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

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

— Thorsten Polleit

Turn Your Images On

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

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.

Turn Your Images On

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.

Turn Your Images On

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

Turn Your Images On

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.

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

As copper flowed into the United States, LME inventories thinned and backwardation steepened. Higher U.S. pricing, tariff protection, and lower political risk made American warehouses the most attractive destination for metal. Each new shipment strengthened the spread.

The arbitrage, once triggered, became self-reinforcing. Traders were not participating in theory; they were responding to the physical incentives in front of them.

The United States had quietly become the marginal buyer of the world’s most important industrial metal. China, long the gravitational center of global copper demand, found itself on the outside.

Under the frost-crusted shrubs, the bears are sniffing around for scraps of bloody meat.

They smell the subtle rot of credit stress, central-bank desperation, and debt that’s beginning to steam in the cold. They’re not charging — not yet. But they’re present. Watching. Testing the doors.

Retail investors, last in line, await the Fed’s final announcement of the year on Wednesday. Then the central planners of the world get their turn: the Bank of England, Bank of Japan, and the European Central Bank.

Treasuries just suffered their worst week since June. And in Japan — the quiet godfather of global liquidity — something fundamental is breaking.

Silver continues its blistering ascent. Gold and bitcoin have settled in at $4,200 and $92,000, respectively.

It’s absurd, really, for any politician to be talking about “affordability.”

The data is clear. If higher prices are your goal, let the government “fix” them.

Mandates, paperwork, and busybodies telling you what you can and can’t do – it’s not a surprise why costs add up.

In contrast, if you want lower prices, do nothing– zilch. Let the market work.

For 30 years, Japan was the land where interest rates went to die.

The Bank of Japan used yield-curve control to keep long-term rates sedated. Traders joked that shorting Japanese bonds was the “widow-maker trade.”

Not anymore.

On November 20, 2025, everything changed. Quietly, but decisively.

The Bank of Japan finally pulled the plug on decades of easy money. Negative rates were removed. Yield-curve control was abandoned. The policy rate was lifted to a 17-year high.

Suddenly, global markets had to reprice something they had ignored for years.

What happens when the world’s largest creditor nation stops exporting cheap capital and starts pulling it back home?

The answer came fast. Bond yields in Europe and the United States began climbing. The Japanese yen strengthened sharply. Wall Street faltered.