They each had $100,000 to invest.

They had much in common.

Both were 45.

Both had spent twenty years in steady jobs, saving more than they spent each year.

Both read the financial news, distrusted gurus, and had a long-term outlook for their investments.

But that January morning, their paths diverged.

Investor A lent his money to the government.

He put it into 10-year Treasury notes — loans to the government that pay a fixed rate of interest every year for 10 years, and then hand your money back.

His investment paid about 6.7% a year, which he reinvested automatically.

Investor B bought the stock market instead.

His $100K went into an S&P 500 index fund. He, too, reinvested his dividends.

Ten years later, these two investors were in very different positions.

Investor A’s $100,000 had grown to roughly $180,000.

But investor B only had about $91,000.

The scorecard:

So what made the difference?

It wasn't intelligence.

It wasn't discipline either. Both men were equally patient.

Something else is responsible for the huge delta between our two investors.

And that something is what this week’s Benchmark is about.

The price of risk

Investor A lent to the government and collected a fixed rate of interest. Stable, predictable.

Investor B invested in stocks in the hope that they’d outperform fixed income returns. Less stable, but more potential upside.

Investor A's 6.7% in January 2000 looked like a good deal.

But it was actually significantly lower than what he could have earned had he bought his bonds earlier.

The 10-year US Treasury yield peaked in 1981 at an all-time high of 15.3%.

This meant an investor could collect more than $15,000 a year on a $100,000 investment — more than $1,250 a month.

From there, it fell for almost 40 years. Call it the falling-rate regime.

So why did Investor A choose bonds?

You have to look at what each option was offering him that January morning.

The Treasury note paid 6.7%, guaranteed by the US government, for 10 years.

Inflation was running at 2.7%. So even after inflation, he was locking in almost 4% a year, no risk.

But the stock market was a different story as 2000 began.

The dot-com boom had pushed share prices so high that the S&P 500 traded at 29 times its companies' annual profits.

So every $100 invested in the index bought about $3.44 of yearly earnings.

Whereas the bond paid almost double that.

By a longer measure — Yale economist Robert Shiller's cyclically adjusted P/E ratio, which compares prices with ten years of average profits — stocks had never been more expensive.

The ratio peaked at 44.2 in December 1999, a record that still stands.

So investor A wasn't being timid, necessarily. He was being offered almost twice the return, with none of the risk.

What he couldn't know was that rates would keep falling for another twenty years.

His notes would hold up just fine, but every time one matured, he'd be reinvesting at a lower rate (hence his annualized return being lower than the yield on his initial investment).

Investor B simply bought the most expensive stock market in history, and had the not-great fortune to get wrecked by two massive crashes in a decade.

But what happens if these two investors start in 2007, instead of 2000?

Round two: 2007

In June 2007, right before the global financial crisis, our two investors start again with $100,000 each.

The 10-year pays about 5.1%. Investor A locks it in.

Investor B buys the S&P 500.

Within two years, his portfolio has lost more than half its value.

But as in the first race, both men hold on, reinvesting their investment income.

Then the Federal Reserve steps in. To stop the financial system collapsing, it cuts interest rates to almost zero in December 2008 and holds them there for seven years. Bond yields fall.

With safe assets paying next to nothing, money goes looking for a return elsewhere, and much of it flows back into the stock market.

By June 2017, Investor B's $100,000 is worth roughly $199,000. Investor A, on the other hand, has about $157,000.

The scorecard this time:

Investor B wins the second race. But look at what he went through, and at what saved him.

Both races ran inside the falling-rate regime.

In the 2000 race, falling rates couldn't make up for buying at the top of a bubble.

But in the 2007 race, they arrived just in time.

In both cases, bonds paid between 5.1% and 6.7% at the start.

Stocks delivered one lost decade and one 99% return (via a generational crash).

Dawn of the next high-rate era?

Around 2020, the 40-year interest rate decline ended.

It ended with inflation.

As the world reopened after the pandemic, prices rose faster than they had in four decades, and US inflation peaked at 9.1% in June 2022.

The Federal Reserve responded by lifting interest rates from almost zero to above 5% in little more than a year, the fastest rise since the early 1980s.

Bond yields followed. The 10-year, which had paid 0.6% in the summer of 2020, was back above 4% by late 2022.

