In the case of a mean-reversion bubble, which is usually but not always a credit bubble, the basic bet is that the future will continue along present trends. It’s based on the assumption that we can extrapolate growth trends based on a future world that’s much like the present, only at a larger scale and with a smaller range of outcomes because we’ve gotten better at managing risks. In a sense, it’s a bet on the Great Stagnation itself.
