Catastrophic Boom

A couple weeks ago I tweeted about that “Duct-Taped Banana” art, that sold on auction at Sotheby’s for $6.2 million:

The punch-line was that a memecoin based on the duct-taped Banana artwork had itself reached a market cap of $144 million (and still holding steady at $146M as I type this nearly two weeks later).

The art piece (dubbed “Comedian”) was bought by Justin Sun, Tron founder, owner of the Poloniex exchange, owner of Rainberry (who invented BitTorrent) and all-around “crypto billionaire”.

On Friday, November 29th, Sun ate the banana.

We are witnessing a flight out of fiat, accompanied by a distinct twinge of “financial nihilism”, a phrase once coined by podcaster Demetri Kofinas.

While there may be no name for the global monetary system on which the world runs today, Russell Napier’s “Non-System” if you will, there is a term for the terminal phase we are in, and the entire world is in it.

Once again, it comes from the Germans – who gave us “Notgeld” (“emergency money”), from the Weimar chapter in history when cities and towns issued their own scrip in an effort to escape the ravages of hyper-inflation; this one is “Katastrophenhausse” – literally “Catastrophic boom”.

It was introduced into the lexicon by Ludwig Von Mises and has been popularized as “crack-up boom”.

The key characteristic of a crack-up boom is that people lose faith in money itself and scramble to convert their money into alternative assets – not because they need those assets, but because they want to get out of the currency.

This creates a self-reinforcing cycle where the increased spending drives prices higher, which causes more people to spend their money faster, driving prices even higher.

You may remember my (horrific) thought experiment analogy of the “burning balloon”:

A group of tourists embark for a hot air balloon tour in India (as I originally heard the story); just after the mooring ropes are released, the pilot sees that the canopy has caught fire and he, realizing the stakes, immediately jumps out of the gondola to safety.

However, this reduces the weight of the balloon, so its rise accelerates. The passengers who grasp what has just happened immediately follow the pilot, deftly jumping overboard while the balloon is still close enough to the ground to do so… however, that reinforces the feedback loop: the even lighter ballon is now rising faster – the lucky laggards who are next to figure it out abandon ship while they still can, which further accelerates the ascent of the fireball; however soon it will be too high to safely jump, and doom is assured for all those left aboard who did not act quickly enough.

Those are the dynamics of a hyperinflation.

Mises described it as a situation where the “masses wake up” to realize inflation isn’t temporary but rather that the currency is doomed to keep losing value. At that point there’s a rush to convert money into goods, any goods – what he called a “flight into real values.”

In our era, a banana meme coin may not, objectively, be something with real value – but if it’s going up faster than the currency is disintegrating, then it’s a winning trade, if you can time it right (I’ve had no position in BAN and wouldn’t recommend it).

The interesting thing about crack-up booms is that on the surface they can look like prosperity – asset prices soar, there’s lots of activity and spending, and money velocity is robust – but it’s actually the last gasps of a currency system.

What makes it tricky is that as the currency collapses against myriad assets (some faster than others) people think they’re bubbles, but there’s a cheat code that can help you tell the difference:

What’s particularly relevant to our Bitcoin as a “Monetary Regime Change” thesis is that crack-up booms tend to happen in the later stages of a fiat currency decline – which is where we believe we are in the current global monetary system. The rush into Bitcoin, precious metals and other crypto assets is the same “flight into real values” of our era that Mises described in his.

A couple weeks ago I tweeted about that “Duct-Taped Banana” art, that sold on auction at Sotheby’s for $6.2 million:

The art piece (dubbed “Comedian”) was bought by Justin Sun, Tron founder, owner of the Poloniex exchange, owner of Rainberry (who invented BitTorrent) and all-around “crypto billionaire”.

On Friday, November 29th, Sun ate the banana.

We are witnessing a flight out of fiat, accompanied by a distinct twinge of “financial nihilism”, a phrase once coined by podcaster Demetri Kofinas.

It was introduced into the lexicon by Ludwig Von Mises and has been popularized as “crack-up boom”.

This creates a self-reinforcing cycle where the increased spending drives prices higher, which causes more people to spend their money faster, driving prices even higher.

You may remember my (horrific) thought experiment analogy of the “burning balloon”:

Those are the dynamics of a hyperinflation.

The genius of the American experiment is that it allows for course correction — but only if we remember our role. Not as subjects, but as stewards.

Your role, good sir or wise gentle lady, is to continue doing what you’ve always done: managing your affairs with clear eyes and a steady hand, educating those who’ll carry the torch, and resisting the ever-present temptation to comply just for comfort’s sake.

Yes, the government will grow. Yes, the financial world may turn inside out before breakfast — possibly before your second cup of coffee. But you still have the right to think. To choose. To invest in your own way.

For now, the mixed economic data means stocks will likely trend higher, until there’s a crisis. And when there is a crisis, the Fed will finally make its move and aggressively cut rates.

And, for now, bond yields are still near their highest level in 15 years. Bond yields, even on U.S. Treasury bonds, are over the rate of inflation.

In short, it’s not a bad time to lock in bond yields now – which will go lower during a crisis, pushing bond prices higher. And in a crisis, today’s high-flying stocks, driven by retail investors with a fear of missing out – could easily get crushed.

Markets are humming, policy dazzles, but beneath the gloss — tech booms, liquidity surges, digital currencies — the very foundations of money, governance, and investor sentiment are cracking, realigning, even smoldering.

The post-World War II Pax Americana isn’t evolving; it’s being dismantled rather quickly.

What’s emerging is accompanied by a load of distraction and showmanship. So it’s important to focus on the actual events taking place right now that are going to affect your portfolio this year.

And, we can’t overstate this, the changes that are actually happening right now to your money.

Today, digital dollars masquerade as cash, tariffs are cloaked as protection, AI layoffs spun as productivity, private assets packaged as democratized. And yet, none of it matters if the final pillar — confidence — crumbles.

When belief falters, no trumpet of “seismic event” grants you shelter.

Private equity tends to perform better than the stock market, provided you do so over time.

Private credit, a newer asset class but a rapidly growing one, also shows strong returns, as well as relatively high current income.

And if you have a retirement account, chances are you’re willing to think long-term.

Win-win, right? Not necessarily.

First, these new funds would also come with an incentive structure similar to investing in a hedge fund. That includes a higher fee than a market index ETF – think 2% compared to 0.1% (or less).

Plus, many of these funds have a hurdle rate attached to them as well. Once they clear 5% returns – which, with private credit, can be easily cleared by making deals with cash returns over 5% – additional incentive fees may kick in.