For a while, it looked as though things might settle there. But they haven't.

This year, war in the Middle East has pushed oil back above $100 a barrel, and inflation is back up with it.

Just this month, the Fed raised rates for the first time in three years.

Washington keeps borrowing heavily to fund its deficits, and technology companies are issuing huge amounts of debt to pay for the AI buildout.

Since buying a bond is lending money, when there are more bonds for sale than lenders who want them, borrowers have to offer a higher interest rate to compete.

Last week, the yield on the 10-year US Treasury briefly reached 5.23%, the highest since June 2007.

The average 30-year fixed US mortgage jumped to 7.45%, its highest in more than two years.

Zoom out, and the last six years start to look more like the reversal of a 40-year trend, and the beginning of a new regime:

Regime change

Investors have traditionally expected stocks to earn a few percentage points a year more than government bonds.

That extra return is the reward for sitting through crashes like 2008.

Economists call it the equity risk premium.

One rough way to measure it is to compare the stock market's earnings yield (a year of company profits divided by the share price) with the 10-year Treasury yield.

Today, the S&P 500 trades at about 26 times its companies' annual profits, which puts its earnings yield at about 3.8%.

The 10-year US Treasury now pays 5.2%.

On that measure, the traditionally safe option pays more than the stock market.

It's a crude comparison, since company profits can grow and a bond's interest can't. But it shows how far the balance has shifted.

The 2000 and 2007 races started from similar conditions.

In 2000, a 6.7% bond was enough. Stocks were so expensive that Investor A finished $89,000 ahead.

In 2007, 5.1% wasn't, because the Federal Reserve cut rates to almost zero and kept them there for seven years. That rescue is the real reason Investor B came out $42,000 in front.

Today, the safe option pays more than 5% again, just as it did in 2000 and 2007.

But stocks are priced much closer to 2000 than 2007.

Shiller's P/E stands at 41 today. In June 2007, it was 27. In December 1999, it hit its record of 44.

Which brings us back to the question we started with.

Two men. Same age, same savings, same patience. Twice, they made exactly the same choices. Twice, they got opposite results.

Very little of what they did explains the difference.

What explains it is the backdrop they were investing against. Interest rates set what the safe option paid, how much investors would pay for stocks, and whether a crash got repaired.

For 40 years, rates moved in one direction. Almost everything most investors know about markets was learned with that wind at their backs.

Arguably, that wind mattered more than any decision either man made.

Most investors alive today have never invested without it.

This week's quote:

'The winds and waves are always on the side of the ablest navigators.'

— Edward Gibbon,
The History of the Decline and Fall of the Roman Empire

Invest in knowledge,

Thom

The Benchmark

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Jacob Coxon had spent three years building the core models at OpenAI and then Anthropic, two of the most valuable private companies on earth. 

Neither company, he wrote, was acting responsibly. Both were racing toward self-improving superintelligence and gambling with our lives.

More than 170 million people have seen Coxon’s post. 

Just four days later, Anthropic CEO Dario Amodei published an essay calling on the industry to slow the pace at which AI models get more capable.

His essay was titled We Must Pace the Frontier. 

Amodei called for US regulation covering every frontier AI company, including any that won't sign up voluntarily. 

He also asked the government for a narrow antitrust waiver, so rival labs could coordinate on safety without breaking competition law.

Within hours, OpenAI’s Sam Altman agreed. 

Shortly after that, Elon Musk — who’s spent part of this year suing Altman — agreed, too. 

Some thought it strange that three such highly competitive CEOs were suddenly so publicly aligned. 

When fierce competitors all want the same rule, it’s worth asking who the rule is for.

Baptists, bootleggers & psyops

A second story swiftly followed Coxon’s.

Critics led, by Silicon Valley investor David Sacks, called his announcement and the subsequent calls to pace the AI frontier a psyop. 

They said the post was amplified within minutes by advocacy groups funded by early Anthropic investors…

That the press coverage was lined up in advance…

And that the real target was a federal licensing regime the big AI companies’ smaller competition couldn’t survive.

Some of the pieces check out. Coxon did take a 2022 scholarship from the foundation of Dustin Moskovitz, an early Anthropic investor. Moskovitz’s philanthropy says it’s on track to commit more than $1 billion to AI policy this year.

