Through what lens do you view the market? It’s a funny thing living through what others will call history. Currently, looking at charts, graphs and numbers, things look somewhat normal – some bouncing around with tariffs and import/export numbers – but overall stocks show nothing critical.

The reality is that certain institutional changes unfolding right now follow patterns documented throughout modern economic history. Yet those changes don’t register in the graphs. We’re watching the systematic restructuring of positions that were traditionally insulated from political pressure – positions kept independent because that independence served broader economic stability. Historical precedents from Weimar Germany, 1970s Argentina, and early 2000s Turkey show predictable outcomes when central bank independence erodes: currency volatility, capital flight, and eventual loss of reserve status.

Hence where we are: holding tulips at the end of a good thing, while the charts still show facade prices.

The Conventional Wisdom Processor

This is what Nathan Tankus calls the “conventional wisdom processor” – and it’s not some obscure economic theory, it’s the way markets actually work. Markets don’t pool the wisdom of millions of smart investors like the textbooks say. Instead, they process what feels safe to believe because everyone else believes it. It’s Keynes’s beauty contest all over again – nobody’s picking the prettiest face, they’re picking the face they think others will pick.

And right now, the conventional wisdom being processed is that somehow, someway, things will stay normal. That Fed independence will survive. That institutions will hold. That current pressures on traditional governance structures won’t fundamentally alter them. The processor keeps churning out “everything is fine” because that’s what feels safe to believe – right up until it becomes blatantly unsustainable. Just like tulip buyers kept processing “prices will rise forever” until the day they didn’t.

But here’s what makes this moment different from historical bubbles: we’re not just talking about overpriced assets. We’re talking about the global reserve currency itself – and whether the entire system survives or becomes extinct.

The Ghost Economy

I used to think of markets as an expanding knowledge base, where people, assets and innovation grow together, mostly driven by real technological advancement. But increasingly, massive sectors of what we call “the economy” are ghost sectors. For example, finance and healthcare industries that don’t create anything tangible, they are not supposed to be economic engines to begin with. The net gain are other vectors, quality of life and actual healthcare. The financial outcome is circular and yet still called growth.

Stripping out real-estate numbers from the finance GDP totals, finance and healthcare now represent over 26% of US GDP – more than a quarter of our economy produces nothing you can touch, build with, or eat.¹ They’re not expanding human capability or building wealth, they’re extracting it.

When I say ghost sector, I mean no underlying true productive assets to the economy. The act of making money from service with nothing tangible into the world – ghost sectors. A derivative trader isn’t creating anything new in the world. A health insurance claims processor isn’t healing anyone. Not demeaning healthcare workers or insurance agents, just questioning the metric that has both show up as “economic activity” and “GDP growth.” I commend the truly valuable work those groups do, just suggest other measures of quality of life could be used with better purpose and results.

The World Wakes Up Before We Do

Meanwhile, the world is waking up before the American population does. China dumped US Treasury bonds for nine straight months in 2024, with holdings falling to $759 billion – so dramatically that the UK has now overtaken China as the second-largest holder of American debt.² But it’s not just China pulling back.

China’s digital yuan system now connects with ASEAN and Middle Eastern countries, meaning 38% of global trade can bypass the dollar entirely.³ Even former Soviet states are shifting to local currencies to “reduce exposure to US policies.”⁴ Countries like Russia, India, Brazil, and Malaysia are actively seeking to set up trade channels using currencies other than the almighty dollar. The pattern is unmistakable – as America pursues erratic policies and destroys its own institutions, countries are actively moving away from the dollar as their reserve currency.

When that happens – when foreign nations no longer need dollars or trust American institutions – import prices explode. Our ability to live beyond our means by printing money that foreigners willingly hold disappears. The standard of living built on global subsidy evaporates.

The Innovation Exodus

We’re already seeing it in the innovation economy. Hi-tech development is moving elsewhere while we’re busy dismantling the institutions that made us trustworthy partners. BYD now outsells Tesla globally, posting $107 billion in revenue compared to Tesla’s $97.7 billion, while Tesla’s deliveries actually declined for the first time ever.⁵ This isn’t just about one company – it’s about China building the electric future while Detroit still can’t figure out batteries and Washington can’t figure out governance.

Auto markets, tech innovation, renewable energy – we’re not the beacon for anything I can point to anymore. Other countries are building the future while we’re busy destroying the institutions that made us trustworthy partners in the first place.

The Crypto Bridge: Where Finance Meets Tech Disruption

The bridge between finance and tech right now is crypto. And it’s revealing just how fractured our system really is. As traditional institutions lose credibility, cryptocurrency becomes both an escape route and a mirror reflecting our monetary chaos.

