Surely the crash of the US economy has to be soon
(wilsoniumite.com)503 points by Wilsoniumite 2 days ago
503 points by Wilsoniumite 2 days ago
I don't understand why people expect the Chinese economy to crash - they can basically make everything, a lot of which is internationally competitive, they can trade for the resources they don't have with the goods that they do - with basically the whole world dependent on them. They have a huge internal base of poor people, and lifting them to a middle class level will alone fuel domestic demand for years to come.
Their biggest problem seems to be they're too good at building stuff, whenever a new category of product pops up, they quickly build up both volume and drive down prices through competition so that they saturate their internal markets (see: housing, EVs)
The Chinese economy is indisputably strong and real, but rumor has it that its reported growth numbers have been inflated in the last couple of years. And why wouldn't they be - there is an autocratic government whose justification is that what they are doing is increasing economic success. No success is not an option.
Personally I'm less and less inclined to believe in capitalism and money as a concept - we've long past moved the concept of money as universal barter, and into strange and speculative theories about how things ought to be valued, with the most valuable things either emerging from immediately unclear value propositions (impossibly valued companies, high-paid jobs that seemingly dont contribute to society) or artificially created shortages (housing, overpriced infrastructure projects due to government regulation and meddling).
If for example, BYD makes a car that's substantially similar between the China and Europe versions, and sells said car for $15k eqv RMB in China, but $30k in the EU, it makes double the revenue for the same 'value'. Even the argument of the EU being generally richer, and thus the car having higher monetary utility doesnt hold - a well-paid EU surgeon wont pay more for it than your average office worker.
So I feel money is increasingly a poor proxy for actual value/wealth etc.
There were worries that they'd issued a lot of debt to build real estate that wasn't needed resulting in ghost towns and people thought prices would fall and the banks lending would collapse but they seem to have managed ok. The Chinese actually seem quite smart at managing their system.
They managed okay up until now because the Chinese gov takes a ton of revenue directly from their industry. They have very low income taxes on the public and instead make a lot of money from their huge state companies and investments in their manufacturing, industrial, and tech businesses which are still booming. That helps offset the losses from real estate, which they also make money off from land sales. They act more like a giant bank than one that simply taxes and spends.
But their fiscal deficits have been growing quite a bit, particularly their local governments and they've had some pretty bad deflationary issues recently.
> Their biggest problem[…]
is demographic in nature. https://www.populationpyramid.net/china/2024/
Great website, not going to downplay the problem, but you can check out other countries, and see that a lot of places - particularly in the West - are f*cked. That China is too, is not much of an upside, Honestly its kinda shocking how bad things are going to get, and Im not sure what can be done if anything at this point.
Korea has a similar demographic shape, and Japan already passed its peak in 2005ish https://www.populationpyramid.net/japan/2024/
Roujin Z shows Japan saw what's coming over 20y ago, already.
This is a profoundly important - central, even - issue that I am very surprised to not see widely understood or acknowledged.
China is in a life-or-death race against time. A good number of their decisions are explained when viewed through this demographic implosion-bomb they are facing.
> I don't understand why people expect the Chinese economy to crash - they can basically make everything, a lot of which is internationally competitive, they can trade for the resources they don't have with the goods that they do - with basically the whole world dependent on them.
One absolutely would have been able to say the same thing about Japan in the 1990s when they were top of the world.
So I dunno! Anything's possible!
Their biggest problem is demographics. They’re living on borrowed time. There won’t be enough young people to do all this work in future with all the old folks to care for.
Depends on your definition of crash?
Real estate prices dropped 30% blowing up most people’s savings. The debt overhang is slowly bankrupting various companies. Growth is an anemic 5% (should be double for a country with China’s per capita income) and means it will never enter middle income status. Unemployment, especially for grads is very high and the lack of babies or immigration means the worker base will shrink while the demand for social services will skyrocket.
Doesn’t seem great to be honest.
Stocks might go down if AI doesn't bring in enough revenue. The real risk seems to be currency depreciation though. The USD is already down 15% this year compared to the Euro. I'm worried about what the next FED chair appointee will do. JPow has stuck to his principles so far.
> The USD is already down 15% this year compared to the Euro.
It's down 12% since a year ago, but that's largely a reaction to the tariffs. It's been fairly stable since July or so and has only seen a small dip (and partial recovery) in the last couple of weeks.
Is it really seen as “the real risk” if it is something the current elected president very explicitly said for decades he wants to do? He does want USD to go down in value. He said it, repeatedly, openly. He made very clear why he went after Powell (that he himself reappointed). It’s more, exactly what we should expect than a risk no?
> The USD is already down 15% this year compared to the Euro.
False in every sense possible. For starters, the year is only a month old. Second, it’s been pretty stable for the past 6-7 months, and is only down 12% from a year ago - not 15%.
It is often argued that the US will grow its economy such that the debt is less significant. There is much confusion between the US debt being cited as a ratio of GDP (common among economists) vs net tangible assets (common among businesses and people). For example, after WWII, the U.S. faced its previous record debt-to-GDP ratio—roughly 106% in 1946. By 1974, that ratio had plummeted to just 23% largely through:
a) massive GDP growth with real consumption rising 22% between 1944 and 1947.
b) fiscal discipline where the U.S. actually ran primary budget surpluses in the late 1940s
c) financial repression with the Federal Reserve capping interest rates at around 2.5% while inflation averaged 6.5%. This meant the government was paying back debt with "cheaper" dollars, effectively "inflating away" the debt at the expense of bondholders.
Fast forward to today, there is an often stated belief that the US will grow the economy again, this time with a dramatic expansion into a space economy including orbiting data centers, solar power plants, asteroid mining, space manufacture - all leveraged with robotics and AI. Let's be generous and assume this actual happens and that it happens soon - what mandate is there that this massive space economy will be denominated in US dollars or even be part of the US economy? SpaceX has already launched numerous satellites for foreign countries. What is to stop them launching a space economy that will be owned under a "Flag of Convenience" from an offshore tax-free zone, perhaps even denominated in crypto? Will we then confront this massive off-planet economy with "space-tariffs" in order to import the value-added component back into the US? The U.S. debt can only be "grown away" if the value-added activities (mining, manufacturing, computing) remain registered in the U.S..
They say that prediction is difficult, especially when it is about the future. Unwise economic policies may be punished quickly, slowly or might be revoked before punished severely. The question is how much risk one is willing to take. Another matter is of morality. Being invested into something means supporting its practices and being partly responsible for them.
I would be surprised if a day went by without someone, somewhere, predicting a crash.
The question is there is no other place for money to go. Liquidity is still in abundance and no other market can capture that liquidity. Eurozone is a total mess, ECB is doing one reckless thing after another which will inevitably lead to Germany leaving Eurozone at some point. Japan market is a joke, Asia and emerging market has huge governance issues. Bond market has penalized the investors and only more pain is in sight. All in all, there is a lot of doom and gloom out there. But I don't see a viable alternative.
Sure, Mark Carney gave his little speech in Davos. The same Mark Carney, that led Brookfield while its finance arms operating out of US.
But realistically, how is opening up to China more even considered as the alternative? When has any deal with China worked at a strategic advantage for the other side? Is not the whole reason the so called globalization project failed was because players like China did not play by the same rule or did not even have to play by the same rule? What gives they will when you open up the market more to them? All it takes is for them to take your product, copy it and sell it 20x cheaper and flood the market everywhere else.
> The question is there is no other place for money to go.
Whenever I've heard people speculate on the US bond market losing its footing, the suggestion isn't that "Japan will be the new US" (eg) - it's that investor will spread assets across multiple places (US, Japan, EU, etc) to hedge against risk, rather than just the US.
That's not an answer. Japan and the EU can't handle those flows so again there is no other place to go.
Even if it's hopeless, the best strategy when everything is falling is to bet evenly. Whether or not those countries can "handle it" doesn't matter.
You're not betting in winning, you're betting on minimalizing losses. Huge difference in behavior.
Yeah people talk about this as though US treasuries didn't have a negative yield for a considerable amount of time.
People were literally paying the US government to hold their money because it was better then the alternatives: the options can all be bad, but some can be worse.
The alternative is recognizing that China offers a level of long term stability that the US is failing to match. That stability is worth a premium. You may not believe it's a high one, but our trade partners facing random tariff changes every month see it differently, even if just for a negotiating tactic at the current stage.
We also need to seriously adjust our line of thinking at what they are capable of. The "copycat" era is ending. Our supply chains have hammered their youth with generations of engineering knowledge. If you are relying on an ideological difference to assume they are not capable of innovation, you are making a strategic mistake.
China innovates orders of magnitude faster than they did even ten years ago. Yes, a lot of it is still copycat, but there is value in being able to copy quickly and well.
The question is whether China offers long-term stability for external investment. Should US retirement portfolios load up on Chinese equities?
ECB is doing one reckless thing after another which will inevitably lead to Germany leaving Eurozone at some point.