But not all the psyop takes fit. Nobody has proven that anyone told Coxon what to post and when.

And whether he was an industry plant, or part of a psyop, might not even be as interesting as what the past suggests is really going on here. 

In 1983, the economist Bruce Yandle looked at the laws banning Sunday alcohol sales across the American South. Two groups backed them: Baptists wanted them on moral grounds, and bootleggers wanted them because they made their money on the days the legal bars were shut.

The two groups never needed to meet or conspire. One supplied the moral case, and the other quietly profited from it.

So why would the leading AI companies want regulation right now?

Subsidizing the frontier

The frontier AI labs have much reason for wanting to dig a moat around their businesses. 

OpenAI is projecting a $14 billion loss this year, with no profit expected before 2029. The vast majority of ChatGPT’s 900 million weekly users pay nothing.

That is by design. By subsidizing usage now, the idea is you can build the habit and userbase, and then charge later. Uber did it with ridesharing. Amazon did it with shipping.

Anthropic is closer to paying its own way. It expects its first operating profit this year. 

But neither company has yet closed a year in the black.

A big risk in the subsidize-now model is that a cheaper rival arrives before you can raise prices.

Many such rivals to the big American AI players already exist. Open-source models from Meta and Chinese labs are free to download and sit just a few months behind the frontier.

A price war against free is hard to win. 

But a rule that makes free models expensive to build…

The playbook is older than electricity.

See if any of the following feels familiar. 

The 140-year printing monopoly

William Caxton set up England’s first printing press in 1476. To the Crown, a machine that could copy a pamphlet thousands of times was a threat. It spread heresy, sedition and eventually the Reformation.

So in 1557, Queen Mary I granted a royal charter to the Stationers’ Company, the guild of London printers and booksellers.

The Stationers got a near-monopoly over English printing. The Crown got a police force: the charter empowered the guild to search premises and seize unlicensed books.

The safety measure and the commercial moat were the same document.

The arrangement survived, in various forms, for most of the next 140 years. When controls collapsed during the English Civil War, the Stationers petitioned Parliament to bring licensing back. 

Then in 1695, Parliament let press licensing lapse.

London got its first daily newspaper seven years later. Presses spread across the provinces. The technology outlasted the gatekeepers, and its impact finally reached everyday people. 

The 70-year phone line monopoly

By 1907, AT&T had a problem. Alexander Graham Bell’s patents had expired in the 1890s, and thousands of independent telephone companies had flooded the market.

The new president, Theodore Vail, chose not to fight them on price. He argued the telephone was a natural monopoly and invited the government to regulate it. His slogan was ‘One Policy, One System, Universal Service’.

Washington took the deal. In 1913, under antitrust pressure, AT&T agreed to let rivals connect to its long-distance lines, and the government backed off. By 1934, a new federal regulator was overseeing the phone business as a utility, with AT&T at its centre.

For the next seventy years, AT&T was the American phone system.

It became a classic widows-and-orphans stock, the kind of safe, dividend-paying holding advisers recommended to people who couldn't afford to lose money. It was also going nowhere fast.

The breach came from outside the walls. Until 1968, Americans had to rent their telephones from AT&T. But that year, the regulator ruled that customers could plug in phones and devices made by anyone.

In 1984, after a decade-long government antitrust case, AT&T broke into seven regional companies.

The Marlboro monopoly

For decades, Big Tobacco fought regulation with everything it had. Then, in 2009, the market leader switched sides.

Philip Morris, maker of Marlboro and holder of about half the US cigarette market, backed the Family Smoking Prevention and Tobacco Control Act, which handed the FDA authority over tobacco. Rivals fought it.

Critics called it the Marlboro Monopoly Act.

New products now needed FDA approval. Marketing restrictions made it harder for smaller brands to win smokers away from the leader. Nobody seriously disputed the health case, and the biggest incumbent did very well out of it.

Then a challenger arrived from outside the category the law was written for.

Juul, a Silicon Valley vaping startup, launched in 2015. Within three years it held more than 70% of the US e-cigarette market.

The rules Philip Morris had backed couldn't touch it. So in 2018, the Marlboro maker paid $12.8 billion for a 35% stake in the upstart it couldn’t keep out.

