Achieving Escape Velocity in the Great Melt-Up
Original author: GRAHAM STEPHAN
Peggy
Editor’s Note: This article begins with a viral but deleted Reddit post to explore a growingly tempting view in today’s U.S. stock market: Against the backdrop of soaring U.S. debt, persistent fiscal deficits, and eroding currency purchasing power, has the stock market entered a new state where it “cannot truly decline”?
The logic behind the Reddit post is simple: U.S. debt has grown too large, and the government will ultimately have to dilute it through money printing and inflation; when the currency depreciates, dollar-denominated stocks and hard assets rise in value. Therefore, stocks are no longer just risky assets—they have become a refuge against currency depreciation.
The author places this claim within the framework of a "melt-up"—a final surge in asset prices driven by liquidity, momentum, and FOMO, detached from fundamentals. Similar moments occurred during historical bubbles such as the dot-com bubble and Japan’s asset bubble: new technologies or real growth initially provided a narrative foundation, after which leverage and sentiment took over the market, leading investors to believe that traditional valuation rules no longer applied.
The key takeaway is that in a high-debt world, assets are indeed more favorable than cash—but this does not mean stocks are “mathematically impossible” to decline. Inflation can raise the nominal prices of assets without necessarily generating real wealth growth; even as stock markets set long-term highs, sharp drawdowns of 30%, 40%, or more can still occur along the way. Historically, in extreme inflation cases such as Germany, Zimbabwe, and Venezuela, rising stock prices did not equate to actual wealth gains for investors—many were forced to sell their assets before prices recovered, simply to cover living expenses.
The author’s final assessment is not extreme: the U.S. is more likely to experience a prolonged period of financial repression—where inflation slightly exceeds interest rates, debt is gradually diluted, cash purchasing power is steadily eroded, asset prices continue to rise nominally, but real returns may fall below what investors have become accustomed to over the past decade.
For investors currently drawn to AI, U.S. tech stocks, and the narrative that “every pullback gets rescued,” this article isn’t really about whether to go long on U.S. stocks—it’s about avoiding the risk of betting your entire financial future on an overly smooth upward story. Just because assets rise doesn’t mean the risk disappears; just because the market gets rescued doesn’t mean everyone will survive until the next all-time high.
The following is the original text:
This might sound crazy, but what if I told you that, mathematically speaking, the stock market might never decline 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 only go up” is no longer just a meme—it’s a law. Like gravity, but in the opposite direction, and it acts on money.
The United States currently owes $40 trillion in debt. Our interest payments will soon exceed GDP. This means that, to simply pay the interest, the government has no choice but to print enough money.
This would lead to hyperinflation. But what does it matter if you hold Palantir or Tesla stock? These stocks would also inflate proportionally. In other words, from now on, stocks can no longer decline in a mathematical sense. If they were to decline, the entire global economy would collapse.
That's why you see any "crash" rapidly recover within half a trading day. The stock market, literally speaking, can no longer fall. This isn't a dying man's boast—it's a new market rule.
This is not the first time such a viewpoint has emerged, but this time, the economic environment truly warrants serious consideration. So we need to clarify: What exactly is happening now, why are governments now forced to continue printing money on an unprecedented scale, and what consequences would follow if this theory holds true?
Because if this theory is correct, we may witness the largest wealth transfer in history. If it’s wrong, it’s a harvest.
Before we begin, if this is your first time reading my article, welcome to join over 40,000 subscribers who gain early insights into the market. You’ll receive a free email every week.
Big Rong up
The statement "stocks only go up" is based on the economic theory known as "The Great Melt-up."
The logic behind this theory is that each bull market continues to rise until it enters a phase of frenzy, where prices are no longer driven by fundamentals such as profits or cash flow, but almost entirely by momentum. At this stage, it feels as though everyone around you is getting rich—except you.
This belief is simple: the price will continue to rise because it has been rising so far.
This phenomenon is not as rare as you might think. During the "margin-driven rally" phase, returns can become extremely exaggerated until they suddenly stop working.
For example, the dot-com bubble of the late 1990s. From 1995 to March 2000, the Nasdaq rose by 400%, with nearly 90% of that gain occurring in the final year alone. At the time, many companies with no revenue, no profits, and even no actual products were valued at hundreds of millions of dollars.
In December 1999, the CAPE ratio reached as high as 44, the highest level in 140 years. Investors believed that the internet had fundamentally changed the rules of the market. “AI will change everything.” Doesn’t that sound familiar?
Subsequently, the Nasdaq plummeted 78% over the next two and a half years and took more than a decade to regain its previous high.
Now consider Japan. Between 1975 and 1989, Japan’s stock market rose by 900%. At its peak, the price-to-earnings ratio of Japan’s stock market reached as high as 60 times. Tokyo real estate prices became so absurdly high that the land on which the Imperial Palace stood was believed to be worth more than all the land in California combined.
This is clearly absurd, but no one wants to be the first to exit and miss the subsequent rally. When Japan began raising interest rates, the entire economic system collapsed, and the stock market fell by 60% in less than two years. It took Japan’s economy 34 years to finally return to its previous peak.
However, this does not mean that every upward movement is a margin-driven rally.
In the early stages of every bull market, there are usually real underlying drivers: new technologies, genuine economic growth, or a different policy environment. But as FOMO and leverage enter the market, valuations continue to rise, and everyone begins to believe the good times will never end.
So, are we currently in a bull market? We need to first look at the stock market in 2026.
The pump-and-dump 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 it possibly eliminate this debt without destroying the economy?
