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Beneath the Surface

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


Autonomous Weapons

October 29, 2025 • John Robb

In the past, weapon systems took decades to build and changed slowly. Autonomy changes this. For example, new capabilities developed by field tests or simulation (testing scenarios in full physics simulators depicting actual environments) could be downloaded to existing weapon systems, making it possible to upgrade a weapon system significantly without any meaningful hardware changes. A process of improvement that used to take many years would shrink to weeks and, in time, days.

Autonomous Weapons
The Great Repricing of Power

October 29, 2025 • Addison Wiggin

Markets heard what they wanted. NVIDIA’s stock surged premarket on news that Trump would discuss the company’s Blackwell AI chip with Xi, pushing it to an unprecedented $5 trillion valuation.

Meanwhile, China quietly bought its first cargoes of U.S. soybeans this season — a symbolic gesture that reminded traders that diplomacy still runs on trade.

“It’s not détente,” wrote  Bloomberg’s Jennifer Welch this morning, “It is a dealmaking with a timer.” Wall Street is ambivalent on peace, but they do like profits.

In the background, China’s biotech sector continues its ethically murky sprint forward — this week, reports surfaced of Chinese scientists creating monkeys engineered to exhibit schizophrenia and autism.

The Great Repricing of Power
About Yesterday’s Rally

October 29, 2025 • Addison Wiggin

A high concentration of capital in a few stocks at the top ranks high among the features we detailed in Anatomy of a Stock Market Bubble.  

On days like yesterday, headlines urge investors to buy. However, they also underscore the fragility of this terrifying bull market: just a handful of names can make the difference between a big up day and a big down day.

About Yesterday’s Rally
American Autonomy

October 28, 2025 • John Robb

America’s role in the world isn’t that of the world’s policeman (a temporary post-World War II role foisted upon the U.S. due to the Cold War) or as the destination of immigrants (for most of the 20th century, when we saw the most significant increases in individual incomes and quality of life, the U.S. didn’t accept many immigrants). Instead, the role the U.S. has played throughout its existence is as the world’s leader in the production, adoption, and socioeconomic integration of new technologies. We figured out how to do it successfully first, and the world followed.

American Autonomy