Pulling up the ladder behind them

History suggests where this sudden ‘please regulate us’ chorus might be coming from. 

When incumbents help write the rules, it usually works, for a while. The Stationers held their grip for the better part of 140 years, AT&T 70, and Philip Morris locked in an unfair advantage for years.  

More recently, one of Amazon’s great advantages over bricks-and-mortar retail was that most of its customers paid no sales tax. But in 2011, Amazon backed a federal bill letting states tax online sales.

It gave up its edge on purpose. Amazon could afford the software to calculate and collect tax across thousands of jurisdictions. But its smaller rivals could not. A rulebook only the biggest player can afford to follow works about as well as a monopoly.

Protection also changes what shareholders own. A company shielded from competition can stop growing fast and start collecting steady profits instead, like a landlord collecting rent rather than building new houses.

Anthropic has reportedly pushed its IPO to November, still seeking a valuation near $2 trillion. OpenAI has deferred its listing to 2027. Altman called this an ill-advised moment to go public, citing safety risks, in the same week he backed slowing the industry down.

For now, the loudest voices for slowing AI are also the ones dictating the moment the public finally gets to see their books. We don't know for sure yet just what the AI labs’ finances look like.

In the past, monopolistic companies feared provincial printing presses, competitors’ phone handsets, and vapes. Today they’re afraid of open-source AI models and labs beyond American jurisdiction.

They also fear the courts. On September 18, four consumers sued Anthropic, OpenAI, Google and Musk’s merged SpaceX and xAI, alleging the pacing push is an illegal agreement to slow competition.

This story differs from the others in one way. The stakes this time are — according to those wanting the government to pace the frontier — existential. 

Remember Coxon’s words: ‘gambling with our lives’.

If they’re correct, then some kind of moat might be the price of safety.

But the pattern seems clear: When an industry’s leaders call for rules and regulations, there tends to be something big in it for them. 

Because once you’ve made it to the top, the only way to stop others taking your place is to pull up the ladder you’ve climbed. 

This week's quote:

'The innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.'

— Niccolò Machiavelli, The Prince

Invest in knowledge,

Thom

The Benchmark

Read more: The secret history of failed taxes

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Compared with a count taken four years earlier, the number of taxable adults in the kingdom had dropped by 36%.

There had been no new plague. No famine. No invasion.

These people had simply disappeared. 

At least, that’s what the tax records said. 

The disappeared 36% were hiding from a poll tax: a flat charge on every adult, levied per head (‘poll’ is an old word for head), rather than on land, income or property.

The crown wanted one shilling from every person 15 and older. For a ploughman earning around 13 shillings a year, a family of four meant handing over several months’ wages. 

So the villages of England lied about how many people lived in them.

We tend to think of tax as something governments do to us with impunity. That taxpayers are helpless victims of the state in which they live and work.  

But there’s a secret 650-year history which suggests that taxation only works for as long as taxpayers agree to it. 

In fact, the thing that stops people going along with it is rarely how much they’re being asked to pay. 

Roadblocks > petitions

In May 2018, Priscillia Ludosky, a small-business owner from the outskirts of Paris, launched an online petition. 

The French government was raising taxes on fuel as part of its climate policy, adding 2.9 euro cents per litre to petrol and 6.5 euro cents to diesel from January 2019.

A rounding error for city dwellers with metro cards. But a pay cut for rural workers who drove long distances every day.

The petition gathered almost a million signatures. The government pushed the tax anyway. 

Then, on November 17, 2018, a movement broke out: the gilets jaunes, or ‘yellow vests’, named after the high-visibility jackets French drivers are legally required to keep in their cars.

They didn’t march politely. They occupied roundabouts and blockaded roads across the country. 

Within weeks, cars burned in Paris and the Arc de Triomphe was vandalized. One weekend alone brought 130,000 protesters and more than 580 roadblocks.

Retailers, hotels and restaurants reported revenues falling by up to 50%. 

Then, on December 4, the government suspended the fuel tax rise. Prime Minister Édouard Philippe said no tax was worth threatening the unity of the nation.

They scrapped it altogether the next day. 

Not only did they ditch the tax, but President Emmanuel Macron added a €100 boost to the minimum wage and replied directly on Ludosky’s petition page, telling her she was right.

Three weeks of roadblocks changed everything, while the six months of growing petition signatures did not. 