The simplest path is to dilute debt through inflation—reducing the purchasing power of the dollar until the $39 trillion in debt becomes substantially less burdensome in real terms. This tactic is known as "financial repression," as it erodes the wealth created by ordinary people. The U.S. government employed a similar approach after World War II.
But when a government devalues its currency, everything priced in that currency rises: stocks, hard assets, all appear more valuable on paper. The problem is that this paper value increase does not equate to real wealth growth, because the dollar itself has become less valuable.
So, when Goldman Sachs recently raised its year-end target for the S&P 500 to 8,000, even if this forecast ultimately comes true, it may not be a straightforward positive.
Another alternative to endless growth is a genuine stock market crash. But no one would be crazy enough to deliberately choose this path.
However, what’s truly concerning are the following figures: according to nearly all major valuation metrics, U.S. stocks are not cheap. In fact, investors are paying close to historical highs for every dollar of earnings—roughly twice the long-term historical average.
The CAPE ratio has only broken 40 twice in history: once during the late 1990s internet bubble, and now.
In other words, the current market is not merely pricing in a debt-fueled rally, but is instead exhibiting a condition that has occurred only once in 140 years of market history.
So, how do we determine whether the "Big Fusion Rise Theory" holds true or collapses?
Crash test
Some claims in that Reddit post require closer examination.
First, interest payments will soon exceed GDP—that is incorrect.
What truly exceeded 100% is the debt-to-GDP ratio, not the interest expenditure-to-GDP ratio. These two things are not the same. Historically, the U.S. has experienced similar situations and emerged from them by "printing money," driving market recovery and continued growth.
Second, the only way to pay interest is to keep printing money—which is also wrong.
Governments can also borrow money from investors, pension funds, other governments, and institutions by selling government bonds. Of course, this model cannot continue indefinitely.
Third, stocks do not rise proportionally with hyperinflation—this is also incorrect.
Historical experience does not support this. Between 1918 and 1922, the German stock market lost 97% of its value before hyperinflation peaked. Many were forced to sell their stocks at the bottom just to pay for rent and food.
In Zimbabwe, the stock market did rise 500-fold, but the local currency depreciated by 99.8% against the U.S. dollar. A similar situation occurred in Venezuela in 2018.
So, what really needs to be understood is that a massive rally isn't necessarily a blessing for stockholders.
Stocks can rise during periods of inflation, but this doesn't automatically mean you've become wealthier. If your portfolio increases by 10%, but everything you buy has also become 10% more expensive, you haven't truly gained any real profit.
So, given this information, what should we actually do?
Exit Plan
History tells us that the most likely scenario is that the U.S. will not default on its debt, will not experience unprecedented hyperinflation, and will not engage in endless money printing due to sovereign debt issues, driving the stock market into infinite bull run.
A more realistic outcome is a prolonged and gradual period of financial repression: inflation slightly exceeds interest rates, debt becomes easier to manage, and the purchasing power of the dollar gradually declines compared to the past.
The cost is that savers will be quietly squeezed. Cash loses value, prices continue to rise, and asset prices denominated in U.S. dollars keep climbing, but real returns after inflation may be far lower than what investors have been accustomed to over the past decade.
For the stock market, prices are likely to continue rising over the long term, as asset nominal prices typically increase when the purchasing power of the dollar declines.
However, a long-term rise in the stock market does not mean it won’t crash along the way. The market could still drop 30%, 40%, or even 60% from its current level. But it could also reach new highs afterward.
These two seemingly contradictory facts can both be true at different times: the market is 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 guarantee that stock markets will be continuously lifted. Most importantly, you should not base your entire financial future on the hope that the next bailout is guaranteed to happen.
In my view, that Reddit post is on the right track, but it misunderstands the path to the outcome.
In a high-debt world, governments indeed have strong incentives to let inflation bear the main burden. Over a sufficiently long time horizon, this typically favors assets over cash. But this does not mean that "stocks cannot mathematically decline." That is a dangerous assumption.
This assumption leads people to jump into every market rally, believing it’s their last chance to get rich. They buy at extreme valuations, with no margin of safety, no diversification, and no plan for what has repeatedly happened in markets—declines.
I am not predicting a crash here. Many very smart people believe the market can still rise.
Historically, those who ultimately thrive during inflationary periods are rarely the ones who bet their entire portfolio on the most expensive stocks with the highest valuation multiples. The winners are typically those who hold a diversified portfolio of productive assets—such as stocks, real estate, some cash, perhaps gold and short-term bonds—and who are not forced to sell when markets turn sour.
In a high-debt world, stocks may outperform cash over the long term. But this could also mean your portfolio experiences little to no real growth for 10, 15, or even 20 years after accounting for inflation.
So instead of relying on willpower to endure decades of stagnation, build a system that doesn’t require you to treat “hope” as an investment strategy.
In summary, the answer is not to panic or sell everything. But neither is it to go all-in, use leverage, and assume every decline will be rescued.
This is a highly emotional time, and you may be tempted to bet everything on what’s called a “once-in-a-lifetime opportunity.” But risk always works both ways.
I believe that for most people, a better approach is to maintain a diversified portfolio and avoid overconcentrating in the most expensive companies. Keep enough cash on hand so you’re never forced to sell at the worst possible time.
Most importantly, don't base your entire financial future on a viral Reddit post.
Stick to your regular investment plan and maintain a diversified portfolio. If you found this article helpful, feel free to like, share, or send it to someone you don’t want to be left behind by the market.