For a "little" speech, it is all people seem to talk about; e.g., it was mentioned few times in the comments above. And, yes, one can be on the board of a public company and still make valid and consequential analyses. Hell, one can be a convicted fraudster and at the same time become the president of a superpower. My point, you could belittle Canada, EU, China etc but it is going to solve the US's intractable problems.
> When has any deal with China worked at a strategic advantage for the other side?
Australia did well out of the Australian-China free trade agreement and then won the subsequent (Australian-caused) trade war.
Turns out being able to produce iron ore cheaper than anyone else and having plenty of alternate buyers when China bans imports means the iron ore price just goes up, Australian miners make more money and Chinese manufacturers get annoyed at Chinese trade policies.
Wasn't awesome for Australian lobster fishers though.
save people a click:
> The incentive structure at the ECB has become distorted and favors high-debt countries [that underperform or are risky]
We have so many problems. So many savaged construction sites that we knew for decades were important. The problem is not, where all this fiat money could go, there are plenty of places. The problem is, where it can go and make a profit. That was a hint to broaden your perspective.
> Liquidity is still in abundance and no other market can capture that liquidity.
I don't know what that means? Market crashes are changes in speculative value, they don't care about counting literal amounts of currency. Selling US securities doesn't require that the resulting "liquidity" move anywhere else, just that the owner prefers to see a cash balance to a stock certificate or whatever.
Basically this point seems like a big "confused money with value" mistake.
But importantly the person buying the stock certificate etc preferred to see that rather than a cash balance.
For every seller there has to be a buyer.
Software sector basically got cut in half just on Claude Code. You have to wonder what is next. I don’t think loss in economics is 1:1 with replacement so it’s not zero sum. Production doesn’t necessarily go up. In fact, net output is going to go down if you think about all the B2B lost too.
Whoever comes into power next better start thinking about universal income fast. We are gonna get there sooner than expected.
Software productivity doubling would be a huge boon for the economy, not a drag.
Of course it's very disruptive for people that lose their jobs, but many of them will get similar new jobs, and the overall impact is higher output.
If all companies fire 50% of their engineers, how will anybody find similar new jobs? In an ideal world software productivity doubling WOULD be a huge boon for the economy IF companies used the increased productivity of their engineers as a way to manage tech debt, R&D and other issues that were put in the backlog because historically there were no resources for this. In reality all companies look at increased productivity as a source for layoffs which does not translate in higher output but the same output done by less people. Which is a net negative because now you have 50% of all engineers without a job and no discernible increase in quality of deliverables.
The FAANG companies hoarded engineering talent for years. It was really difficult to hire in any market where they were located. What I think will happen/is happening is the combination of AI assisted development and reduction in FAANG engineering headcount will enable business transformation pretty much everywhere.
The impact of that transformation remains to be seen.
If software engineer productivity basically doubled as is being claimed in this thread, I think you'd see companies scrambling to lay off everyone else in an effort to hire even more software engineers. They'd be by far the most valuable and productive employees at every tech company and you'd be foolish not to have as many as you can. I'm being a bit facetious but throughout history when a resource or profession takes a dramatic leap in efficiency, the demand for that thing rather than decreasing as is predicted here, only increases since it has become far more valuable & effective.
You can't straight add/subtract effects that happen on very different time scales.
(1) Laying off people increases margins immediately.
(2) Creating new initiatives pays off in years, if initiatives are taken on carefully, not just thrown at walls.
That means even if (2) is happening, the signal won't show up for years, but (1) will happen immediately, regardless.
If all companies fire 50% of their engineers,
This is not a reasonable premise.
It does.
There will be loads more people who will want software customized to themselves and their needs!
The catch, of course, is that there are, all of a sudden, a whole lot more people who will now be able to create that software.
How will it all land? No idea. But it just feels like a bad idea to go long on software development when weighed against the opportunity cost of going long on domain expertise.
For instance, from 1980 to 1990, the number of secretaries doing all the typing and filing in the workforce severely constricted. That said, the number of actual typists in the workforce skyrocketed!
No one lost the need for typing and filing services. Tools, (PC, word processors, databases), simply became more available. Which decreased the need for people who were formerly doing the typing and filing as a service. Now people could reliably do the typing and filing on their own.
Jevon's paradox in action! Exponentially more typing and filing is happening today than was happening in 1976 or 1980. At the same time, there are infinitesimally smaller numbers of actual secretaries out in the workforce today than were in the workforce pre-1980. And the ones that are still in the workforce are doing much different work than they did pre-1980.
Why do people keep espousing such bullshit. Anthropic has terrible subscriber numbers, they are absolutely no where near profitability, a 100k people buying a product that struggles to sell itself is NOT the win you think it is.
If any of these tools did 10% of what their proponents claim they would become trillion dollar companies overnight and not you know... struggle so hard selling the amazing elixirs and perpetual labor machines.
>Software sector basically got cut in half just on Claude Code.
Source?
What you're claiming is completely untrue. There have been claims like this circulating on the internet recently, and they're all based off this one chart:
https://fred.stlouisfed.org/series/IHLIDXUSTPSOFTDEVE
There are a few major problems with this. First, all of the data comes from one source: Indeed. Indeed SURGED in popularity in the Covid years and interestingly fell off in popularity at exactly the same time as the FRED chart topped. Hey look - the chart for total jobs posted on Indeed looks similar:
https://fred.stlouisfed.org/series/IHLIDXNEWUS
Beyond that, the effect is further exacerbated by the fact that tech hiring went absolutely fucking bonkers during Covid as everyone was convinced we would be stuck inside forever and money was literally free to borrow. The FRED chart only shows us the data during Covid. The inability to see realistic developer hiring numbers before that limits your context and gives a false impression. Here's a chart that goes a few years further back (first one on this page) and shows that hiring has simply normalized:
https://www.dallasfed.org/research/swe/2024/swe2406
Finally, look at the first chart again. Claude Code was released in May 2025. The chart has actually been RISING since that point.
But the software sector was cut in half by Claude Code. Right. And the false narrative marches on. It's honestly amazing to me how people just soak up false information with literally zero filter and zero critical thought or willingness to do some research.
I agree that there's no way the market has been cut in half, however I am curious to see if aggregate cash (or at least non-stock) spending on engineers has been affected. Are we seeing a decline in average or median wages?
I'm kinda new into economy crashes, was a kid in 2008, is there a way to protect of it?
Live like you're already poor, reduce all unnecessary spending, adopt an ascetic mindset to support this lifestyle. That way, when a collapse comes you'll be accustomed to living frugally already and you'll have all the money you saved by getting a head start already saved up to get you through rough patches with relative ease.
Now, when I say live like you're poor, I mean do it smart. Don't grocery shop at a gas station, do your necessary purchases in bulk (actually poor people can't or won't, but would be better off if they could.). Don't but the cheapest boots, but rather the best value. But when choosing how many vacations to take, maybe pick camping locally more often than exotic vacations. Eat simple foods, don't order out fancy stuff and get accustomed to such luxuries. Don't automatically buy the latest consumer toy just because it looks fun. Don't move into a nicer apartment just because you got a raise. You get the idea.
At the very least, live like a prudent low-middle-income earner in your country, not like a Bay Area SWE.
Get used to using public transit, if it’s at all an option for you. Going down to being a one-car household instead of two saves us at least 5k EUR per year, even counting the additional cost of two unlimited local transit passes.
Avoid habit-forming conveniences like restaurant delivery, and instead learn how to grocery shop with a list and to cook things you like to eat. If you’re really pressed for time, order your groceries online and pick them up, or get them delivered (that’s an easier thing to back away from if money gets tight than restaurant delivery).
Develop non-consumerist hobbies, where you can get a lot of enjoyment out of little marginal expenditure. I’m partial to fiber arts (free/cheap sheep fleeces I clean with dish soap, then spin and crochet/knit), but there are plenty of relaxing ways to spend time that don’t involve spending much money or being convinced to spend money (like most media consumption - everyone is susceptible to advertising, to some extent)
I’ve been through several recessions.
Painfully I’ve learnt that you want to work in an industry that is largely recession proof.
Focus on industries that sell things that people need and will try to keep buying right down to their last buck.
Food, utilities, insurance. People don’t like sitting in the dark. People need water. People need to eat. People really don’t like living without insurance cover or to let cover lapse.
They don’t need Netflix, Disney+ or Prime. They don’t need Spotify. They don’t need training or e-learning. They don’t need luxury goods. They don’t need new motor vehicles. They don’t need holidays. They don’t need new iPhones or new computers.
Try and move now to an industry that has some security.
Investment wise diversification is key. Just pray that it doesn’t get so bad that banks start to fail.
Broadly agree, but I'd bet on Spotify being safe (unless overtaken by a competitor.) The workers in all the robust industries you mentioned are all listening to Spotify to get through their workdays. This is one of the last things they'll give up, normies need music like they need alcohol (and/or weed.)
I (like I'm sure many others) predicted it in 2007 and hedged against it by getting a 10 year fixed mortgage at then-current rates on the basis that rates would go sky high as they had in earlier recessions in the UK.
They plummeted to next-to-zero, and in addition to the injury I had to endure the insult of the people who hadn't seen it coming gloating about their low standard variable rates.
