The US fiscal deficit will remain the primary determinant of economic growth and inflation for the next 3-10 years, with multiple attempts to reduce it failing to produce material or persistent results, creating a bifurcated economy and political turmoil as consequences.
The US running structural trade deficits is necessary for maintaining global reserve currency status, but forces the dollar to be structurally overvalued on a trade basis, creating a headwind against lower-margin manufacturing domestically.
Rebalancing the global reserve currency system requires the US to give up some percentage of its global reserve status, leading to currency devaluation and inflation as the dollar gradually loses dominance in the multipolar world.
Foreign capital inflows into US stocks and bonds prop up valuations and strengthen the dollar, benefiting American asset owners short-term but creating an imbalance that makes manufacturing uneconomical at scale.
A 10% blanket tariff on foreign investment in major asset classes like stocks and bonds could rebalance capital flows, with revenue used to permanently reduce American individual and business tax rates.
The US economy is insolvent with currency devaluation inevitable, requiring painful decisions like rebalancing Social Security and fixing the healthcare system to reduce costs, despite political unpopularity and potential riots.
The US is buying more depreciating assets than selling, financing this by selling stakes in valuable companies and government bonds, representing a poor long-term trade for the nation.
AI represents a massive productivity boon for white-collar work similar in scale to the manufacturing automation boom of the 80s and 90s combined with the offshoring boom, but primarily impacts services rather than manufacturing.
AI’s productivity growth can disguise monetary debasement, allowing more debasement before it becomes painful, but rewards will be lopsided, leading to polarization and uneven impacts on incomes.
AI’s productivity growth is constrained by hardware requirements that remain costly compared to human processing, and by regulatory and social political challenges in scaling infrastructure, leading to a long bleed rather than sudden shift.
AI will disrupt lower-skilled jobs first, with companies preferring to roboticize away dependable 9-5 positions, while skilled blue-collar work has a buffer due to complexity and context understanding required, like HVAC experts handling edge cases.
In the white-collar sphere, being fluid with AI agents and automating low-skill tasks is crucial to avoid being outcompeted, allowing experts to focus on high-impact, quality control work while offloading busy work to AI.
AI reduces friction in services like accounting, law, design, editing, and translation, making them cheaper but impacting incomes unevenly, with some workers quickly becoming proficient while others struggle, leading to heightened turnover and churn.
Lyn Alden’s three-pillar portfolio strategy for 2026: profitable equities (diverse, cash flow positive, AI resilient), cash equivalents (dry powder for selloffs), and hard assets (sound money, commodity producers) to protect against various market conditions.
The 2010s-2020s boom in asset-light, capex-light mega-cap tech companies with entrenched network effects is shifting to a more value-focused market with capex spending and increased competition, benefiting end users as AI companies remain unprofitable while their customers pay less than actual service costs.
The US federal government spends 120% of its revenue on just three categories: entitlements (70%), interest (30%), and defense (20%), leaving zero room for any other government functions and making cuts paradoxically increase the deficit due to leverage effects in the system.
In a debt-based monetary system, AI-driven deflation mathematically guarantees system collapse because it reduces the money supply and tax receipts while debt obligations remain fixed, creating an unrepayable sovereign debt scenario that forces governments to choose between printing money or defaulting.
If employment drops significantly due to AI, the US government faces a 25% shortfall in receipts (since over 50% of tax receipts are employment-related), while entitlements and interest already consume 25-35% of the budget, making it impossible to cover obligations without money printing.
AI is advancing with 10x annual improvement rates, creating deflationary pressures fundamentally incompatible with Western economies built on debt and inflation, as productivity gains without corresponding job creation trigger defaults, foreclosures, and rising delinquencies across mortgages, cars, and credit.
AI’s deflationary impact directly threatens the solvency of Western governments by simultaneously reducing employment-related tax receipts (the bedrock of government revenue) while their debt becomes unrepayable in real terms, forcing an inevitable choice between hyperinflation or default.
