RegulationOpinion
|7 min ReadManaged Capitalism Rises as Debt Overtakes Equity
Maya Chen
Senior Analyst
Published
Jan 16, 2026
Capital Shifts, Private Credit Ascends
Markets are not healing themselves. Policy is back inside the production line. The destination is not collapse but controlled decay, a system held up by liquidity and scaffolding instead of fresh reinvestment. Equity is retreating. Debt is in charge. Policy is the new growth engine. Finance has become the economy. You can manufacture nominal growth. Real productivity still needs the old link between capital, labor, and innovation. Without that link, the system endures, but it stops compounding.
Equity markets once powered American capitalism. Now they fail the broad base of enterprise. Public issuance sits near multi-decade lows, while private credit assets have surged past $1.7 trillion. Companies lean into debt because public markets are broken. Liquidity is thin, passive ownership is dense, and asset-heavy models get hit with punitive multiples. Listing looks uneconomical.
That fuels a perverse loop. Nobody wants a balance sheet. Asset-light, rent-extracting models win the valuations. Capital-intensive innovation gets starved. Private credit moves in with an asset-capture mindset. Lenders collect high spreads when borrowers thrive, and they seize hard assets when borrowers stumble. Heads they win, tails they also win.
Financialization’s Endgame and the Policy Backstop
This is the finish line of a four-decade bet on financialization. For years, interest rates sat below growth. Investors chased price appreciation and leverage instead of production. Households leaned on rising asset values to replace weak wages. Corporations favored shareholder primacy, outsourced real production, and engineered balance sheets. Growth uncoupled from productivity. The domestic industrial base hollowed out. Returns on capital beat returns to labor, time and again.
Post-COVID fiscal heavy lifting added a new distortion. Record Treasury issuance crowded out private borrowers in public markets. Capital migrated into private structures. A reflexive loop took hold: public issuance falls, mandated buyers fight over scarce yield, spreads compress, private credit reprices lower, and more borrowers switch to private loans. Since 2020 the Fed’s implicit backstop has dulled the signal. Spreads no longer price default risk cleanly. They price policy.
Passive Dominance, Thin Liquidity, Weak Discovery
Passive investing turned markets into flow machines. Index funds dominate volume. Ownership concentrates in a handful of trillion-dollar managers. Incentives become homogenous and benchmark bound. Small and mid-cap companies suffer structural illiquidity. Research coverage fades. The IPO pipeline withers and gets replaced by late private rounds that public investors cannot touch.
When flows reverse, algorithms bite. Breadth narrows. Volatility clusters. Everybody knows it. It is not a vibrant marketplace. It is a giant indexing engine.
State Muscle, Social Strain, and a Managed Outlook
Innovation needs heterogeneity. Different investors with different horizons create the collisions that produce new ideas. Today the architecture compresses risk into a single dimension: maximize yield under a risk budget. Everyone lends. Few invest. Serendipity dies. Productivity slips.
So the state steps in. Industrial policy returns. The CHIPS Act and green subsidies try to rebuild supply chains and create nominal growth through targeted public-private projects. It is a partial inversion of the old U.S.-China contrast. America uses focused partnerships to re-anchor manufacturing. China leverages surplus power and factories to project dominance. Execution in the U.S. is uneven. Politics slows delivery. Geography misfires, like fabs in water-scarce regions. Still, the philosophical turn is decisive.
The social contract shows the bill. Asset wealth soars as real wages stagnate. Housing and equities claim a record share of GDP. Without broader ownership, not transfers but true participation, stability frays. Populism rises. Protectionism returns. Tariffs and industrial nationalism reflect economic exclusion. The U.S. is not immune. It is leading the experiment.
The likely path is not a single Minsky blow-up. It is gradual erosion. Lower real returns. Slow de-equitization. Episodic volatility, cushioned by intervention.
Expect public credit to dominate as deficits persist. Expect re-onshoring that manufactures nominal growth through subsidies. Expect private credit saturation that eventually compresses margins and exposes idiosyncratic defaults. Expect equity multiples to grind lower as capital prefers certainty over promise.
Macro Pulse: What Moves Next
A fresh macro pulse frames the near term. Last week’s events set the table. The coming week’s docket will steer positioning.
Last week’s slate:
Next week’s setup:
Additional reference material and flows:
The Bitcoin buzz indicator captures the policy and institutional backdrop. Recent U.S. political moves and corporate steps signal a pro-crypto lean. Former President Trump pardoned Binance founder Changpeng Zhao after a $4.3 billion settlement, a dramatic marker. The Federal Reserve floated “skinny” accounts to open access for fintech and crypto platforms. JPMorgan plans to accept Bitcoin and Ethereum as institutional loan collateral by late 2025. T. Rowe Price filed for an actively managed crypto ETF targeting 5 to 15 digital assets. It reads like a big-tent shift.
Operational risks remain. A major AWS outage disrupted crypto platforms and exposed how centralized infrastructure can be a single point of failure. Corporate stress is part of the cycle. Kadena shut down operations after a 65 percent KDA slide and delistings. New tokens keep coming. Polymarket announced the POLY token and an airdrop with a U.S. relaunch plan, eyeing a 5.8 trillion client base.
Hardware and wallets evolve, not without pushback. Ledger launched the Nano Gen5 and a wallet app, then faced criticism over new multisig fees and exclusions. Stablecoins and payments scale up. Tether is set to hit $15 billion in profit and 500 million users, with USAT and Bitcoin tipping via Rumble planned in December.
Other market signals round it out. Michael Saylor’s Strategy slowed Bitcoin buys, adding 168 BTC worth 820 million in ETH, lifting holdings to 3.24 million ETH valued at 375 million, leaning back into on-chain fundraising. Google claimed a 13,000× quantum speedup, reigniting debate over Bitcoin’s long-term cryptography. Kalshi discussed a 1 billion Evernorth SPAC to build the largest public XRP treasury. Hyperliquid Strategies filed for 40. Polychain led a $110 million round to launch a Berachain treasury. Solana co-founder Anatoly Yakovenko started scoping a perpetuals DEX, revealed through GitHub activity. Zelle’s operator explored using stablecoins for cross-border transfers. Crypto.com pursued a federal charter to expand institutional services. Coinbase and Cloudflare launched the x402 Foundation for machine-to-machine crypto payments. Binance listed Giggle Fund and SynFutures, expanding its roster.
Markets, Metrics, and China Spotlight
The market overview is simple. The U.S. economy sits in a holding pattern. A prolonged government shutdown clashes with upcoming CPI data. Policy paralysis and inflation prints drive the near term. Global growth signals are soft but maybe stabilizing. China’s GDP and Eurozone PMIs will shape whether momentum is bottoming. Trade tensions between the U.S. and China remain the wildcard. Contained for now, but a tariff or rare-earth shock could move fast.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.