The Great Unravelling: From Asset Bubbles To Monetary Reckoning

The American economy now teeters on the edge of a historic reckoning.
 

The signs are everywhere - in the monstrous expansion of debt, the hollowing out of the middle class, and the absurd valuations of a stock market priced for perfection in the face of deteriorating fundamentals. The coming economic reckoning isn’t speculative or emotional - it’s grounded in hard numbers and historical precedents. This isn’t hyperbole. It’s math.

THE DEBT SPIRAL AND LEVERAGE BUBBLE
Let’s begin with the debt. Total U.S. non-financial debt has soared to $77.9 trillion - a staggering 256% of GDP. That’s not just unsustainable; it’s terminal. For context, debt was $19.3 trillion (189% of GDP) during the NASDAQ bubble in 2000 and $33.7 trillion (234% of GDP) at the onset of the Global Financial Crisis. We’ve blown past both.

Margin debt has hit an all-time high of $1.06 trillion, up 33% year over year. Leveraged loan issuance reached a record $400 billion in Q3 2025, pushing the market past $2 trillion. Private credit, once a niche corner of finance, has exploded from $100 billion in 2007 to $1.7 trillion today. This is not growth. It’s leverage masquerading as prosperity.

The bond market is now a ticking time bomb. Interest payments on U.S. debt have breached $1 trillion annually. The debt-to-GDP ratio stands at 123%, with projections reaching 140% by 2029. The national debt is now 720% greater than annual federal revenue. These metrics point not to a soft landing, but to intractable stagflation.

THE MIDDLE CLASS IS BEING HOLLOWED OUT
A Goldman Sachs retirement survey found that 40% of Americans now live paycheck to paycheck—up from 31% in 1997. The top 0.01% of Americans control a share of national wealth that has quintupled since 1989. Credit card debt has crossed $1.3 trillion. Delinquencies are surging. The middle class is being sacrificed to preserve the illusion of prosperity. You cannot have a nation without a viable middle class.

ASSET INFLATION AND MARKET DELUSION
The stock market is priced for perfection. The S&P 500 trades at 21× projected earnings, despite just 9% earnings growth and negative GDP in Q1. The Wilshire 5000/GDP ratio hovers near 200%, far above its historical mean of ~73%. Total public and private equities now represent over 250% of GDP, with a normalised benchmark of ~55%.

The “Magnificent Seven” stocks - Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla - now account for over one-third of the S&P 500’s market cap, up from 12% a decade ago. AI investment drove 40% of GDP growth and 80% of stock market gains in 2025. This is the most concentrated market in history.

Housing is no better. The home price-to-income ratio has reached 5.0x, marking a new peak in the housing bubble. The average American cannot afford to buy a home, yet prices continue to climb—and are at their most expensive in history.

REAL INTEREST RATES AND MONETARY MALPRACTICE
The Real Fed Funds Rate has oscillated sharply, dipping into negative territory during inflation spikes and now hovering near neutral. Despite nominal rate hikes, real rates remain historically volatile, complicating capital allocation and retirement planning. The Fed is trapped in a policy loop where every cut accelerates the erosion of purchasing power and deepens the debt spiral.

Depository reserves have surged to historic highs, and the M2 money supply has ballooned to $22.2 trillion, more than doubling since 2010. The Fed’s balance sheet remains elevated above $6.59 trillion. This is not monetary policy. It’s monetary malpractice.

The Fed is no longer a steward of stability — it’s a hostage to its own balance sheet. Every rate cut now accelerates inflation. Every hike risks a debt spiral. This isn’t policy. It’s panic.

THE MONETARY ENDGAME: GOLD, SILVER AND THE COLLAPSE OF CONFIDENCE
This new cycle should be the most devastating to Americans’ purchasing power in history.

The Fed kicked off another unwarranted and dangerous rate-cutting cycle. The consequences will be catastrophic. When the next downturn arrives, the Fed will panic. They’ll slash rates to zero, accelerate QE, and flood the system with liquidity. But this time, it won’t work.

Why? Because the bond market will revolt. Long-term rates will spike as investors flee the dollar and demand real compensation for risk. That’s when the house of cards collapses. Markets don’t stay irrational forever. They just stay irrational longer than most can remain solvent. When the reversion comes, it will be violent.

Gold recently surged past $4,230 before consolidating at lower levels. Silver also shattered historic highs. These aren’t just asset moves - they are the market’s indictment of central bank fraud and monetary malpractice. Gold and silver are not just commodities. They are monetary truth in a world of fiscal lies.

India’s silver demand has triggered a global squeeze. Refiners ran dry during Diwali. Premiums spiked. Vaults emptied. This isn’t seasonal - it’s structural. The paper silver market - leveraged to absurdity - is being exposed as a house of cards. COMEX and LBMA are under siege. Confidence in fiat dies slowly, then all at once. That moment is approaching.

China and India are hoarding gold like it’s 1933. India’s reserves have crossed $100 billion. China is building four new gold hubs to move reserves out of Western jurisdictions. This is not diversification - it’s preparation. Foreign buyers, once reliable sources of demand for Treasuries, are now retreating. Japan, China, and Gulf states are reallocating to gold. The dollar isn’t being diversified away - it’s being abandoned.

INVESTMENT STRATEGY:
The 60/40 portfolio is dead. Passive asset gatherers continue to peddle this relic while ignoring the triple threat of credit, equity, and real estate bubbles. They are not managing risk. They are sleepwalking into systemic collapse. Passive investing will be exposed for what it is: a reckless abdication of risk management. Advisors who cling to it are not stewards - they are sleepwalkers.

Crypto’s October collapse wiped out $370 billion. Exchanges froze withdrawals. Stablecoins depegged, It was a digital bank run in real time. And it proves what I have long argued: crypto is not a currency; it’s a speculative asset class masquerading as monetary salvation. October’s crypto implosion wasn’t a correction — it was a revelation. Crypto isn’t monetary salvation, it’s speculative leverage with a tech wrapper.
Gold is a monetary truth in a world of fiscal lies. When the reconciliation arrives - and it will - hard assets will scream higher.

The classic 60% stocks, 40% bonds mix is dangerously outdated in today’s macroeconomic environment and could delay your retirement by decades. It is a relic of a bygone era, especially in the face of simultaneous bubbles in credit, real estate, and equities. Having a process that can profit during all macroeconomic conditions is the winning strategy. Liquidity is the true driver of asset prices — not backward-looking diversification models.
When central banks are distorting every asset class, you need a model that can anticipate and respond to the very distortions that passive portfolios ignore – that is precisely what my IDEC model is designed to do.

The IDEC model isn’t just a framework — it’s a firewall against systemic collapse. It tracks liquidity signals that passive portfolios ignore: reverse repo flows, volatility in the Treasury General Account, and real interest rate distortions. When liquidity dries up, markets don’t correct — they convulse, and you need to be invested in a model that will navigate through the reckoning.   EG