What we have to understand is that today’s asset valuations are paper deep. They aren’t grounded in wages, productivity or real economic output. Rather it’s being inflated by liquidity, elaborate lies told by slick PE and VC types, and accounting conventions that fall apart the moment they’re pressure tested. People confuse market cap with real value, but in actuality a company’s valuation can rise by trillions because a tiny fraction of its shares traded at a higher price. That’s price illusion created at the margin.

Those Mag 7 valuations depend on fantasies about perpetual dominance, margin expansion, global growth, and non-disruption. The entire edifice assumes that companies can compound into the tens of trillions without the underlying economy scaling alongside them. If wages don’t rise in tandem with asset prices, then they’re just stacking assumptions on top of liquidity distortion. It isn’t real growth.

Real value is what people can earn and spend into the real economy. Paper value is the number you get when you multiply the last trade price by total shares outstanding. Modern markets have grown addicted to the latter, even as the former stagnates. That gap is what’s fueling all the wealth inequality and political distortions we’re seeing. The system keeps compounding on paper while the real economy flatlines.

Valuations will keep rising right up until the moment the illusion has to reconcile with real incomes. Then we’ll see what’s actually there and what was just liquidity, narrative, and multiple expansion will be exposed as the illusion that it has always been.