Dear readers,

Will another terrible hurricane hit the United States this year? If you want, you can bet on it! Financial markets make it possible.

As a business journalist, I have always researched complex financial topics. I was therefore very curious about the Futures of Capitalism program at THE NEW INSTITUTE, as it focuses on the role of financial markets. In light of the new alliances forming between parts of the financial industry and Donald Trump's government, this is a highly relevant topic. However, it is also complicated, and I admit that I was sometimes overwhelmed after talking to program director Aris Komporozos-Athanasiou. I think there were two reasons for this. Firstly, the view of the financial markets that he and his team have developed is unfamiliar and distinct. Secondly, the team, which includes an artist and a psychoanalyst, needed time to find the language to describe their approach.

THE NEW INSTITUTE is a place with space and time to conduct such experiments. As a media fellow, I have witnessed this firsthand over the past few months. In a series of short newsletters, I have been reporting on some of the ideas and projects as clearly and concisely as possible – and I have almost saved Komporozos-Athanasiou and his team’s approach until last as it has become clearer to me over time. Essentially, the question is: what if financial markets do not provide stability but instead exacerbate crises and speculate on collapse?

I hope you enjoy reading!

Felix Rohrbeck

P.S. We have a German version of the text available for you here.

Financial markets betting on collapse

A team at THE NEW INSTITUTE led by Aris Komporozos-Athanasiou, a researcher specializing in capitalism, has developed a new approach to better understand the contradictory and speculative role of financial markets in times of impending collapse. They call it “Collapse Finance”.

1. What Is the Problem?

Anyone who wants to can bet on the climate. Will another terrible hurricane hit the United States this year? Or will flooding destroy the beautiful mansions on Florida's coast? The financial market has turned climate change into a booming business. By the end of 2024, around 50 billion dollars has been invested in so-called “catastrophe bonds”. Since April 2025, retail investors have also been able to easily participate via an ETF. The catastrophe casino is open to all!

While catastrophe bonds may seem cynical to many, the idea of financial markets profiting from crises is nothing new. However, two things are new, according to Aris Komporozos-Athanasiou, head of the Futures of Capitalism program at THE NEW INSTITUTE. Firstly, the risks around which financial products are developed have increased. Climate change and catastrophe bonds are a good example of this. Secondly, the financial markets themselves have changed. They have become more complex, volatile, and unpredictable.

“Financial markets are actually designed to manage risks and ensure stability,” says Komporozos-Athanasiou. “But what if they accelerate crises and speculate on collapse instead?”

According to Komporozos-Athanasiou, we are currently seeing in the United States, in particular, how parts of the financial markets have entered an alliance with Donald Trump's government. Banks and financial investors are abandoning climate targets and sustainability criteria in droves. Meanwhile, they are profiting from the market chaos caused by Trump's tariffs. While much of the economy is suffering, investment bankers have many opportunities to exploit market volatility. Wall Street banks are currently making record profits.

“The financial markets thrive on systemic instability and produce it at the same time,” says Komporozos-Athanasiou, founder of the Centre for Capitalism Studies at University College London. Classical economics, which assumes rational actors and self-stabilizing markets, is not designed to adequately capture such mechanisms.

Photo by Maximilian Glas

2. What Is the Approach?

To better understand the role of financial markets, Komporozos-Athanasiou and his team developed a new framework they call Collapse Finance. This refers to the fact that financial markets often act in a contradictory and speculative manner in the face of an impending collapse. According to Komporozos-Athanasiou, their central promise can be summarized in one sentence: “The world may be falling apart, but don't worry—your portfolio can still perform.”

Therefore, the framework does not focus on the classic Homo economicus assumption, which is that people soberly calculate their own benefit and make predictable decisions based on this. Instead, Komporozos-Athanasiou and his team came up with the concept of Homo speculans. “He is neither the rational actor of classical economics nor the disciplined neoliberal investor,” says Komporozos-Athanasiou. “Instead, he must act in the face of an impending collapse while speculating about its outcome. He vacillates between denial and exaggerated vigilance, fantasy and anticipation. Homo speculans thus embodies the lived contradictions of a financial system that thrives on systemic instability.”