Chancellor taxes own head off

Back to 1381 and the poll tax. 

England was fighting the Hundred Years’ War against France, and it was going badly. 

Parliament had already imposed two poll taxes in three years. The third, set in late 1380, was the harshest.

When the money didn’t arrive — 36% of the population had vanished, remember — the government sent commissioners into the counties to hunt down the non-payers and get the money. 

On May 30, 1381, villagers in Essex drove one of them out. Within days, Kent had risen too, and the rebellion spread across the south-east. 

Rebels freed John Ball, a radical preacher jailed for sermons on equality, and marched on London under a leader named Wat Tyler. 

They burned the palace of John of Gaunt, the most powerful noble in England.
Then, they took their grievance all the way to the top. 

The rebels held the Archbishop of Canterbury and Lord Chancellor, Simon Sudbury, responsible for the tax. 

They stormed the Tower of London, where they found the archbishop saying mass in St John’s Chapel.

They dragged him outside to Tower Hill, where, by one later account, they beheaded him with eight brutal sword blows (these people weren’t professional swordsmen, apparently), then stuck his head on a pole on London Bridge. 

King Richard II was just 14 years old. He met the rebels and promised them almost everything they demanded. Then he watched as their leader, Wat Tyler, was cut down. The king withdrew his promises and hunted down the rebellion's other leaders.

By any military measure, the rebels lost.

But England did not levy another poll tax for nearly 300 years.

In 1990, Margaret Thatcher’s government replaced local property rates with a flat per-adult charge, officially called the Community Charge. 

But everyone called it the poll tax. Millions refused to pay, 200,000 people marched on London, and the tax was abolished within three years of its launch.

When cheap tea ends up costing a colony

People like to frame the American Revolution as a tax revolt. But the real story is stranger.

Britain won the Seven Years' War against France in 1763, but ended it deeply in debt. Part of that war had been fought to defend the American colonies, so London decided the colonists should help pay.

They were hardly overtaxed. By 1775, Britons handed about a fifth of their economic output to the government. New Englanders paid just 1–2% of their income.

The 1765 Stamp Act, the first direct tax on the colonies, required newspapers, legal documents and even playing cards to carry an official stamp. Colonial activists called the Sons of Liberty harassed anyone who agreed to sell the stamps, and the tax became unenforceable. Parliament repealed it a year later.

Then came the 1773 Tea Act, a bailout for the struggling East India Company, Britain’s state-backed trading giant. This let the company sell its surplus tea directly to the colonies through its own agents, cutting out local merchants.

For years, many colonists had refused to buy British tea because it carried a small tax. They drank cheaper smuggled Dutch tea instead.

But the Tea Act changed the maths. British tea, tax included, was now cheaper than the smuggled stuff.

London was betting that colonists would choose the cheaper tea, and in doing so, pay the tax. 

Boston refused to take the bet. Colonists dumped 342 chests of British tea into the harbour.

The fight was over consent. The colonies had no seats in Parliament, so, in their view, Parliament had no right to tax them at any rate. Accepting a small tax meant accepting a large one later.

London answered with punishment, and the dispute became a war. In 1778, after a British army surrendered at Saratoga, Parliament promised never again to tax the colonies for revenue.

By then, the colonists wanted independence.

A window to the weird world of taxation

In 1696, King William III needed — surprise, surprise — money. 

He introduced a tax based on the number of windows in a house, partly to cover revenue lost to coin clipping, the practice of shaving silver off coins. The logic was that more windows meant a larger, more valuable home, and therefore a wealthier owner. 

The English responded with bricks. Property owners walled up windows to avoid the tax, and new homes were built with fewer of them.

The cost fell on those with the least say. Poor families in large tenement buildings were taxed as a single unit, and the resulting lack of light and air was linked to typhus, smallpox and cholera. 

After pressure from doctors and others who argued that darkness was making people sick, the tax was repealed in 1851. It had lasted 155 years. 

Are bond vigilantes the new tax rebels?

Today, the most effective tax rebellion needs no pitchforks. Bond vigilantes are investors who punish governments they see as reckless by selling their debt.

In September 2022, new UK Prime Minister Liz Truss and her Chancellor, Kwasi Kwarteng, announced £45 billion in unfunded tax cuts, including scrapping the top 45% income tax rate.

