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Daily Missive

Portrait of a Crack-Up Boom, in Four Charts

Loading ...John Rubino

August 12, 2025 • 2 minute, 55 second read


crack up boom

Portrait of a Crack-Up Boom, in Four Charts

“Hyperinflation is perhaps the darkest side of a government fiat money regime.”

— Thorsten Polleit

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The market breakthrough is occurring just as investors look to get out of the dollar.

August 12, 2025 — August 12, 2025 –The Austrian school of economics (the only good school of economics) has a concept called the “crack-up boom” that perfectly explains today’s world. Here’s an AI-generated summary:

A crack-up boom is an economic crisis characterized by the collapse of a monetary system due to sustained, expansionary monetary policy leading to hyperinflation and a complete loss of trust in the currency. This phenomenon occurs when the public becomes convinced that the money supply will continue to increase indefinitely, causing the purchasing power of money to fall relentlessly. As a result, individuals rush to exchange their cash for tangible goods, known as a “flight into real goods” or “Katastrophenhausse” in German, to preserve value, drastically reducing the demand for money.

This shift creates a vicious cycle: as people abandon the currency, the demand for money collapses, accelerating price increases and further eroding the currency’s value. The monetary system breaks down, with money failing to function as a medium of exchange, unit of account, store of value, or standard of deferred payment. This breakdown can lead to a return to barter or the adoption of alternative currencies. The process is a key component of the Austrian business cycle theory, where the central bank’s attempt to sustain an artificial boom by continuously expanding credit ultimately triggers a fundamental economic collapse.

US government debt was $20 trillion in 2018.

Today, it’s maybe two years away from $40 trillion. In other words, it took us 250 years to borrow the first $20 trillion, and only a decade to borrow the second $20 trillion.

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Soaring government debt requires commensurately aggressive currency creation. The widely followed M2 money supply, after a brief post-pandemic pause, is now back on its long-term trajectory. It hit an all-time high this year.

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All this cash has to go somewhere, and a big part of it has flowed into tech stocks. Compare today’s NASDAQ index with its bubble peak in 1999. The dot-coms were apparently just a warm-up.

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Gold, another popular destination for excess cash, is up by $1,000/oz in just the past year.

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Now here’s where the “crack-up” part of the theory morphs from “inferred” to “guaranteed”: The US is preparing to shift its borrowing from longer-dated notes and bonds to short-dated bills.

The plan: Load up on short-term paper, and then lower short-term interest rates to zero or below. This will cut (and potentially eliminate) the government’s interest expense, which in turn will lower the deficit going forward.

But the cost will be a tsunami of currency creation, which will turbo-charge the stampede of capital out of financial assets and into tech stocks, gold, and other traditional inflation hedges. Hence, the crack-up boom. Keep stacking.

John Rubino
Substack & Grey Swan Investment Fraternity

P.S. from Addison: The economist Ludwig von Mises is credited with being the first to use the term Katastrophenhausse,  or “catastrophic boom.”

It’s better known in English as “crack-up boom”: when credit expansion leads to hyperinflation and people abandon the monetary system as a result.

Spoiler alert: the sharp rise in the global money supply plays a starring role in the prospect for a crack-up boom – as well as our gold forecast. With the dollar intrinsically structured to lose purchasing power, you owe it to yourself and your family to protect your money.

Your thoughts? Please send them here: addison@greyswanfraternity.com


The Ghost of Bastiat

October 6, 2025 • Addison Wiggin

By then the receipts on my desk had arranged themselves into a sort of chorus. I heard, faintly, another refrain—one from Kentucky. In the first days of the shutdown, Senator Rand Paul stood alone among Republicans and voted against his party’s stopgap, telling interviewers that the numbers “don’t add up” and that he would not sign on to another year that piles $2 trillion onto the debt.

That, I realized, is what the tariff story shares with the broader budget theater: the habit of calling a tax something else, of shifting burdens into the fog and then celebrating the silhouette as victory. Even the vote tally made the point: he was the only Republican “no,” a lonely arithmetic lesson in a crowded room.

The Ghost of Bastiat
The Dollar’s Long Goodbye

October 6, 2025 • Addison Wiggin

Senator Rand Paul, (R. KY), who was the sole Republican to vote against a continuing resolution, seems to care about the actual finances of the government. “I would never vote for a bill that added $2 trillion in national debt,” Paul said in various interviews over the weekend.

The $2 trillion he’s referring to is the lesser of two proposals made by the national parties… and would accrue during this next fiscal year.

Oy.

We liked what Liz Wolfe at Reason wrote on Friday, so we’ll repeat it here: “One of the dirty little secrets of every shutdown is that everything remains mostly fine. Private markets could easily replace many federal functions.”

It’s a strange kind of confidence — one where Wall Street soars while Washington goes dark.

The Dollar’s Long Goodbye
A Vote For The Yen Carry Trade

October 6, 2025 • Addison Wiggin

The Liberal Democratic Party victory has sent Japanese stocks soaring, as party President Sanae Takaichi – now set to become Japan’s first female Prime Minister – is a proponent of stimulus spending, and a China hawk. The electoral win is a vote to keep the yen carry trade alive… and well.

The “yen carry trade” is a currency trading strategy. By borrowing Japanese yen at low interest rates and investing in higher-yielding assets, investors have profited from the interest rate differential. Yen carry trades have played a huge role in global liquidity for decades.

Frankly, we’re disappointed — not because of the carry trade but because the crowd got this one so wrong!

A Vote For The Yen Carry Trade
Beware: The Permanent Underclass

October 3, 2025 • Addison Wiggin

Back in the Global Financial Crisis (2008), we recall mass layoffs were driving desperation.

Today, unemployment is relatively low, if climbing.

Affordability is much more of an issue. Food, rent, healthcare, and childcare are all rising faster than wages. Households aren’t jobless; they’re stretched. Job “quits” are at crisis-level lows.

In addition to the top 10% of earners, consumer spending is still strong. Not necessarily because of prosperity, but because households are taking extra shifts, hustling gigs, working late into the night, and using credit cards. The trends hold up demand but hollow out savings.

It’s the quiet form of financial repression. In an era of fiscal dominance, savers see easy returns clipped, workers stretch hours just to stay even, and wealth slips upward into assets while daily life grows harder to afford.

Beware: The Permanent Underclass