War & The U.S. Economy. Dollar Down, Gold and Oil Up.
See our math at end for calculating real economic productivity. The U.S. economy is shrinking, not growing.
I have not written an economic piece in sometime because the U.S. has been on the wrong fiscal and monetary path since 2008, but especially since 2020 when fiscal and monetary policy concluded every facet of the U.S. economy needed to be bailed out. This is incredibly frustrating for me to discuss, because it is all fixable.
U.S. fiscal and monetary policy in 2020 jointly decided that it was somehow morally wrong for equity investors, debt holders and bank depositors to absorb risk, to pretend as if Adam Smith never wrote The Wealth of Nations.
Here’s the easy call: The U.S. Dollar will continue to weaken versus the price of goods and services and real assets in because the U.S. is hell bent on growing the money supply in perpetuity.
Why the money supply grows: the money supply is supposed to grow modestly as banks extend credit to help producers drive economic growth by growing production.
The problem is the U.S. produces little other than Financial Services and Software at scale.
These days Financial Services means Private Credit. PE shops take on boat loads of debt to buy companies, pay themselves a huge dividend when the acquisition closes (before the PE firm has lifted a finger), and then cut heads to service the debt that was used to pay the dividend and pay off down other debt, but that is not used to invest in portfolio companies. Go figure. That equates to zero economic value added. No production, no productivity growth.
Banks are still operating under a zero percent reserve requirement. The Fed took it down to zero in April 2020, so naturally bankers are extending credit they should not be. Talk about moral hazard. Defaults are at their highest levels since 2011. When the big default wave ripples through housing, or we have the next banking crisis, the Fed will be ready in conjunction will the fiscal side to pump $Trillions into the economy. Those Trillions of Dollars are largely printed money. Treasury will issue the debt, but the Fed will be the big buyer, meaning it will have to print, thereby growing the money supply and further devaluing the Dollar.
Trump got rolled by the DoD, so now we have multiple wars taking place. DoD is of course controlled by the private contractors: Lockheed, Northrop, Boeing, RTX. They are the war mongers. This effort will be funded by more debt issuance and money printing, further devaluing the Dollar. Gold on balance will continue to climb until such time the U.S. goes back on the Gold Standard. But instead Treasury spends money it does not have on a stupid, foolish crypto reserve, bailing out David Sacks and company. B.S.!
We built this matrix back in May 2025, seems especailly relevant now: Iran-Israel Conflict: Domestic Attack Risk Assessment.
Meanwhile oil is marching toward $100+ per barrel.
M1 is up 620% over the past 10 years, yet Nominal GDP is only up 71% over the same period. There’s your Real GDP equation = Change in NGDP less Change in M1 over the same period. Enormous real economic shrinkage - not growth.