Nobody marched. Instead, investors sold UK government bonds, known as gilts, driving up the government’s borrowing costs. The pound fell to a record low against the US dollar. Pension funds came close to collapse, and the Bank of England had to step in.

Within ten days, the top-rate cut was reversed. Kwarteng was sacked. Truss resigned after just 44 days as Prime Minister. 

The bond market had refused to fund the policy. And like the villagers of 1381, it did not need to win the argument. It only needed to stop cooperating.

The quiet truth behind every tax system

Line these episodes up and a pattern appears.

Most of the taxes that sparked them were small.

What they shared was a sense of unfairness.

A shilling a head, which could cost a ploughman a month's wages but a landowner almost nothing.

A fuel tax that city dwellers barely noticed and rural workers felt every day.

A levy imposed by a Parliament the colonists had no seat in.

And what ended them was, in one form or another, refusal.

Every tax system rests on something no government can legislate: the willingness of people to pay (and right now in certain high-tax countries, fewer and fewer people are willing).

Most of the time, that willingness is so reliable that nobody notices it. We grumble, we file, we pay.

But it can be withdrawn. By villagers who lie about who lives with them. Residents who brick up their windows. Drivers who block the roads, or investors who sell bonds.

Governments can win the fight when that happens. What they can't do is force millions of people to cooperate.

Taxation has always been a negotiation, even when only one side seems to be talking.

This week's quote:

'There is no art which one government sooner learns of another than that of draining money from the pockets of the people.'

— Adam Smith, The Wealth of Nations

Invest in knowledge,

Thom

The Benchmark

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Up to $4 billion per operation, from $2 billion. Long-dated bonds — the ten, twenty and thirty-year varieties.

A buyback is what it sounds like. The government goes into the market and purchases its own outstanding bonds. 

Of the US’s $40 trillion in debt, about $31 trillion is the bond market, held by investors. 

More buying means higher prices. And because bond prices and bond yields move in opposite directions, higher prices mean lower yields — which is to say, cheaper borrowing for the government doing the buying.

The timing was not subtle. Days earlier, the yield on the thirty-year Treasury bond had touched its highest level in nineteen years.

For about six hours, Treasury’s plan seemed to work; bond yields fell. 

But by the following afternoon, the thirty-year bond yield was trading above where it had been before the announcement.

Then, on the following Monday, came the part nobody expected.

‘A subsidy to procrastination’

The most damaging attack on the bond buyback plan did not come from a political opponent. It came from Stanley Druckenmiller, the macro investor who ran George Soros's Quantum Fund, in an opinion piece for the Wall Street Journal.

Sidenote: Druckenmiller later admitted he used AI to create the piece (no judgement). 

Druckenmiller hired Scott Bessent in 1991. He mentored him for years afterwards.

The two spoke daily as Bessent built his own hedge fund career, long before Bessent became Treasury Secretary.

In September 1992, Bessent was twenty-nine and running Soros Fund Management’s London office. He worked out that the British government could not defend the pound’s fixed value against the German mark, because doing so meant raising interest rates, and most British mortgages at the time were variable rate. 

The rate rises would have destroyed the country’s homeowners. So Bessent convinced George Soros that the government would have to fold. Druckenmiller ran the trade, shorting sterling on a scale that put most of the fund behind a single bet.

On September 16, the Bank of England raised rates twice in one day, exhausted its reserves defending the price, and abandoned the peg by evening. Soros made about a billion dollars and got the nickname The Man Who Broke the Bank of England.

Druckenmiller’s argument in the Journal was that his former student was now on the other side of that trade.

‘Every basis point of artificial yield suppression is a subsidy to procrastination’, he wrote. 

‘Once markets believe Treasury is defending a price, every rise in yields becomes a test of official resolve, and the operations must grow to survive the tests.’

He called the long-term Treasury yield the only fiscal disciplinarian the United States had left.

The price of money

The US Treasury market trades about $1.2 trillion on an average day.

Bessent is planning to bring $4 billion per buyback operation — around a third of a percent of a single session’s average volume.

That is the scale of the thing he is trying to move. 

The reason he is trying to move it is that American government debt passed $40 trillion this year.

