From 1929 to today: What history tells us about America’s speculative culture and India’s prudence

Financial markets inevitably reflect the societies that shape them, and this becomes especially clear when comparing the United States and India, two large and dynamic economies located at very different ends of the speculative spectrum.

The U.S. financial system is structurally designed to accommodate and often actively encourage speculative behavior. In contrast, Indian markets are deliberately structured to discourage this.

Both approaches are extreme in their own way and reveal important truths about how society thinks about risk, capital and wider societal priorities.

In the United States, speculation is not simply tolerated; it is institutionalized. Retail investors have easy access to leveraged ETFs, ultra-short options, margin leverage, and a wide range of complex products that magnify both profits and losses.

These products are liquid, highly visible, and widely accepted within the financial ecosystem. Their availability is no accident.

This reflects a regulatory mindset that believes that disclosure and individual choice are more important than imposing strict limits on behavior. When excesses occur, they are largely accepted as an unavoidable cost of generation.

India chose a very different path. In India, leverage is tightly controlled, settlement systems are designed to limit excessive churn, and product complexity is carefully filtered before it reaches retail investors. When speculative activity increases rapidly, regulators quickly step in to slow it down. The basic assumption is simple. The fundamental belief is simple. In the Indian context, the systemic and social risks of unchecked speculation are considered to be far greater than the benefits it may deliver.

History helps explain why these two systems evolved so differently. In the United States, the 1929 stock market crash was not simply an institutional failure but a mass retail event.

Many middle-class households participated, often using borrowed money, and many suffered serious losses. But this experience did not lead to a lasting retreat from speculation.

Instead, it reinforced the idea that households participate in both booms and busts, a pattern that continues to this day.

India has never allowed speculation to penetrate household finances on such a scale. Here, savings are not considered purely personal wealth. It represents family security, intergenerational capital, and informal forms of social insurance.

So significant financial losses are not just market lessons. This can be a long-term social setback. Indian market design reflects this reality.

Structural factors further exacerbate these differences. In the United States, retirement security is so closely tied to market performance that necessity drives households into financial markets and blurs the lines between investing and trading.

In India, stronger family-based support systems can reduce this burden and enable households to approach risk more cautiously.

However, both models are not without flaws. The U.S. system provides excellent innovation, liquidity, and capital formation, but it also produces recurrent bubbles and periodic damage to household balance sheets.

Indian systems offer resilience and stability, but often at the expense of speed, experimentation, and market depth.

The answer lies in neither extreme.

A more sustainable model lies somewhere in between. This encourages long-term investment and innovation, while setting firm boundaries on household-level leverage, product complexity, and financial gamification.

Speculation cannot and should not be eliminated. But it must be restrained, appropriately contextualized, and consistent with social reality.

The United States shows what happens when speculation becomes industrialized. India shows what happens when you pay close attention. The optimal financial system borrows America’s dynamism without importing excesses, and India’s prudence without stagnating growth.

Markets ultimately work best when risks are understood, priced reasonably, and kept within limits, not when they are glamorized or suppressed.

(Author: Feroze Azeez, Co-CEO, Anand Rathi Wealth Limited)

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