Ofc I clearly didn't have much real economic understanding but I guess I am saying that beyond normal common financial sense (the lack of which at scale leads to these situations) which you should be using anyway, we don't really know which way the wind is blowing, and what the exact consequences will be.
Refinancing and loans work differently outside of the U.S. what I don't remember is exactly how. If I recall, you can't refinance without paying
I remember the opposite, just before we left the ERM (European Exchange Rate Mechanism). Interest rates hit 15% and one of my colleagues was gloating about how he had just taken on a fixed rate mortgage. A few days later we left and interest rates plummeted.
Are the ones newer to the workforce just screwed or is there a way out? Kinda sucks that all this went down around 6-7 years into my tenure and it's just been a few years of scraping together freelance + portfolio projects to try and climb out of tbis rut.
(This might sadly be rhetorical given what I hear of '08, but perhaps there are new channels open to take advantage of. Or at least old channels to raise awareness of).
Yes. And here I am nearly 3 yesrs post last full time, 9 years of exexperience, and still looking (feel free to read my struggles in detail below).
What do you recommend applying to? I work in games so I guess I'm playing on hard mode (especially in these times), but the common wisdom of "normal software jobs love taking game programners in" hasn't rung true this time around.
----
Life story: Laid off mid 2023. I took a few months off when I got laid off, but the last quarter of 2023 wasn't kind to me.
2024 got me some freelance work, so I wasn't out on the streets, but it was a complete circus of an interview racket. Honestly worse than my first job hunt out of college. Its bad when you feel deep down there was someone better than you, but when you go 5 rounds in with good vibes to hear... Nothing back? That's truly disrespectful. And it sadly wasn't a one off.
Then in 2025 I hit some medical emergencies so I needed to urgently find anything. So I found part time work outside of tech and made due with that as I paid down those debts. That totaled up to a part time freelance gig, a part time job, and a few (failed) attempts at some hustles over 2025 only to end up making maybe a third of what I made back in 2022.
Now it's 2026 and I'll try again next month. My freelance work covers any gaps I would have had, I have a website almost ready with some personal projects to point to, and I'm overall more adjusted to the realities of this current market and will approach accordingly. I'm optimistic, but I know we're still in the thick of the weeds here. So I'll take any leads I can get.
None of that is true. Not one word of this applies anymore. Being highly skilled means you're highly paid, which puts you first in line for cuts. Talent doesn't get you hired, networks do. "Future earning potential" is just nonsense words, you can't eat "future earning potential".
This advice is from half a century ago. The times have moved on.
Nothing provides complete protection, but diversification can help reduce the impact.
The person saying gold and mining stocks may or may not be correct - it's still a risky position. Precious metals could be in a commodity bubble right now (or not). It's had to predict anything with perfect accuracy, which is why diversification matters.
You probably shouldn't be jumping completely in or out of anything because that requires timing, which is also not easy to do. What you can do is change he weights withing your portfolio. For example, reducing your US equity exposure to increase your bond exposure. Or reducing your US growth exposure to increase your US value and Eurozone dividend exposure. It's best to listen to several financial companies reports to weigh what to do.
Assets traditionally used for such hedge are already massively inflated (look gold an silver price charts), so I'm not sure it's worth it.
This all depends on what timelines you work on, how many assets you are trying to protect.
Alternatively you protect yourself by lowering your dependence on steady income.
Prices of investments will also go down - stocks certainly, although precious metals were traditionally recession proof, we've never had such a bull run on gold/silver in anticipation of recession. My guess is that it won't hold - I've heard that jewelers already refuse to take precious metals at anything near market value.
It's euphoria at this stage.
Ads from the World Gold Council are becoming very frequent, targeting consumers. That must mean something (looking for exit liquidity)
Be careful, I would not stay 100% invested or 100% uninvested. The market can remain in an Everything bubble for far longer than we expect (see: since 2008). It can be a lot harder psychologically to get back -into- the market when you're totally out because of sunk cost fallacy (thinking, I gotta wait just a little longer and this thing will finally crash).
I would argue that parts of the economy should (hopefully) remain healthy. I mean, AI bubble or not, people need medicine, food, internet access, energy, ... . Invest in that.
Also (not a financial advisor), when a crash occur there is a so called "flight for quality" where people move money they made by cashing out the assets to stable (A+ assets). So look for companies that have solid financials and can weather the storm.
Finally, diversify not only on the industry, but also geographically. EU, Swiss, Asian. I personally stay a bit away from emerging markets stuff as I don't have enough knowledge to make informed decisions (I don't even consider Emerging Market ETFs which should be run by SMEs).
It's difficult to draw many lessons from 2008. The people who suffered most then were over extended home owners. It's still not a good idea to be one of those people but there aren't so many of them now anyway.
There's a common consensus in economics that bubbles are really hard to predict, and even some argument that they don't actually really exist. Great paper came out recently called "Bubbled for Farma"[0] which looks at predictability for bubbles and finds some indicators but no sure fire thing.
That sort of rules out an easy or known way to predict and avoid bubbles. That said, it's worth noting our current historic period marked by being post financialisation (taking out a bunch of investment regulation) of markets in the 80s exhibits a lot more economic crashes (the real reason we should car about bubbles) than most of history (although most of history also does not exhibit any economic growth, so be careful what you wish for).
In particular, the period between around 1930-1975 showed extremely high growth with almost no bubbles or market crashes[1].
So my semi-knowledgeable but definitely not expert view is that: - Bubbles and crashes are not easy to predict, and therefore avoid - That said, our existing market rules have effects on the number of crashes/bubbles we see (but there's debate around whether you actually would want an economy with less crashes/bubbles if that meant left growth)
[0] https://www.hbs.edu/ris/Publication%20Files/Bubbles%20for%20...
[1] You can find this discussed a bunch of places but Ha-Joon Chang's Economics: The User's Guide talks about this very fluently.
Edit: I think your question might actually have just been about personal protection again bubbles, rather than protecting the economy as a whole. In which case, having margin in your spending so you'd be able to live if things were some portion more expensive against your earnings is probably the only sane suggestion.
Maximize income and cash flow, when things start to crash, you want to have fresh new money coming in to start buying undervalued oversold assets.
In the meantime, keep investing to avoid eroding the value of your money as the dollar drops in value. It also prepares you for the possibility the crash doesn’t occur for a very long time, long enough to grow your net worth substantially to be better insulated.
Gold and silver mining stocks. And International ETF funds. It looks like the United States will be going through the depression alone.
Was thinking the same, but why would everyone be more interested in gold an silver in a couple of months than they are right now? Sure it beats holding dollars of stocks.
But, keeping both feet on the ground, I'm tempted to think that if the economy collapses I'd not be very interested in buying precious metals. I'd be looking for food, a roof to live under and safety.
You can invest in silver mining stocks, and be concerned about food at the same time. One is for long-term survival. The other is for short term survival. You can think of things like toilet paper and razors as bartering tools or actual new money, and the golden silver investments as objection of the current money you have right now.
My grandfather lives in a great depression in Manhattan. He told me some crazy stories, but you know what most people made it through. I think this time our system is more fragile, but I have no doubt that human survival is much stronger than me think as well as human socialism.
For instance, I am homeless living with schizoaffective disorder and I’m not worried so why should you be?
Mini stocks were traditionally used as way to invest in asset as a security. But currently with all the ETFs that are backed with physical asset itself, I'd choose that way.
Holding asset yourself (gold) causes logistical issues and massive buy/sell split on your side, but it has some advantages too.
> you might temper your expectations of a rational market
TSLA is like a snowball down a hill. It morphs from EV to autonomous driving to AI to robots to space to tera fab to space datacenters. Rolling in the next big narrative or gov handout as it speeds down the hill.
If you just do very crude pattern matching on the first chart he shows - it is warped by the (intentional?) way he drew orange overlay lines.
The slope in 2024 and 2025 (the data that we already have) is much lower than the orange line drawn.
Following the real visual trend, the next peak would be maybe another 5-10 years in the future. (Not that this is a good way to predict the future, as also stated in the article, "not very scientific").
That spark could end up being the rollout of chinas digital currency to the world and requiring payment using that currency when dealing with foreign businesses. This will kill the position of the US dollar as a reserve currency, slowly, but almost certainly.
The us are two economies in a trenchcoat. One a classic naval trade economy, the other a imperial security trade economy. One damages the other regularly and applies local monetary anesthesia to prevent the population from rising up against the whole state of affairs. Now they are divorcing.
It's funny people still say this. The two are very much linked, as many millions of Americans have a large percentage of their net worth tied up in stocks via their 401Ks. Market tanks, net worth tanks, there's far less assets for people to borrow against, psychology changes, people stop spending, companies stop hiring, economy is now following the market.
I do really hope the AI bubble will collapse soon. The sooner it blows the less damage it will do. And hopefully we can go back to doing real work without all these leadership guys breathing down our necks to see if we are doing enough of this AI all their shareholders want us to be involved in.