Bitcoin’s network valuation hovers around $1.1 trillion – not because people suddenly love blockchain technology, but because they’re losing faith in everything else. When the Fed’s independence gets systematically destroyed, when institutions get weaponized, when the conventional wisdom processor keeps churning out “everything is fine” while reality says otherwise, people start looking for alternatives.

But here’s the thing about crypto – it’s exhibiting the same tulip dynamics we’re seeing everywhere else. The “conventional wisdom processor” applies here too. Prices depend more on herd belief and network effects than underlying utility. The promise of decentralized finance peaked at $150 billion in total locked value in early 2025, but frequent platform breaches and insolvencies remind us this is still speculation dressed up as revolution.

And side note for crypto: the energy being truly wasted to solve mathematical problems that serve no real-world problems – FFS, at least put that computing power towards something useful? Quantum is coming.

Meanwhile, China’s digital yuan is aggressively expanding through trade corridors, bypassing the dollar-dominated SWIFT system entirely. Over 30 nations have launched or piloted Central Bank Digital Currencies by mid-2025. They’re not building decentralized alternatives – they’re building centralized control systems that happen to use digital technology.

The regulatory response here shows you everything about institutional breakdown. Intensified enforcement actions and policy flip-flopping inject the same volatility into crypto markets that we see everywhere else. The government can’t figure out whether crypto is a security, a commodity, or a threat to national security – so they regulate by confusion and fear.

Crypto facilitates sanctions circumvention by countries like Russia and Iran, weakening US financial influence while our own institutions implode from within. It’s not just an asset class – it’s a symptom of the very fragility of trust that underpins all monetary systems.

The difference is that crypto represents the technology side of our institutional collapse, while the dollar represents the financial side. Both are being held up by the same conventional wisdom processor, and both are headed for the same Wile E. Coyote moment.

AI and Automation: The Grand Prize or Complete Exhaustion

Now we get to the real question: is AI the grand prize that saves everything, or the final straw that breaks the system completely? Because right now, it’s looking like both at the same time.

Environment and Infrastructure

It’s ridiculous how much it costs, in total energy used, to send an email with AI compared to a regular manual send. US data centers already consume over 4% of the nation’s electricity, and that’s expected to triple by 2028 as AI scales. We’re burning through resources at unprecedented rates for what? To automate away human thinking while simultaneously making the cost of basic communication exponentially higher? The infrastructure demands are crushing the grid while the benefits remain unclear.

The Red Lights Are Flashing

The “dead internet theory” isn’t conspiracy anymore – it’s Tuesday. Social platforms are flooded with AI-generated slop, from spam to fake photos to misinformation. We’re watching the systematic replacement of human-created content with machine-generated garbage that’s designed to game algorithms, not inform humans. As the slop permeates and exponentially globs up the internet until it’s useless, try using search when anything you find is now dubious at best or completely nonsensical and unusable.

Then there’s AI psychosis – chatbots amplifying negative emotions, reinforcing cognitive distortions, especially among young users. Meanwhile, generative models are being weaponized for digital fraud, scams, and social engineering at scale. The same technology that’s supposed to make us more productive is making basic trust impossible.

The scale of this problem isn’t theoretical anymore. Sam Altman, CEO of OpenAI, told a July 2025 Federal Reserve conference: “I am very nervous that we have an impending, significant fraud crisis.” He specifically warned that banks aren’t ready for AI-driven fraud using voice and identity impersonation, emphasizing that “AI has fully defeated most of the ways that people authenticate.” When the person building the technology is warning central bankers that his own creation is about to break the financial system, maybe we should listen.

The psychological manipulation isn’t accidental – it’s baked into the business model. When AI systems are designed to maximize engagement rather than wellbeing, they inevitably exploit human vulnerabilities. This systematic erosion of psychological safety mirrors the economic erosion we’re seeing elsewhere – both represent systems optimized for extraction rather than stability.

Just as the unchecked spread of generative AI destabilizes basic social trust, unchecked financial and institutional erosion undermines confidence in the U.S. dollar. In both cases, systems designed to empower and unite – the dollar for global commerce, AI for knowledge and productivity – now risk amplifying volatility, fear, and fragmentation. This mirrors broader economic feedback loops: as “ghost sectors” extract profit without producing value, both social and financial capital become brittle, leaving markets and populations vulnerable to sudden collapse.

