Nobel laureate Paul Krugman isn't pulling punches when it comes to the Trump administration's financial policy moves. In a recent post, he's sounding the alarm that we might be headed back to 2008—and not in a nostalgic way.

Weakening the Guardrails

Here's what has Krugman concerned: The regulations put in place after the 2008 financial crisis weren't just bureaucratic red tape—they were designed to prevent banks from blowing up the economy again. Now, according to Krugman, Trump's allies are systematically taking them apart.

The Federal Reserve's bank supervision role is being undermined, with Michelle Bowman, a Trump appointee, pushing to loosen capital requirements for banks. Sure, that might juice short-term profits for financial institutions, but it also increases the odds of another meltdown when things go sideways.

The Crypto Wild West

Then there's the cryptocurrency angle. The administration is backing the GENIUS Act, legislation that would promote stablecoins—digital currencies supposedly pegged to traditional assets. Krugman isn't buying the promise. He compares poorly regulated stablecoins like those from Tether to 19th-century private banking schemes, warning they could create systemic risks that ripple through the entire financial system.

Whether it's free-market ideology or something less noble driving these decisions, Krugman argues the result is the same: increased financial fragility at exactly the wrong time.

AI Bubble or Breakthrough?

Krugman also sees worrying echoes of the late 1990s dot-com bubble in today's AI investment frenzy. He describes the current U.S. economy as "schizoid," caught between Trump's unpredictable trade policies and a massive wave of AI-related investment that might be overheated.

Speaking of trade, Krugman views Trump's recent tariff cuts on China as a strategic retreat—a significant policy reversal that signals the administration's tough talk doesn't always translate to tough action.

Not everyone agrees with the bubble diagnosis. Cathie Wood from Ark Invest recently pushed back hard, insisting the AI boom is just beginning and that both artificial intelligence and cryptocurrencies have massive long-term potential despite short-term volatility.

The question investors face: Is this 1999 all over again, or is Wood right that we're at the start of something genuinely transformative? Either way, Krugman's warning is clear—weakening financial safeguards while markets are running hot is a dangerous combination.