It will suck even for us in europe due to shortsighted pension funds having invested in AI as well. But we'll just have to deal with it. I'm sure it will happen sooner rather than later.
PS: I'm not an AI hater as such. It definitely has its usecases where it shines. The problem is like with all hypes; it's not good at everything and it won't be all golden mountains tomorrow like the investors expect. This overhyped investor circlejerk is what screws up technology. It happened to blockchain, it happened to metaverse. All things that have their merits but somehow investors thought it would change the world overnight and make them insta-rich. Obviously didn't happen and it won't happen now.
> It happened to blockchain, it happened to metaverse.
I don't think AI is comparable to these technologies.
AI had a real impact on certain daily activities, such as search, coding, etc. While the metaverse was just a fantasy with no tangible benefit other than Zuck trying to create his own platform to take on Apple and Google.
Blockchain had some potential in certain fields, but it wasn't user-friendly or usable by many people.
> AI had a real impact on certain daily activities, such as search, coding, etc.
You aren't addressing the issue at hand, the problem isn't a total lack of impact, it's the cost of that impact, both the actual and the opportunity cost of it.
Currently, the AI "revolution" is running on pure credit - as every other bubble - even the operating costs of the AI supply chain exceed its income and economic impact. Their capital expenses are orders of magnitude higher and constitute a severe drag on the rest of the economy.
There's no indication that anything would change in the future, more AI leads to less employment, less disposable income and less income for the AI providers - it's a race to the bottom.
If this isn't reversed, it will soon end in bank bailouts, more inflation and income degradation for those bellow the top tier.
I’m not sure how I’ll feel if it actually happens, but just even entertaining the idea of LLM companies getting bailed out makes me irrationally angry. Like, really? Gonna go for the hat trick here? Housing crisis and Covid stimulus didn’t fuck everyone over enough?
It’s not like I can even leave for greener pastures, there’s nowhere to go.
It won't bail out AI ventures directly but it will bail out the banks that financed them.
Not a trick, if banks fall everything falls. what is infuriating: that we can see the value isn't there to justify the cost, yet that unprecedented amounts continue to flood into this tech segment, especially to the loudest and popular and over promising flavour of it: GenAI.
I'm willing to bet that the metaverse (defined by me as AR glasses) is a future that's coming and that Zuck was just too early, just like Palm Pilot was arguably too early. The use cases are too compelling, effectively a computer assistant that can tell you anything and everything about what you did or are doing. Yes, privacy people will hate it but the rest will eat it up just like they don't care about privacy on their phones.
An AR-glass assistant is very different from the metaverse Zuck blew tens of billions on, which was a shittier version of Second Life in VR, with a side of blockchain
He wasn't early with a good thing; he was unfathomably disconnected from reality with a bad thing
Not really, there are good applications for metaverse tech, they just need time to mature. However I don't really see it in the realm of social media. It's not something that's for everyone, at least not yet. I don't understand what meta was thinking there.
It's amazing for gaming though, and for architecture, 3D product design collaboration. I use it a lot daily and I have 5 headsets (plus two AR ones) but I also know it's not for everyone. It's also really good for porn which somehow in America isn't seen as a real industry but in my view it's a good usecase for the tech too. Anything that relies on immersion benefits from it.
AI has its niches too where it's genuinely useful (and coding really is a niche, it's not a mainstream activity) but just like metaverse they're trying to cram it in situations where it doesn't really add any value.
> It will suck even for us in europe due to shortsighted pension funds having invested in AI as well.
Only to a very small degree and systems like Germany THANK GOD do not have any AI exposure at all.
The real problem is that when the US sniffs, Europe gets a full blown cough. We are way too dependent on the US, we have seen that 2007ff, and we haven't changed a single darn thing.
>Only to a very small degree and systems like Germany THANK GOD do not have any AI exposure at all.
Well put, and it makes sobering reading to see the impact of what happened the last time Germany was deeply reliant on money from the US.
This long read by Grant Williams really helped put everything into context. https://www.epsilontheory.com/there-can-be-only-two/
A lot of us don't have time for all the long reads, podcasts, or in-depth videos posted in the discussion here. Able to provide a summary for us that expresses your general point? Those interested can then use your link to learn more.
LLM summary, for discussion only:
The article’s core argument is that the U.S. dollar isn’t going to lose global dominance in some dramatic, headline-friendly collapse; instead, like every reserve currency before it, it will slowly erode at the margins as users quietly reduce reliance on it. Historical transitions (sterling to dollar) didn’t happen because of declarations or crises, but because the world gradually found alternatives that were good enough for specific needs. What’s changing now isn’t that the dollar has “failed,” but that the global financial system has evolved past some of the assumptions that made dollar dominance frictionless. The freezing of Russia’s reserves in 2022 shattered the idea that reserve assets are politically neutral, prompting central banks to hedge geopolitical risk via gold, bilateral trade arrangements, and non-dollar settlement systems. The result isn’t de-dollarization as revolution, but de-dollarization as creep: a long, largely invisible process that only looks obvious once it’s mostly done.
I think the government is laser focused on reducing regulations, reducing energy costs, reducing interest rates, a weaker dollar that makes exports better, minimizing taxes. Technological innovation is increasing overall productivity. There are definite headwinds like upward pressure on labor by reducing the worker population, stagnating population growth, undertainty, tarriffs, a weaker dollar increasing inflation.
There’s the looming threat of geopolitical world war that has been overhanging the world since the combination of the pandemic isolating different countries and Russia’s invasion of Ukraine.
It’s really a mixed bag, but it’s not clear to me that we are headed into a total economic crash as the government is definitely focused on doing a lot of good things for the economy, but also is creating lots of different headwinds.
Hold on there, they have been very explicitly doing the opposite of reducing energy costs. The administration has been aggressively trying to cancel all sorts of energy projects, even projects that have almost been completed. At the same time they've been encouraging as much data center build out as possible. Lowering supply and increasing demand is hardly going to reduce energy costs.
They have managed to significantly lower expectations for global economic growth which brings down energy costs, but that's hardly a sane way to accomplish that goal.
I think it's a little bit more nuanced than what you say and that they generally are trying to increase energy supply while withdrawing from using heavy government subsidies or extensive regulations to pick the winners and losers.
From a demand side, they aren't looking to restrict demand, but want to have ample supply to meet the demand.
If that was true they would have let incentives for new energy infrastructure (which can be net positive, given energy is a national level concern), draw down in a way that didn't disrupt/destroy existing investment.
You can alter forward looking policy sensibly in a day. But you can't redline years of cooperative investment on the same day without destroying tremendous value (of the kind you claim to be working toward), credibility and trust.
I am baffled that performative flailing gets interpreted as progress, with such thin narratives.
The deeply counterproductive actions taken ostensibly to increase US investment in manufacturing are more of the same.
The destruction of valuable US research and capabilities, in the name of fiscal responsibility, only to continue fiscal irresponsibility is more of the same.
The destruction of diplomatic and defense alliances and influence, in the name of being stronger, is more of the same.
The private masked army roaming cities, harassing people with low relevance to their purported purpose, in the name of making the country safer: more of the same.
They all involve some truth, and then loud damaging counterproductive execution. Unless loud chaos is value.
The thing I don’t get is that IMO Americans have a higher standard of living due to demand for the dollar. Being a net importer means they make less and the countries they’re importing from make more. Money = labor = people working, so people in other countries are working harder than Americans to benefit Americans with a higher standard of living.
It’s like a roofer working for a contractor that’s a millionaire and the contractor is upset because he’s paying the roofer while having a higher standard of living because of the profit made off the roofer’s labor.
No one is working for that rich contractor if his money is worthless. Isn’t a weaker dollar for America a disaster? The world works to serve America right now because of the dollar. Life’s going to be tough when America has to “get a job” and start earning their keep with real productivity contributions, isn’t it?
Maybe I’m just dumb, but all I can see is a massive drop in the average standard of living if the US maintains their current trajectory. It might even be too late already.
> Isn’t a weaker dollar for America a disaster?
For the majority of average Americans trying to scrape by and save enough for a dignified retirement, yes.
For the ultra wealthy, no. A weak dollar leads to an asset firesale to prop up their wealth even further.
The ultra wealthy have captured the US government completely.
You assume that these economic policies are dictated by some sort of common good. The reality is that most policies are dictated by corporations and are designed to benefit their shareholders and not the average american. In addition, the US is now pivoting towards authoritarianism which implies future policies will be determined mainly by a tight group of people who are going to use them as a means of enriching themselves.
>massive drop in the average standard of living if the US maintains their current trajectory.
Very rich people control the narrative in the US and get poor people to repeat their claims. Hence where we get statements like this from.
>“John Steinbeck once said that socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.”
The thing is the billionaires/trillionaires don't care as long as they get more power. They'll eat the goose that lays the golden eggs.
You see a ton of this with Trump voters like my grandma that are getting screwed over with medicare changes and live in some kind of grand delusion that Trump is doing exactly what he said he was going to do in cutting benefits, and yet somehow it's all the democrats fault (???).
I'd be interested to hear your idea in more detail (e.g., policy statements, metrics, etc.)