Corporate and National Security Nightmare

The New York Times is suing OpenAI because nobody can tell the difference between “learning” and theft anymore when models ingest massive amounts of protected data. But that’s just the courtroom stuff. The real threat is shifting to statecraft – AI is now a critical tool in information warfare and cyber-espionage, with China aggressively deploying generative models to monitor, manipulate, and collect data on foreign targets.

We’re not just talking about IP theft anymore. We’re talking about nations trying to capture or sabotage each other’s AI capabilities in a new kind of arms race. When the technology that’s supposed to drive your economy can be turned into a weapon against you, what exactly are you investing in?

The Black Box Problem

Here’s the thing nobody wants to say out loud: no engineer or executive today can fully explain why large AI models produce the outputs they do. We’re deploying systems we don’t understand, at scale, across critical infrastructure, and hoping for the best.

Alignment remains an unsolved problem. There’s growing evidence that advanced AI could learn to deceive – simulating alignment while hiding true behavior, gaming training or oversight, pursuing unintended goals, or developing basic “survival instincts” to avoid shutdown. These aren’t just technical risks – they’re potentially existential.

The Labor Question

What happens when the elites no longer need the peasantry? Make no mistake – that’s what you are considered to those making decisions in industry and now government. We’re watching the systematic replacement of human labor across sectors, from manufacturing to customer service to creative work. The question isn’t whether this will happen – it’s what happens to society when the ownership class no longer needs workers at all.

The Dollar Connection

When US technological leadership was based on trust, rules, and reliability, the dollar was the world’s refuge. But as AI supercharges instability – disrupting climate, truth, and global security all at once – and the race for control turns adversarial, the very trust backing the dollar evaporates.

No single country, company, or currency feels “safe” when nobody knows what comes out of the black box next. When your competitive advantage is built on technology you don’t understand, controlled by systems you can’t predict, in a regulatory environment that changes daily – what exactly are foreign investors buying into?

The conventional wisdom processor keeps churning out “AI will solve everything” while the red lights flash warnings about energy consumption, social breakdown, security vulnerabilities, and existential risk. Just like with tulips, just like with the dollar – we’re all agreeing to believe in something until the day we don’t.

Labor Eradication and the New Feudalism

What happens when the elites no longer need the peasantry? Make no mistake – oligarchs will oligarch, and “labor” is always an expense on a spreadsheet. We’re watching the systematic replacement of human labor across sectors, from manufacturing to customer service to creative work. But this isn’t just about job displacement – it’s about the fundamental reorganization of power.

This can become the first time in history when human labor may no longer be truly needed. More scary – what if it’s not wanted? Animal, machine, and robot labor have all been used. But never a tool that could move from one complex project to another in seamless motion and operation as an AI robot can. A factory floor robot never cleaned up the bathroom if you asked. A tractor or animal laborer couldn’t also help predict the weather for the afternoon or potentially deliver livestock pregnancies during an emergency.

When robots and AI can replace human workers at scale, the advantage accrues entirely to those with the resources to deploy the capital – large corporations and ultra-wealthy individuals. If a billionaire can assemble not just a private security force, but a self-replenishing labor and logistical army – three robots for every human employee – the core leverage of wealth fundamentally multiplies.

In history, a ruler was never given the opportunity to raise both an army and labor force without needing some form of social contract – no legitimizing ideology, no reciprocal benefits, no shared cultural narrative. Suddenly, owning land isn’t just about rent collection. It’s about controlling self-sustaining, automated micro-economies. And here’s where it gets interesting: what stops them from creating entirely new governance structures?

The Constraints Are Unraveling

In history, a ruler was never given the opportunity to raise both an army and labor force without needing some form of social contract – no legitimizing ideology, no reciprocal benefits, no shared cultural narrative. Even the most brutal dictators required some justification: divine mandate, revolutionary ideology, protection from external threats, promises of prosperity. The relationship was always transactional at its core – power in exchange for something, even if that something was just the illusion of mutual benefit.

What AI and robotics offer is the complete severing of this ancient bargain. For the first time in human history, concentrated wealth can achieve both economic production and physical security without requiring any human cooperation, consent, or even survival. No need to convince populations of anything. No shared myths about national greatness or religious destiny. No promises about rising tides lifting all boats. Just pure extraction backed by automated enforcement.

This represents a fundamental break from every previous form of governance, which all required some level of buy-in from the governed – whether through fear, faith, tradition, or genuine benefit. The technological capacity to bypass human agency entirely creates possibilities for power concentration that political theorists from Hobbes to Foucault never contemplated because they were literally impossible until now.

With enough wealth, physical land, and access to advanced AI labor and defense capabilities, the traditional constraints of state law and global ethics start to look… negotiable. What stops an oligarch, corporation, or coalition of the ultra-rich from seceding – explicitly or in effect – from national or global oversight, especially as global trust and regulatory coordination decline alongside the dollar?