AI is expected to displace a significant number of jobs within 6-18 months (by February 2026), triggering a crisis similar to 2007 with Treasury market dysfunction, systemic leverage failures, and likely requiring a UBI response with unprecedented political and inflationary implications.
The divergence between US Treasury yields and Japanese Government Bond yields, combined with a weakening yen, signals Japan may face an emerging market-style debt crisis, with markets indicating the rate that destroys Japanese debt isn’t much higher than the US breaking point.
The convergence of a 100-year debt cycle, 50-60 year monetary system end, US-China power competition, and AI acceleration creates unprecedented tectonic shifts requiring individuals to maintain conservative balance sheets and prepare for extreme volatility.
The Jacob Fugger portfolio allocates 25% gold, 25% cash, 25% blue-chip dividend stocks, 25% productive real estate, rebalanced as events unfold, designed to survive both hyperinflation and Great Depression scenarios without financial destruction.
Individuals should avoid consumptive debt, focus on physical health, stay overweight in cash and gold, and prepare for a brief “whoosh down” in asset prices that creates opportunities for those with strong balance sheets to acquire cheap assets during the crisis.
The political challenges of AI-driven job displacement and UBI implementation are unprecedented, as governments struggle to maintain democracy and voting rights when a quorum of voters receive direct government payments, fundamentally altering the social contract.
Across history, when people’s meaningful roles are eliminated—whether blue-collar American workers, Soviet apparatchiks, or Plains Native Americans—they consistently turn to substance abuse and suicide, highlighting the fundamental human need for purpose beyond economic survival.
In an AI-driven abundance scenario with free products, corporations face a Schrödinger’s finance paradox: unable to repay debt while having no revenues, potentially causing stock markets to simultaneously approach zero and infinity as traditional financial metrics break down.
The only ways to stop a credit bubble are voluntary withdrawal (Austrian approach of stopping credit growth) or complete currency destruction through hyperinflation—the end destination is mathematically certain, but the path remains unpredictable with extreme volatility expected.
US launched strikes on Iran during active negotiations with Trump’s Jewish negotiators, comparable to the December 7th Pearl Harbor attack in terms of dishonorable timing and potential for catastrophic escalation toward regional conflict or World War III.
Iran’s missile/drone capabilities create severe economic asymmetry where cheap attacks systematically drain resources through expensive US interceptors, while Iran has been picking apart US bases across the Middle East since conflict started, surprising the Department of War.
Strait of Hormuz carries 20% of global oil supply through a narrow, difficult chokepoint where thousands of drones could target US destroyers, with Trump’s offer of insurance to ships and destroyer deployments risking major escalation despite US energy independence.
Attacks on AWS data centers used by Emirati banks caused banking outages in Dubai, while targeting the busiest airport demonstrates how digital infrastructure becomes military targets with missiles and drones disrupting critical services.
Disruption to oil, gas, and fertilizer flows through the Strait of Hormuz would cause price increases and supply disruptions affecting global standard of living, with potential involvement of Sunni Gulf states against Shia Iran widening regional conflict.
US involvement in Iran stems from 1979 revolution following 1953 regime overthrow for oil and installing the Shah, while US gives Israel $4B/year in military/economic aid and identical amount to Egypt to maintain Israel’s friendship.
US maintains 873 foreign bases with 800+ facilities globally and many in Middle East dominated by US, creating vulnerability by putting bases around numerous countries and making Israel the hill to die on.
US dollar’s purchasing power halved since 2020 indicating potential currency crisis, while average car age reached record 13 years with replacement costs now equaling what a house cost a generation ago.
Government spending ballooned to 40-60% of GDP in recent years from average 5% before World War I, driving inflation and declining standard of living for average person.
Gold and silver mining stocks represent only 1% of average portfolio, suggesting significant upside potential as general public and major fund managers haven’t invested heavily yet, making them underpriced relative to overall stock market.
2020 COVID lockdowns and vaccine campaigns, viewed as more dangerous than virus itself, desensitized public to crises, eliminating shared community experience needed to recognize and evaluate threats effectively.
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