My read of the last year is that the current government's goals and outcomes are somewhat different, but I could be wrong.
No one will ever get the timing right, but if you see the fundamental flaws of the economy, you know a crash is going to come. There were a lot of people who predicted the housing crash, not the timing but the crash. There are several signs that this is happening and the one no one is talking about is gold and silver prices. Don’t worry about the timing, you’ll never get the timing right, just worry about the fundamental economics and the flaws and protect yourself.
I happen to agree just because of golden silver prices that it’s going to happen sooner than later, regardless if war breaks out with Iran.
At any given moment there is always someone predicting that the economy will crash. So someone will always have predicted it. The question is do they actually have some insight or were they just lucky.
This not a prediction. The crash is currently happening. You just do not want to see it. Can you explain gold and silver prices? can you explain why bitcoin has been flat now dropping? The falling dollar? The US Treasury yields rising since 2020? CAn you explain why consumers feel at ease even though economicsts are stying everything is great?
I mean why do you think the FED and Trump are all over each other? Because there is no way out. If they lower rates, inflation. If they raise them, assets collapse.
People have been warning about this exact secnario since 2008 and no one is listening. Back then it was a prediction, but now it is happening.
> This not a prediction. The crash is currently happening.
The stock market being at an all-time high, a crash in the usual meaning of this term is not, by definition, currently happening.
Since apparently this isn't what you mean by "crash", could you define what you mean by this term so we're all on the same page?
I'm an old guy. Some people (goldbugs) have been predicting that the debt would lead to a crash since the 1970s. I'm withholding judgement.
Keep in mind that not only did people predict the housing crash, some were certain houses would be sold for pennies on the dollar.
I bought a short sale distressed town house in 2009 for 40% lower than its peak price, and many people told me it was a terrible decision because if I just waited long enough, I'd buy it for a fraction of the price.
I think prices went a bit lower in 2010, but then I gained about 400k in equity over the next 10 years and sold it.
Gold and silver are likely to crash. I don't think they are big enough to cause a crash of the overall economy, though.
The Economist front page illustration of the 90s .com stock market, with the heading "CRASH DAMMIT!"
Everyone knew there was a bubble. People began to get impatient for what obviously was going to happen, as you say.
The Typical language of believers is to say no that wont happen and how? I learned and studied enough history and the usual narrative is to not accept something that is possibly so catastrophic that it will change their way of life.
The tech bubble is another story and to be study on it's own, but it was summarized well that is < its a cycle of delusional capital invested over and over. Along with the numerous indicators of "what ifs"> The housing market is simply stupid, im sorry i don't have another word for it that better describes the current take on this matter. Home prices are outrageous because of market driven assumptions. A house is technically worth $150 is now on the market for $350 and why is that. from 2 years ago. People truly think that home prices are expected to keep rising and to what extent and why? They couldn't tell you<< " my zip code is the place to live at the moment, the person living in the next zip code is saying the same thing about hiss home, Homes in silicon valley were above and beyond the national average and it was the only thing on the headlines during 2021 - 2022 but for good reasons that cant be argued too much/ Today it is the rest of US in the same mindset.
All of the US economy seems to be in protection mode right now. As to say it's the mother that doesn't want you to go out again after falling of your bike and scuffing your knee on the pavement.
tariffs were used the wrong way this time around, inevitably the very purpose of them was not so effective, it backfired, Damage is done and reputation is broken in a lot of ways. Britain is renegotiation relationships with china, Canada is renegotiation relationship with China, EU is renegotiation relationships with India and China. All with successful results.
There is a lot of stake here the US has a lot to offer to the world and to use that as weapon is tends to not have a good outcome. The market is large, yes it is resilient to some factors but not all/ When collapse takes place there will be tremendous momentum and its going to be hard to stop.
> People truly think that home prices are expected to keep rising and to what extent and why?
Home prices aren't rising, the value of dollar keeps, and is expected to keep, falling.
https://fred.stlouisfed.org/series/CSUSHPINSA I was taking this as an example.
Median house price / median income is at an all-time high for the US.[1] But what that means is that the rest of the country has caught up to California's overpriced housing. Hence the call for a 50-year mortgage. Still, looks a lot like the 2008 housing bubble.
[1] https://www.longtermtrends.com/home-price-median-annual-inco...
I keep seeing soon, sliding into, moving towards.
USD Currency futures have already collapsed.
World trade will move to (not a good idea) RMB or (mistakenly) crypto.
Euro is the only real option left and it’s beautifully positioned in the center. Great leadership too.
https://en.wikipedia.org/wiki/Religion_in_Sweden
Not even the right order of magnitude
Who do we expect will replace Americas global leadership and will they really be better for everyone?
China seems to be the only candidate. But whatever happens it won’t be in the same way as before.
As for whether it is better for everyone, that question became a lot harder in just the last year. Who is «everyone»? And what do we mean by «better»?
With the US wanting to annex territory from its NATO allies, and engaging in extortionate tariffs, it is harder to argue that the US is good for Europe. Which is why Europe has already started to look eastward. Starting with a comprehensive trade deal with India.
What’s happening is good for Russia and China. Not so much for the rest of the world.
I disagree that something good for China is necessarily bad for the rest of the world, which you seem to imply here includes only Europe.
China alone has a higher population than Europe and the USA combined. I'd say that even if things got worse for Europe, to humanity it still constitutes a net benefit. Lives aren't of less value just because they're in a (gasp) communist country.
> communist country
New things need new words to describe them, I know people love to call bad guys "nazis" or "communists" and that everyone seems stuck with 1939 lingo but come one. 1950s china isn't 1980s china which isn't 2026 china, yet they're all ""communists""
Not necessarily. But China's aggression towards Taiwan and their recent rare earth metals move last year show that China does not have the worlds best interests at heart either. We're picking between two evils and China's evil is more predictable than the US's right now.
This goes for Asia in general. Korea, Japan, and China spent centuries fighting and making them the de facto super power makes it easy to resume the Korean war or try to overtake the (military wise) crippled Japan should they be emboldened by the faltering/collapse of NATO.
The single superpower thing was an anomaly which was mostly a result of one specific country being largely untouched by WW2; we're more likely heading back towards multiple regional powers with varying levels of cooperation, e.g. EU+Mercosur+India agreements that just happened.
The lines are still being drawn, but its doubtful one single power will emerge.
The US is resigning the position intentionally. It's not as if someone is gearing up to replace it.
But as a trade partner? China, markets love reliability and stability. Not every 4 years wondering if there will be another trade war for reasons unknown.
You'd be very surprised the amount of malicious behavior countries will ignore to allow trade. Look at Saudi Arabia.
The EU just signed large deals with Latin America and India, binding a sizable chunk of the world to its rules. ASEAN is on the docket, Japan, Canada and South Korea have been signed for a while now.
Make of that what you will. Power isn't always tanks and soldiers. Sometimes its bureaucracy and contracts.
I don't see any way we're not heading back to the multipolar world. They've managed to burn almost all of the goodwill and soft power that took 80 years to accumulate in 373 days.
Even with a "return to normalcy", the trade and military agreements being forged are permanently diminishing America's influence. Especially given that we're never more than 4 years away from this happening again.
Well, cooperation with one specific player.
Cooperation among the rest of the world is rapidly progressing in response.
That's not how it works though, is it? What you're really saying there is global governance.
Which faction that emerges as a dominant ever says "Oh no! We better stop using our advantage to improve our condition".
China probably. No I don't think it is better but at least their leadership is actually sane. Evil, but sane and predictable.
Even the evil adjective starts to look debatable in contrast to what current hegemony is doing on its way down.
Apparently their worst offence so far was calmly outgrowing and out competing their peers while benefiting global consumers with he fruits of organized labor of their own society.
Iam sceptical whether china is more evil than the current and historic US. Both countries have commited atrocities but the US was way more involved "for their interests overseas". Maybe the western distrust towards china will make it a different power equilibrium.
As opposed to America who uses cruise missiles on fishing boats in a different continent?
Maoist protracted people's war has traditionally relied on being less of an asshole to the peasants than the enemy.
I was referring more to the millions of Uyghurs in political prisons and their overreaching surveillance of the population.
And I was just speaking of what I think about China, not saying the current US administration is any better. I don't think it will be there forever though.
I'm particularly annoyed that the US is for the people of Iran and not, like China, for the government of Iran. And the US putting secondary sanctions on Russian oil to starve Putin from Chinese and Indian oil revenues? Disgusting.
China wants but China won't. They lack the military capability of force projection that is the basis of the US dollar dominance, their currency cannot be used as a reserve/trading currency due to capital transfer controls (that have no sign of ever going away because otherwise everyone who has money in China will move it immediately out of the reach of the CCP), foreign investors have gotten very skeptical over the years regarding IP theft on one side and supply chain law issues (e.g. underage labor, 996 and modern slavery, environmental concerns) on the other, and on top of that China is getting rocked hard by the inevitable consequences of the one-child policy that is driving up labor costs, further reducing the attractivity for foreign investors.
