Like the cartoon character who runs off a cliff and only falls after realizing it, the economy may be fundamentally insolvent but continues to function on momentum. The eventual collapse will be sudden and digital, triggered not by a gradual decline but by a collective moment of realization.
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Financial and political systems can unravel at an exponential pace. The collapse of SVB took two days to trigger a $300B printing, while the USSR went from superpower to non-existent in just two years. This highlights the danger of slow reaction times, where waiting for clear signals means it's already too late.
The US economy is not broadly strong; its perceived strength is almost entirely driven by a massive, concentrated bet on AI. This singular focus props up markets and growth metrics, but it conceals widespread weakness in other sectors, creating a high-stakes, fragile economic situation.
Widespread credit is the common accelerant in major financial crashes, from 1929's margin loans to 2008's subprime mortgages. This same leverage that fuels rapid growth is also the "match that lights the fire" for catastrophic downturns, with today's AI ecosystem showing similar signs.
Global governments are actively pursuing policies (running economies hot, suppressing energy costs, managing rates down) to create a period of artificial prosperity. This is a deliberate strategy to push a massive debt sustainability crisis further into the future, which will feel great until it doesn't.
Governments with massive debt cannot afford to keep interest rates high, as refinancing becomes prohibitively expensive. This forces central banks to lower rates and print money, even when it fuels asset bubbles. The only exits are an unprecedented productivity boom (like from AI) or a devastating economic collapse.
Market participants are conditioned to expect a dramatic "Minsky moment." However, the more probable reality is a slow, grinding decline characterized by a decade of flat equity prices, compressing multiples, and degrading returns—a "death by a thousand cuts" rather than one catastrophic event.
Unlike the 2008 crisis, which was concentrated in housing and banking, today's risk is an 'everything bubble.' A decade of cheap money has simultaneously inflated stocks, real estate, crypto, and even collectibles, meaning a collapse would be far broader and more contagious.
Contrary to intuition, widespread fear and discussion of a market bubble often precede a final, insane surge upward. The real crash tends to happen later, when the consensus shifts to believing in a 'new economic model.' This highlights a key psychological dynamic of market cycles where peak anxiety doesn't signal an immediate top.
The underlying math of U.S. debt is unsustainable, but the system holds together on pure confidence. The final collapse won't be a slow leak but a sudden 'pop'—an overnight freeze when investors collectively stop believing the government can honor its debts, a point which cannot be timed.
The U.S. economy's only viable solution to its long-term debt and inflation is a "beautiful deleveraging"—a painful but controlled economic downturn. The alternative is delaying and being pushed off the cliff by market forces, resulting in a much more severe and uncontrolled crash.