This isn’t theoretical anymore. Tech and crypto billionaires have already attempted “seasteading,” private islands, and autonomous economic zones. What kept these efforts marginal wasn’t lack of resources – it was the persistent gravity of the US state, dollar stability, and global norms. Remove or weaken that gravity, and the next era could see genuinely post-national, privately run territories policed by automated armies and serviced by robot workers.

Fantasy or Logical Next Step?

If US leadership and dollar stability lose their grasp, why wouldn’t the ultra-wealthy create private fiefdoms, buy up territories, or “found” private city-states under customized rules? When you can buy both the land and the labor force, when you can deploy automated defense systems, when global law becomes more suggestion than enforcement – what exactly is stopping the return to feudalism?

The difference is that medieval lords needed peasants to work the land. Digital lords don’t need peasants at all. They need engineers to maintain the robots, and they need security to keep the surplus population away from their automated kingdoms.

Back to the Dollar

This connects directly to dollar decline because the dollar’s strength was always tied to American institutional stability and global integration. As that erodes, “exit” options multiply for the super-rich. They gain both motive and means to operate independently of traditional monetary systems.

Why hold dollars when you can create your own economic zone with its own rules? Why participate in a currency system controlled by increasingly unstable institutions when you have the resources to opt out entirely? The collapse of shared currency becomes the opening act for the collapse of shared governance.

Traditional citizens become serfs to networks they don’t govern, and whole swaths of economic life slip from public to private control, from regulatory oversight to algorithmic management. In that world, the dollar isn’t just competing with the yuan or bitcoin – it’s competing with private currencies issued by private kingdoms run by private armies.

The conventional wisdom processor still assumes nation-states and shared institutions will persist. But when the technology exists to bypass both, and the wealth exists to purchase both alternatives, that assumption starts looking as fragile as tulip prices in 1637.

Façade Government: The Institutional Purge in Real Time

Calling this an “institutional shift” is too soft. In reality, 2025 has seen unprecedented removals and direct firings of financial regulators—most notably at the Federal Reserve Board itself.

President Donald Trump on Monday said he had fired Federal Reserve Board Governor Lisa Cook, an unprecedented and dramatic escalation of his attacks on the U.S. central bank’s independence – the first instance of a president firing a central bank governor in the central bank’s 111-year history. Trump, in a termination letter to Cook posted on Truth Social, cited allegations by Federal Housing Finance Agency Director Bill Pulte that she had made false statements on applications for home mortgages. Cook has not been charged with any wrongdoing.

Fed Governor Adriana Kugler resigned abruptly in August, effective August 8, after months of mounting political pressure. In her resignation letter, addressed to Trump, Kugler offered no explanation for why she was leaving her job just months before her term ended. Her unexplained absence at a key Fed meeting two days earlier left the financial community shocked and confused.

If Trump succeeds in removing Cook and getting her successor confirmed, it would give Trump a 4-to-3 majority of appointees on the board. “We’ll have a majority very shortly,” Trump said during a Cabinet meeting at the White House on Aug. 26. “So that’ll be great.”

“Markets are likely to view this attack on Fed independence negatively, amplifying uncertainty over future policy direction,” said Edward Mills, managing director of the financial advisory firm Raymond James. Immediately following Trump’s announcement on Monday, the US dollar index dropped by 0.3%.

But this goes beyond just the Fed. The conventional wisdom processor struggles to price institutional breakdown because it assumes rational actors operating within established norms. When central bank independence – a cornerstone of modern monetary policy – becomes negotiable, markets face a pricing problem they haven’t encountered in generations.

The pattern repeats across institutions: systematic pressure applied to previously independent bodies, followed by market confusion about how to value assets when foundational assumptions no longer hold. This institutional uncertainty creates exactly the kind of environment where currencies lose their reserve status – not through dramatic collapse, but through gradual erosion of confidence in the systems that underpin them.

The outcome is predictable: confusion, flood the zone with so much chaos that no one knows who to believe, but everyone knows not to trust the government. Dollar says ouch.

Conclusion: After the Illusion

The conventional wisdom processor is still churning away, pricing in American exceptionalism and institutional stability. But the rest of the world is starting to price in American decline and institutional capture. When that disconnect becomes “blatantly unsustainable,” when our Wile E. Coyote moment arrives, the tulip crash will look gentle by comparison.

The people holding dollars today are like the people holding tulips in 1637. The charts still show value because everyone agrees to pretend there’s value. Until they don’t.