> The unemployment rate just follows these smooth curves, covid was an exception, and it was due to jump again. Not very scientific I know.
Why did you feel the need to post this article? It totally lacks substance. The above quote says it all.
I hope that after the Big Reveal, nationalism will immediately begin to fade away and we can start tackling species-level problems, like the plastic everywhere and in all of us, or dying ecosystems, or ... literally anything other than commerce.
3 more years, then the macroeconomic headwinds from aging millennials will be past peak earnings and rather than funding cap weighted index, they will be draining cap weighted index.
1929 silent generation decade or depression after.
1967 post war Baby boom from The Greatest Generation, followed by decade plus of stagflation and recessions.
1999, after a two decade run of the stock market going from 1000 on the Dow Jones in 1980 to 10,000 on the Dow Jones in 2000, the baby boomers born to the greatest generation, peak, earning ears, leading to the lost decade afterwards.
Two decades of stock market returns from 6000 on the Dow to 60,000 on the Dow, followed by post peak millennial earnings…
One does not speak unless One knows.
You know nothing Jon Snow.
Last 2 reported quarters have 3.8% and 4.4% gdp growth.
Next report is end of february. So it's minimum 4 months away at earliest.
Stock markets are at 10 year peaks.
Unemployment is a little bit high at 4.5%.
Inflation is a little bit high at 2.7%
US government debt is very high at 125%
PMIs are strong across the board.
Also in context, trillions in declared new investments in the usa. Probably trillions more in undeclared new investment trying to avoid tariffs.
No competitor possible on reserve currency status, Euro in about 2013 was looking like hot stuff but they regulated themselves out of it.
So I consider, the crash probability of the US economy is certainly not going to be happening.
The person declaring "trillions in new investments" is Donald Trump. He doesn't understand how tariffs work, he doesn't understand how trade works, and he doesn't understand how the truth works.
So many of the stats you mention are based on potentially-untruthful statements from the Trump administration. When the facts and figures aren't favorable to Trump, his strategy is to shoot the messenger and install his cronies. Works great, right up until it doesn't.
> This is the 11th time that tariffs have happened, and it just isn’t surprising anymore.
There are tariffs everywhere, all the time. Canada just dramatically cut its 90% (or something) tariff on Chinese cars. Tariffs haven't just started happening because someone you don't like did them.
Otoh, tarrifs as a foreign policy / coercion method disconnected from trade and local economy impacts definitely is a new thing.
Sure, it might have been used as a delicate lever previously but in its current brazen form is just bad diplomacy.
Any time now:
1. Market crash
2. AI bubble bursting
3. Year of the linux desktop
Have I missed something?
I feel like one of the following is true (and I don't know yet which is the case):
- I'm genuinely a lot more pessimistic than is accurate around what is and isn't a bubble - Bubbles are just slower to burst than I expect
Possibly some combination of both. But even ignoring AI which is relatively new, it seems "obvious" to me, that whatever value Bitcoin has, investment in the asset is detached completely from that value. I'd have expected to see Bitcoin crash a long, long time ago, and have been thinking it's "just around the corner" for years and year.
And yet, the bitcoin price as a whole, although it's dipped recently, and is clearly volatile, still remains something like 10x what it's value was 5 years ago[0].
Something I think people forget when it comes to the valuation of bitcoin is just how much of it is used to fund illegal activities (Betting, Drugs, anything on the darkweb,...). I honestly believe much of the valuation is linked to that, but I have no source or proof.
No... problem is that most investors are flooded with liquidity/money (thanks to QE and the rallies) thus alternative assets like Bitcoin are being flooded with liquidity (see: Blackrock BTC ETF)
We only would see a real valuation if there was a sudden need for liquidations, or a loss in faith in value, which would need some kind of an event, either rapid liquidation or some sudden shift in sentiment
I'm guessing it will be part of a larger sell-off in Tech and BTC will be lumped in⁶
There is so much wrong with this blog post that it is difficult to know where to start. Does he even know that China has placed silver on the rare earths list? Considering they export 60 % of the worlds refined silver and now exports are limited and controlled. Silver markets have sold 200 contracts to every bar of refined silver. Now they are scrambling to fulfill delivery if someones requests it and are forced to buy on the spot market, which incidentally has driven spot pricing higher than contracts.
People are moving out of Bitcoin and into Gold currently. I see this trend continuing (Bitcoin falling).
The markets today are indestructible at the moment as you have witnessed over the last 3-4 years. This year will be similar to 2025 according to many different and smart people. I tend to agree with them and we are still in a bull market.
-not an expert, not investment advice, your mileage may vary.
The US was in decline, a vote for Trump was a vote to accelerate that decline.
Biden never got a credit for taking us out of the COVID mess.
As a US citizen, I will vote to bring him back once again just to fix this mess.
Expecting the crash of the most important economy in the world based on two graphs, where you do chart astrology, is such an insanely stupid argument it is hard to fathom.
With all these charlatans predicting imminent collapse it is always imperative to consider how strongly they believe in their revealed preferences, based on how much they have invested in their position. That said, how much money does OP have invested e.g. in shorting the S&P 500? Or any equivalent. Let me guess, zero dollars.
> People buy precious metals when they might be worried about the value of fiat currencies
It’s not just people. Central banks are buying precious metals due to the dollar and new Basel rules. Gold needs to be allocated if you want it to be considered a tier 1 asset.
There's quite a few factors here that delayed what should have logically already happened.
1. All the tarriff reactions cause US companies to import a huge amount of stuff for 2025. From what I understand, we're about to exhaust all of those imports.
2. The unemployment reports (especially the U3 numbers) hide quite a bit of turmoil going on under the hood of the job market.
- If you lost your job and switched to Uber/Doordash, you're not unemployed.
- If you are riding on severance pay instead of filikg for unemployment, you're not unemployed.
- If you got tired of throwing out hundreds of apps only to get automated rejections and take a break a month, you're not unemployed.
- If you just graduated into this hellscape and can't qualify for any unemployment, you're not unemployed (you're technically not part of the workforce yet).
There's a lot of these small shifts in how jobs work that make U3 less reliable in reflecting reality. And I only touched the surface of these issues.
3. Continuing on the U3 with a point worthy of its own bullet: the unemployment appears flat, but the makeup of what's happening per industry really lays down the reality. The only industries growing are hospitality (aka food service and similar sorts of duties) and health care. And to top it off these "growing" industries shift more and more to fractional work. Pretty much every other industry is down. So people are getting laid off/fired and moving to part time work to get by. "Stable" by unemployment numbers, but very unstable on the day-to-day. Add in the recent congressional bills for healthcare subsidies and we're throwing more gas on rhe fire.
4. I'm sure it's been said so much by now, but AI in the US is the only thing holding up the GDP. Without that massive investment, the GDP would be at best, dead flat. The US isn't growing in a way that reflects actual yields to anyone outside of a select few shareholders. We're not building more houses, mining more materials (on the contrary, we've resumed ransacking others'), manufacturing more machinery, nor even producing more service value for customers and businesses. We're putting all hedges on one thing with an uncertain outcome. If that industry declines, so does the rest of the US.
5. The K shaped economy. I have to check these numbers again, but I believe that spending is indeed up, but the makeup of spending per income band is more stark than ever. The too 10% income households makes up half of US's spending. But there are signs that even many high income houses add also starting to hunker down on spending.
----
That was a lot and it still only scratches the surface. But the TLDR version is that there's a lot of statistics massaging over the real struggles of life and many industries reaching a breaking point they did a good job putting off. But by this point it will only take a needle to break this camel.
> So, perhaps we won? Perhaps we built our markets so stable that they are these days impervious? That sounds silly on its face, and the two reasons I’d actually give are:
> 1. Markets are just slower moving than ever before, big players just like to sit on their big piles of money
> 2. There are one or more bubbles in the stock market. Almost everyone agrees that AI is a bubble. It funds itself in a circular fashion, and capex cannot be recovered with profits any time soon, even with optimistic outlooks.
It’s a bit of both. The impact of political instability in the US (read: Trump pissing off as many people as possible) may not be felt in the markets quickly, if even within his term. He has severely dented confidence in the US as a trading partner and as an arbiter of the global rules-based order. That will have decades-long implications, the result being a pivot away from dollar-denominated commodities trading, and export markets for US goods being increasingly unfriendly. The value of the dollar will probably decline, and in fact that is a goal of many in his administration. That could actually be good for US equities if it’s in moderation.
The biggest risk I see is flight of capital away from US treasuries, which would drive up interest rates, leading to a sovereign debt crisis in the US. The likely solution to that would be money printing and resultant inflation. The high treasuries rate would drag capital away from equities.
I find it crazy that people are so obsessed with the current administration they want the world economy to crash. I can tell you that in a current climate a complete world economy crash is going to play out very very badly politically all over the world. I have a real bad feeling it will be a replay of the 30s.
The debt clock is a proxy for the total amount of plastic we route from shipping containers -> landfills. Plastic is oil, oil is energy. Energy can be exchanged for labor globally therefore energy prices money not the other way around. It’s our civilizational bottleneck. The true cost of oil isn’t priced in to begin with and we have it bound up for 500+ years. This is creating a massive distortion in the global economy which physics will insist on regardless of monetary policy.
