Portrait of a Crack-Up Boom,
in Four Charts “Hyperinflation is perhaps the darkest side of a government fiat money regime.”
— Thorsten Polleit 
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.  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.  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.  Gold, another popular destination for excess cash, is up by $1,000/oz in just the past year.  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 Continued Below... 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.
A special note to paid-up Grey Swan members: This week’s Grey Swan Live! will air Friday, August 15, at 11 a.m. ET — not our usual Thursday slot.
We’re in the thick of some groundbreaking research and pulling together VIP access for select folks outside the Grey Swan orbit. But paid-up Fraternity members get the early look Friday morning.
It’s a fitting date. August 15 marks 54 years since Nixon took the U.S. off the gold standard, dismantling the Bretton Woods exchange rate system. That single move flipped the global monetary order from gold-backed stability to one backed only by the “full faith and credit” of the U.S. government — and put more political heat than ever on the Federal Reserve’s “dual mandate” to tame inflation and maintain full employment.
Back in 1971, markets initially cheered Nixon’s decision — the Dow popped nearly 4% the next day. But the party didn’t last. Within a decade, inflation was running into the double digits, gold had rocketed 15-fold, and the Fed was forced into the brutal rate hikes of the Volcker era to restore credibility.
That same dual mandate is why Jerome Powell is squarely in Trump’s sights today. We have reason to believe the outlines of a new Fed regime are already forming… and we’ll be unpacking the details live.
For now, mark your calendar or register for the sneak peek Grey Swan Live! Here. Sneak Peek Grey Swan Live!
Friday, August 15, 2025
11am ET Your thoughts? Please send them here: addison@greyswanfraternity.com
How did we get here? Find out in these riveting reads: Demise of the Dollar, Financial Reckoning Day, and Empire of Debt — all three books are now available in their third post-pandemic editions. You might enjoy one or all three.
 (Or… simply pre-order Empire of Debt: We Came, We Saw, We Borrowed, now available at Amazon and Barnes & Noble or if you prefer one of these sites: Bookshop.org, Books-A-Million or Target.)
Please send your comments, reactions, opprobrium, vitriol and praise to: feedback@greyswanfraternity.com |
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