle will continue to rise until it enters a frenzy stage. Prices are no longer driven by fundamentals such as earnings, cash flow, etc., but almost entirely by momentum. At this stage, you'll feel like everyone around you is getting richer, except yourself.
The belief is simple: the price will keep going up because it has been going up so far.
This phenomenon is not as rare as you might think. In the "melt-up" stage, returns can be very exaggerated until they suddenly are not.
Take, for example, the late 1990s dot-com bubble. From 1995 to March 2000, the Nasdaq rose by 400%, with nearly a 90% increase in the last year alone. During this time, many companies with no revenue, no profit, and even no real product could also obtain billion-dollar valuations.
In December 1999, the CAPE ratio reached 44, hitting the highest level in 140 years. Investors believed that the internet had changed the market dynamics. "AI will change everything." Sound familiar?
Subsequently, the Nasdaq plummeted by 78% over the next two and a half years, taking over a decade to recover its peak.
Now, let's look at Japan. From 1975 to 1989, the Japanese stock market soared by 900%. At its peak, the price-to-earnings ratio of the Japanese market reached 60 times. Tokyo land prices reached absurd levels: the land value where the Imperial Palace stands was even considered to exceed the value of all land in California.
It was clearly absurd, but no one wanted to be the first to exit, fearing to miss out on further gains. When Japan began to raise interest rates, the entire economic system collapsed, and the stock market plummeted by 60% in less than two years. It took the Japanese economy 34 years to finally return to its previous peak.
However, this does not mean that every rally is a bubble.
At the beginning of every bubble, there are usually some real factors driving it: new technologies, genuine economic growth, or a different policy environment. But as FOMO and leverage enter the market, valuations keep rising, and everyone starts to believe that the good times will never end.
So, are we currently in a bubble? To answer that, we first need to look at the stock market of 2026.
The Reflation Theory on Reddit
The core of this theory on Reddit is debt.
If the U.S. government owes $40 trillion in debt and continues to run a $2 trillion deficit each year, how can the U.S. ever get rid of this debt without destroying the economy?
The simplest path is through inflating the debt away. The purchasing power of the dollar falls until the $39 trillion debt becomes less burdensome. This technique is known as "financial repression" because it erodes the wealth created by ordinary people. The U.S. government has used similar methods after World War II.
However, when a government devalues its currency, everything priced in that currency rises: stocks, hard assets, all appear more valuable on paper. The issue is that these assets' paper gains do not equate to a real increase in wealth because the dollar itself has depreciated.
So, when Goldman Sachs recently raised its year-end target for the S&P 500 Index to 8,000 points, even if this prediction were to come true, it might not necessarily be a simple positive.
Another alternative outcome of an endless rally is a true stock market crash. However, no one would be crazy enough to actively choose that path.
However, what is truly unsettling are the following numbers: according to almost all major valuation indicators, US stocks are not cheap. In fact, the price investors are paying for each dollar of profit is close to historical highs, approximately twice the long-term historical average.
The CAPE ratio has only crossed 40 twice in history. Once during the 1999 dot-com bubble era, and the other is now.
In other words, the current market is not just pricing in a debt-driven melt-up but is exhibiting a state seen only once in 140 years of market history.
So, how can we determine whether the "big melt-up theory" will actually hold true or collapse?
Crash Test
There are some statements in that Reddit post that need closer examination.
First, the claim that interest payments will soon exceed GDP—it is incorrect.
What has truly exceeded 100% is the debt-to-GDP ratio, not the interest payments to GDP ratio. These are two different things. Historically, the US has experienced similar situations and has navigated through by "printing money," driving market recovery and continued upward movement.
Second, the assertion that the only way to make interest payments is to keep printing money—it is also incorrect.
The government can also borrow money from investors, pension funds, other governments, and institutions by selling government bonds. Of course, this model cannot last forever.
Third, the claim that stocks will rise proportionally with runaway inflation—it is equally incorrect.
Historical experience does not support this. From 1918 to 1922, the German stock market lost 97% of its value before experiencing hyperinflation. Many people were forced to sell their stocks at the bottom just to pay rent and buy food.
In Zimbabwe, the stock market did soar 500-fold, but the local currency denominated in US dollars plummeted by 99.8%. A similar situation occurred in Venezuela in 2018.
So, what really needs to be understood is that the big melt-up is not necessarily a boon for stockholders.
Stocks can rise during inflation, but that doesn't automatically mean you become wealthier. If your investment portfolio has gone up by 10%, but everything you buy has also become 10% more expensive, then you haven't actually gained anything.
So, with this information in mind, what should we really do?
Exit Plan
History tells us that the most likely scenario is: the U.S. will not default on its debt, nor will it experience unprecedented hyperinflation, nor will it engage in endless money printing due to the national debt issue, propelling the stock market into an infinite melt-up.
A more realistic outcome is a prolonged period of financial repression: where the inflation rate is slightly higher than interest rates, debt becomes more manageable, and the purchasing power of the dollar gradually diminishes compared to the past.
The cost is that savers are quietly squeezed. Cash loses value, prices keep rising, asset prices continue to climb in dollar terms, but the real returns after accounting for inflation may be much lower than what investors have been accustomed to over the past decade.
For the stock market, the price is likely to continue its long-term uptrend because as the purchasing power of the dollar declines, asset nominal prices tend to rise.
However, a long-term rise in the stock market does not mean it won't experience a collapse along the way. The market could still drop by 30%, 40%, or even 60% from its current levels. But it could also subsequently reach new highs.
These two seemingly contradictory facts can coexist at different times: the market is very expensive, and a single event could trigger a 20% sell-off. Nothing is risk-free. But on the other hand, high debt does not necessarily mean high inflation, nor does it automatically mean the stock market will continue to rise. Most importantly, you shouldn't base your entire financial future on the hope that the "next bailout will definitely happen."
In my view, the Reddit post was right in direction, but it misunderstood the path to the outcome.
In a high-debt world, governments do indeed have a strong incentive to let inflation take the brunt. Over a sufficiently long period, this tends to be favorable to assets and detrimental to cash. But this by no means implies that "stocks cannot mathematically fall." That's a dangerous assumption.
This assumption leads people to rush in at every market frenzy, thinking it's their last chance to get rich. They buy in at extreme valuations with no margin of safety, no diversification, and no plan to deal with what has repeatedly happened in the market—declines.
I'm not here predicting a crash. Many very smart people believe the market can still go up.
However, historically, the ultimate winners during inflationary periods are usually not those who go all-in on the most expensive, highest multiple stocks. The winners are often those who own a range of productive assets: stocks, real estate, some cash, perhaps gold and short-term bonds, and who are not forced to sell when the market turns sour.
In a high-debt world, stocks may outperform cash in the long run. But that may also mean that your portfolio has seen almost no real growth for 10, 15, even 20 years after inflation.
So, rather than relying on your willpower to withstand decades of stagnation, it's better to establish a system that doesn't require you to count on "hope" as an investment strategy.
In summary, the answer is not panic, nor is it to sell everything. But the answer is also not to go all-in, use leverage, and assume that every downturn will be rescued.
This is a very emotional period, and you may be tempted to put all your chips on a so-called "once-in-a-lifetime opportunity." But remember, risk is always two ways.
I believe that for most people, a better choice is to maintain a diversified allocation and not overly concentrate on the most expensive companies. Keep enough cash on hand so you're never forced to sell at the worst time.
Most importantly, please do not stake your entire financial future on a trending Reddit post.
Stick to your regular investment plan, maintain a diversified portfolio. If you found this article helpful, feel free to like, share, or pass it on to someone you don't want to see left behind by the market.
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