Or we burn the oil -> heat into the atmosphere via silicon doing things like routing “wyd” texts around dozens of network devices across the country when the message doesn’t have that value.
The economics of how we allocate energy makes no sense and we debate how to fix this via policy.
I like how the last image based on "C'mon, Do something" with all the AI symbols, has hard to recognize body part shape, with Claude being right in the middle of it. Hank Green talked about it last year - https://www.youtube.com/watch?v=fIbQTIL1oCo
Where it's gonna crash to? Where is going the capital move to when everythings going up? (except crypto apparently)
Why does the capital have to go anywhere? People just bid less and less for the same assets and prices go down. Margin calls happen and increase seller volume, prices go down further. And so on.
I'm not saying all this will happen. Just that capital doesn't have to "go" anywhere for a crash to occur.
People, or organizations, but mainly people, can just refuse to invest in stuff, parking their money in low-interest bank accounts, or the old style "stuffed into mattresses."
This was the multi-decade problem Japan ran into after its hot economy imploded, and unleashed the "lost decade" (which became decades). It was not a marginal issue, and for year the Japanese government tried everything it could think of to get people to invest in things - to little effect.
Statement: if AI crashes where will the capital go?
Claim: people will just choose to not invest capital at all
Response: that’s the opposite of what we know about supply/demand. When a supply of something (desirable investments), goes down, with demand steady, prices go up
It’s the same thing that happened during zero interest rate environment - huge supply of capital, few places to put it, so it piled into tech which drove up prices
So I guess my answer to “where will the capital go?” is “the next best thing” which drive up prices of that thing
The banks will start to pull back on AI financing because their risk calculations are going up. That will make the news and people will sell their AI stocks and just put cash in a money market fund or something. Stock price decline confirms the bank’s calculations and now they def. aren’t lending to AI companies. That makes the news and now people are really selling their AI stocks which drives the price down further. The banks react again…
In 2008/9 people became paranoid there was nowhere safe to go and that really screwed things up on top of everything happening in the stock market.
https://www.investopedia.com/articles/economics/09/money-mar...
> just put cash in a money market fund or something
So you are predicting everybody will escape into dollars. Which by themselves are extremely risky because the world is at the verge of ditching dollar as global currency.
There was already double digit inflation just because during the pandemics US overprinted dollars in relation to the size of the global economy. Imagine what the inflation will be if the dollar economic domain shrinks by half or more.
This is a great question, and one that drives right to the key issue! (oh god, that sounds like an LLM response, sorry)
Like with the implosion of the Japanese economy, people will just not invest, instead parking their money in low-yield bank accounts. It was, in some cases continues to be, an issue for that country.
They're not definitionally the same. Normally a (stock market) crash is just "everyone's assessment of expected future cash flows goes down, meaning that what everyone owns is less valuable". One thing that can cause people's assessments to drop is "everyone else is withdrawing from it, which I assume means they're assessing it as being much less valuable, so they have information I don't, so I should revise downwards", which can make a self-sustaining feedback loop, but that's certainly not the only possible cause of a crash; I wouldn't even say it was the most likely cause of an AI-bubble crash.
My guesses would be "everyone's assessments go down together because OpenAI et al's predictions of their future revenue are observed to be consistently vastly overinflated vs actual performance, but everyone was previously assuming they were roughly correct" or "some political thing happens which makes OpenAI et al's services obviously much less valuable or makes them much less able to provide services".
> Where it's gonna crash to?
You know that the reason things bubble and burst is because speculation outpaces reality at too high a rate, ie : too much "capital" is make up of hopes and dreams.
When reality hits and the numbers make sense, all that hope and dreams go pop.
Scotty doesn't know!
There is no reality in the market. All prices are speculation, always. If there was any reality involved things like Tesla would crash 3 times already. My question is where the spekulants are going to escape to. I don't think it can be even dollar this time because in this crash dollar most likely will go away as the global currency and the inflation will be devastating.
This is really obscured by the K-shaped growth, dual economy now. We've reached a stable pattern of a deep underclass serving the wealthy. We won't have a crash or "correction" because the entrenched top 5% has figured out a way extract value from everyone else indefinitely.
> This is really obscured by the K-shaped growth, dual economy now. We've reached a stable pattern of a deep underclass serving the wealthy. We won't have a crash or "correction" because the entrenched top 5% has figured out a way extract value from everyone else indefinitely.
Apologies for quoting all 3 sentences of parent, but the poorly-drawn conclusion depends on the full sequence of seemingly rational statements.
The context this sequence is missing is that approximately 70% of the US economy depends on consumer spending. [0][1] If the lower stroke of the K-economy diverges too much from the upper, the economy is going to grind to halt.
Consumer spending of the bottom 90% cannot (easily?) be replaced by the top 10%.
[0] https://govfacts.org/money/broader-economy/economic-indicato...
[1] https://www.npr.org/2025/11/23/nx-s1-5615222/consumer-spendi...
I used to think along these lines. But now I think the truth is - does it matter if the economy grinds to a halt? Perhaps the ruling class can still keep enough Americans comfortable enough, and fearful of losing more, doing largely pointless jobs, to stay passive - and that’s all they need to do to completely bifurcate the society such that they face no threat to their own position.
Some advice for those who are young:
If every idiot (I'm including myself in this) on HN/Reddit/Youtube/Tiktok/mainstream news/etc. thinks we're in a bubble and is crazy pessimistic and thinks economic collapse is near...it means we're not actually in a bubble.
When the bitter, frustrated pessimists on HN shift their tone to being neutral or even mildly optimistic, then I will start worrying. Because that will mean the general public must be reaching 1999 levels of euphoria for a hint of optimism to show up here.
>When the bitter, frustrated pessimists on HN shift their tone to being neutral or even mildly optimistic, then I will start worrying.
That seems to have happened around 2023 or so as people chose to laud over AI instead of understanding the underpinnings of society coming undone in real time.
So, should I be worried?
>because your pessimistic feelings only serve to strengthen my claim.
So me pointing out optimism in discussion strengthens your claim, because it's specifically my feelings that prove your point.
Well I'm glad you can prove yourself right, if nothing else:
>When the bitter, frustrated pessimists on HN shift their tone to being neutral or even mildly optimistic, then I will start worrying.
Denial sure is a worrying point.
Its a busy site, I can also find hourly "AI brought joy back to my life" threads.
The COVID economic depression is not accurately shown in the charts. The economy shut down for more than 2 years. Before RTO, the economy was in a depression. These charts provide indicators to what's happening on the ground. The classic indicators didn't accurately capture the Coronavirus lockdown.
The economy is still growing from the quarantine lockdown. It's why we didn't see a collapse, it would have to be worse than what happened during the lockdown for the economy to be in a recession. That's not the case, and I don't see a collapse or recession for at least 3 years.
For most of us, we work remotely and some people might be out of touch. Don't take this the wrong way, but people are just recently recovering from cottage syndrome. We're still in the transition period with the layoffs and AI doomerism being growing pains.
If you're going to chart-gaze, you need to have a healthy skepticism about the chart itself - is what it's measuring still meaningful? Every chart is an isolation of variables in an ocean of variables. The shark attack / ice cream sales chart will mysteriously stop working when everyone is on Ozempic and stops craving icecream! Likewise, there's a very real possibility that "inverted yield curve means recession imminent" logic only works during a particular era of USA dominance in the world, which we have thoroughly left behind. Food for thought, I hope.
> Which is to say that no individual decision make want’s to be the first mover, so the market does not move.
Uh, that's not accurate. Hathaway is sitting all cash because of it and so far they have been the one losing. Even if you assume (and correctly I think) that the market is overvalued, their stock pile of cash is eroding: https://newzsquare.com/warren-buffett-warns-of-fiat-currency...
> A year ago there were a few signs. Right now, it feels like everything is primed to blow. Is that new?
The market is unhealthy. Too unhealthy that I think it can no longer self-heal the usual ways (recession/crash/etc.) and we'll instead move to more advanced stage of hyperinflation, global war, etc.
Trump is lowering interest rates, fueling the bubbles.
We can’t know when it’s going to happen, but there is a good chance that one is going to be super bad.
We basically borrowed our way out of the 2008 crash and through covid, but we havent repaid the debt. It is so high I doubt we can do the same next time.
I know HN always has its fair share of doomers, and generally the HN communities track record anecdotally regarding finance and the market is frankly terrible. Tesla (stock price wrong), Bitcoin (wrong), AI a huge dot com like bubble (wrong in my opinion - TBD though).
I’m optimistic on the US. We could realistically print a 5 handle GDP, oil at rock bottom prices, lower federal income taxes this year. As far as Gold and Silver I just see it being propped up by speculators. Silver spot is down 15% this mornings and gold down 8%.
I predict double digit gains in the S&P by end of year and strong financial conditions with mag 7 continuing their lead. Tesla also will be a big winner.