This can be applied to the way we deal with climate change. First, sustainability is declared a megatrend, and suddenly, even board members of institutional investors sound like climate saviors. Then, Trump's “drill, baby, drill” slogan makes it seem like fossil fuels are a lucrative alternative, and climate targets are revised as if the problem had vanished.

Financial markets are betting on a future in which drilling can continue, even if it means the collapse of our planet.

The situation with betting on cryptocurrencies is different but similarly erratic. The focus is less on the practical benefits of new digital currencies and more on the feverish ups and downs of fluctuating expectations. In some cases, there is a longing for the end of the previous, rather stable, monetary system.

Komporozos-Athanasiou proposes four key hypotheses for understanding the Collapse Finance framework.

1. Financial markets are strongly influenced by imagination.
Rational analysis of facts is not always decisive. Financial markets are carried away by grand narratives. At the same time, they can play a key role in turning these narratives into reality. Money follows stories and shapes reality.

2. Financial markets thrive on instability.
It is often said that the economy needs planning security above all else. But does this also apply to financial markets? If they benefit from market fluctuations and turbulent conditions, then they have a genuine interest in creating instability.

3. Financial markets can exacerbate the climate crisis.
Thus far, the role of financial markets has primarily been discussed in the context of solving the climate crisis. For example, if banks allocate funds according to sustainability criteria, it puts strong pressure on companies. But what if they no longer consider these criteria important because they have a different vision of the future? What if they develop climate bets that benefit investors but not those affected by climate change? “We should also consider this aspect of financial markets,” says Komporozos-Athanasiou.

4. Financial markets can be part of the solution.
As negative as all this may sound, Komporozos-Athanasiou believes that the Collapse Finance approach opens up new ways of thinking about how financial markets can contribute to solving crises. If imagination is so crucial, how can we influence it? If we can all bet on the climate or cryptocurrencies as homo speculans, what collective power does that give us?

Photo by Luzia Cruz

3. What Exactly Is the Project at THE NEW INSTITUTE?

The Collapse Finance framework is the result of an unusual collaboration between participants from very different disciplines. The seven-person team led by Komporozos-Athanasiou includes economists and historians, but also artist Till Witwer, and psychoanalyst Jamieson Webster. “THE NEW INSTITUTE has given us the opportunity to work in a truly interdisciplinary and trans-sectoral way,” says Komporozos-Athanasiou. “The result is not just a new framework. We have also found a common language that makes it possible to describe the contradictory, speculative role of financial markets.”

In addition to developing the framework, the fellows applied it to several case studies. These case studies are now published in a volume of essays. Jamie Pietruska uses the example of “catastrophe bonds” to illustrate how disasters are increasingly viewed as speculative opportunities. Kimberly Chong analyzes how the realignment of the UK's largest pension fund has turned retirement provisions into gambles while creating new profit opportunities for asset managers. Giulia Dal Maso examines the longevity trend — the desire to live as long and as healthily as possible with the help of modern technology — and how financial markets are monetizing it with longevity bonds. Melinda Cooper's essay focuses on volatile personalities, such as Donald Trump and investor Peter Thiel, and how they act as anchors for new speculative ecosystems. Psychoanalyst Jamieson Webster places the financial markets on the couch and ponders whether diagnoses such as neurosis or psychosis could apply to them.

In mid-June, THE NEW INSTITUTE held a workshop where the framework was discussed with high-profile guests. Attendees included Jens Beckert, director of the Max Planck Institute for the Study of Societies, and Gillian Tett, a Financial Times editorial board member. The framework will be further developed beyond the program at THE NEW INSTITUTE by a network of academics and practitioners coordinated by University College London.

Photo by Luzia Cruz

4. So, What Does this Mean for Capitalism?

According to Komporozos-Athanasiou, financial markets are a unique part of capitalism that can develop dangerous dynamics, especially when faced with major risks. This framework aims to improve our understanding of these dynamics so that we can counteract them with political regulation and perhaps collective counter-speculation. “We need new instruments and a more imaginative framework to ensure that financial markets counteract crises instead of exploiting and accelerating them,” says Komporozos-Athanasiou.