At this point I think Tesla could sell zero cars this year and their stock price would still be astronomical.
> We could realistically print a 5 handle GDP, oil at rock bottom prices, lower federal income taxes this year.
Ignoring everything else in terms of oredictions: the US simply doesn't have that spending buffer anymore to really outspend yet another crash. Its at what, 37 trillion right now? And it's only rising more and more by the month.
The only thing worse than a crash would be the US defaulting on that. And then we'd be screwed in ways that we don't recover from in any of our lifetimes. Nearly a century of trust and soft power completely down the drain.
Even if they don't default. How long there is willing investors? Even if FED drops rates. It is an auction. So rates should be set there. But maybe printing will happen via bigger and bigger market operations. Leading higher and higher rates. With probably inflation... So I suppose valuations could go even higher...
I do not understand economics and from engineer perspective whole thing doesn't make much sense.
Some sort of an AI crash / bubble bursting is expected to be honest - now if that will take the rest of the US economy as well.... debatable. Any strong opinions on this?
I'm not an expert, my knowledge is just from reading around a lot, but I think there's some stats that would suggest the US is particularly exposed:
- At points, AI investment has actually seen more spending that US consumer spending[0], there's some debate on this[1] but if true, that leads to a narrative of the US being 'propped up' by AI investment.
- US GDP growth was strong last year, but behind quite a lot of other similar countries like the UK, Germany and Japan, which doesn't suggest a comparatively strong economy.
- The US is actively increasing it's borrowing substantially (Big Beautiful Bill) while lowering it's currencies value through trade wars and unpredictability (see bond market). That reduces its ability to use its wealth to borrow its way out of a financial crash (like with the 2008 crash, or Covid).
This could be a little overblown and is hard to tell, the US is definitely an extremely wealthy country, even if its less wealthy comparatively that a few years prior.
[0] https://fortune.com/2025/08/06/data-center-artificial-intell...
[1] https://www.cnbc.com/2026/01/26/ai-wasnt-the-biggest-engine-...
On (1): Might be useful to separate investment flows from the rest of US's economic activity.
AI investment is propping up capital flows, the GDP statistic, and responsible for most of the gains on SPX, but its still a small fraction of the economy.
What else does the economy consist of these days? It's pretty much already in a recession if you exclude the big AI companies.
Besides, basically every company had been desperately shoving AI into all their products. Throwing all of that out when the bubble pops won't be pretty.
I imagine depreciated AI features will be like the soft varnish surfaces of some 90s cars after 10 years - disgustingly sticky, shedding flakes left and right, and in hindsight an obviously stupid idea that wasn't tested sufficiently before pushing it on consumers
> now if that will take the rest of the US economy as well.... debatable.
In the grand scheme of GDP, the US hasn't done much growth in anhtjjg else this decade, all while massively increasing spending to prevent post COVID recessions.
It certainly doesn't look good. But this was being setup for 30 years as we outsourced our strong manufacturing wing to make the top brass richer in the short run. So I do think the house of cards falls if AI does.
The sad part is that we may have been able to whether the storm under the right leadership. But that sure isn't the leadership in the White House right now.
Is there really a bubble though?
Most of the activity is with the same old big tech stocks, and the largest investment by far is not even market driven. Stargate is defense spending.
AI doesn't have to sway consumers, and it doesn't even have to work that well now or ever for governments to keep pumping money into it. The whole point of Stargate is to de-risk with reduced need for security clearances to handle big data (whistleblowing) and eventually get away from foreign tech. Also, there are a ton of businesses who have always done things on-premises for compliance and they can now cut costs by migrating to these government vetted data centers.
It genuinely shocks me how rarely anyone brings this up. It's been very loudly said by Trump and OpenAI since he took office, and it was going to happen regardless of who was elected.
Yes, the concentration of wealth led to the AI boom and it’s going to lead to the crash for sure. The AI boom was nothing but a crypto bubble. And since it’s making up a large majority of the investment right now I would say that’s the only reason that we didn’t have a crash last year.
This isn't a crash, it is something else comming, perhaps the "jackpot", where society/civilisation unravells, climate disaster kicks in with real persistant challenges everywhere, and some third, fourth, fifth effects that break our millenial run to the top of our planets ecosystem as the ultimate apex species. It has been a good run, but useing the same tacticts as our stone age ancestors, is, I think, about to bite, hard. And it is literaly this, our strategy is to keep useing the same tacticts.Jackpot.
It is a giant Ponzi scheme and those tend to collapse at some point.
I can't time the market worth shit - I got my first investments out before the 2008 collapse in earnest, and got into the job market at its peak. I waited through the 2010s to accumulate money to invest, only to start doing so amidst rampant speculation in crypto, then NFTs, then meme stocks, then AI.
So yeah. I am not getting a job at a financial firm anytime soon.
That said, the societal gestalt seems primed for something to go horribly wrong. AI boosters are positing their models as solving all of society's ills, which first requires acknowledgement that these are in fact problems facing society requiring solutions. Everyone is broadly on the same side - wealth inequality is a problem, climate change is a problem, energy dependence is a problem, job security is a problem, housing is a problem, etc - but we're all varied on the approach to solving these problems based on personal biases and perspectives. YouTube is infested with AI slop, social media is filled with doomers and preppers, and subcultures are simultaneously splitting off from larger groups (like those leaving Twitter/X for BlueSky or Mastodon) while also forming newer alliances and communities around shared goals or ideologies. Even those in positions of power acknowledge the polycrisis before us, while exacerbating it further by firing swaths of workers to fund their own bunkers, yachts, and contingency plans via share price bumps.
It's in the air, this horrid pit in the stomach that doom lingers just around the corner. It's been there for a decade, long before COVID, festering beneath the surface. Hell, for many of us pre-9/11 Americans, it's been a gradual decline since the heydays of the maximum-employment 1990s. So many of us feel it that it just cannot be ignored, and thus it becomes a sort of self-fulfilling prophecy: enough of us believe something bad is coming, therefore something bad must happen to quell those feelings.
There's two things that give me (and my OCD) solace of a sort:
* We'll all find out together, regardless of status or strata
* Most of us - statistically, generally, based on prior events and barring any explosive escalation - will likely be relatively fine
Yeah, the shifting of geopolitics is likely to result in more violent conflicts with the potential to kill billions if things go NBC. If we don't address climate change, millions will die from wholly preventable causes and tens of trillions of dollars of property will be destroyed over the next century. Misuse of AI could result in doomsday scenarios that Sci-Fi has warned us about for decades. Wealth inequality appears poised to create a modern version of the Coal Wars, if current events are any indication.
Technology alone won't save our asses. Neither will some mythical billionaire genius, or AGI deity. It'll have to be us, regular humans, rejecting the present and choosing to build a better future together.
And I think we can do that.
> In Europe, people hold cash at negative interest rates because they have so few new ideas and so little innovation to invest in. Where exactly do you think the money will go?
That's a bit reductive, in Europe there's a much bigger culture of saving, most people I know here are very averse on taking debt if unnecessary, only going into debt for large purchases like a house or a car. Even for cars I see many outright purchasing a used one in cash instead of going into financing/leasing.
People hold cash but also invest, it's savings in general that are high, varying between 10-25% of yearly income saved (compared to the US's ~5%).
I think this narrative of "so little innovation" is peddled very much in the software-adjacent circles but it forgets that innovation is not only from software, if you really think Europe has no innovation you are either ignorant or purposefully fostering a bad narrative. No, Europe doesn't have the VC industry, and the software companies' culture of the USA, it does innovate with a different model.
> If you insist on believing the US economy will crash without a well thought out thesis, I think that’s a beautiful thing. When you sell your positions on US companies, I’ll gladly be on the BUY side of that order.
Please do, as I've been cashing out throughout this year anything that has any direct exposure to the USA stock market I need people like you on the other side, thank you very much.
If Russia's economy is kept afloat after 4 years of full-scale war... Why would one year of Trump 2.0 do us in? Don't get me wrong, a whole lot of problematic actions have been taken in that time-frame but that pales in comparison to 1.25 million casualties and about the same number having left the country (and our population is almost triple theirs) on top of infrastructure destruction.
Entirely different cases. Russia never relied on the strong rouble for its economy to function. Or having unfettered access to most of the world's markets. So it had some know-how on weathering the storm.
But OTOH, if Trump is erratic enough to trigger a world-wide de-dollarization trend, and close down markets that were traditionaly open (e.g. Europe), then US would be facing an unprecedented storm that would be much harder to navigate.
Have we seen any signs of any limits to erratic behaviour?
Yes. Until 2019 we stagnated. Since then we have the best Prime M of the last 100 years, Kyriakos Mitsotakis. He has made some incredible stuff and some mistakes, too, but they are nothing relatively to the Balkan traitors of the past. The country has rebooted and from an IMF victim it has become an exception in the current European/world shity situation. He decided to remain a third term, going to have almost a double score from the leftists in the 2027 elections, so I advise you to invest in Athens stock exchange.
Maybe simultaneous with the crash of the Chinese economy, which was predicted for 40 years now