About $8.4 trillion of it is due for repayment before December. The government doesn’t have that money. It has to borrow it again from whoever will lend, at whatever rate the market demands on the day.

So the bond market is where the price of money gets set. Mortgages are priced off it. Corporate borrowing is priced off it. Every government budget in the developed world is written against it.

Think of it like this: Equities tell you what investors hope. But bonds tell you what they will actually charge.

The merchant moneylenders of Venice

In 1172, the Doge of Venice (doge is Venetian dialect for duke — not kidding) needed a fleet.

Rather than raise taxes, Sebastiano Ziani assessed the wealth of every prosperous citizen across the city’s six districts and simply took a proportion of it. Not as tax — as a loan. The state would pay it back, with interest.

These were called prestiti, and Venice’s merchants preferred them to taxation for an obvious reason; a tax takes money, but a loan gives it back with interest. 

In 1262, Venice bundled its outstanding loans into a single fund and allowed people to trade them. If Venice owed you 100 ducats, you could now sell that claim to another investor.

What they’d pay depended on whether they thought Venice was good for it. After a run of military defeats in the fifteenth century, buyers would only pay 60 ducats for a 100-ducat claim.

That discount was the market’s verdict on the Venetian government, published daily, five hundred years before anyone thought to call it a bond market.

Four hundred years later, the same thing happened to a far bigger borrower.

Philip II of Spain ruled the most powerful empire on earth in the second half of the sixteenth century, funded by silver mined in conquered South America and shipped home by the fleet.

He suspended payments to his creditors four times — in 1557, 1560, 1575 and 1596. These are generally counted as the first great state bankruptcies in European history.

But his lenders did not abandon him. His short-term borrowing simply started costing more than fifteen percent, and the Genoese bankers who supplied it went on earning better than ten percent a year for their trouble.

That is what the discipline actually looks like. The bond market does not stop a government. It charges it.

Or, occasionally, removes it.

Bond market removes British PM in 27 days

On Friday, September 23, 2022, Liz Truss’s government announced £45 billion of tax cuts and no plan for how to pay for them.

Investors reached one conclusion: this government would have to borrow far more than it could afford. They sold the British government debt they held, and demanded a higher return before buying more. The rate Britain paid to borrow for thirty years jumped 0.8 percentage points over a weekend — an enormous move in a market that normally shifts in hundredths.

Then came the part nobody had modelled. British pension funds had borrowed using their government bonds as security. As those bonds fell in value, lenders demanded more security, and the only way to raise it quickly was to sell — pushing values down further and triggering more demands.

By the evening of September 27, fund managers were telling the Bank of England that several funds would collapse the next morning.

The Bank’s staff worked overnight and stepped in on September 28, buying £5 billion of bonds a day. UK pension assets fell by around £425 billion over the year.

Truss resigned 27 days after the announcement. No election, no vote. The bond market had effectively removed a British prime minister for making a promise it did not believe.

America has been here before

Here is the part missing from most of the coverage on the bond market situation.

In April 1942, at the Treasury’s request, the Federal Reserve agreed to cap the yield on long-term government bonds at 2.5%. Short-term bills were pegged at three-eighths of one percent. The purpose was to finance the war cheaply.

The United States ran that policy for nine years.

But it outlived the war it was designed for. Consumer price inflation hit 17.6% between June 1946 and June 1947, and the cap stayed. President Truman and his Treasury Secretary both wanted it kept, partly to protect the value of the war bonds ordinary Americans had been urged to buy.

In January 1951, Truman summoned the entire Federal Open Market Committee to the White House. Afterwards, his press secretary announced that the Fed had pledged to maintain the peg.

But the Fed had promised no such thing. Governor Marriner Eccles took a memorandum to the New York Times and the Washington Post and publicly contradicted the President of the United States.

By February, inflation was running at an annualized 21%. The Fed informed the Treasury it would no longer hold the line. The following month, the two institutions signed what became known as the Treasury–Fed Accord — the modern doctrine of central bank independence was born out of that fight.

An investor who bought US Treasury bonds in April 1942 and held them to the day of the Accord had lost roughly $27 in real terms on every $100 invested.

This graphic from James Lavish at The Informationist shows how things have gone since the Accord:

Suppressing a yield does not make the cost of borrowing disappear. It relocates it onto the person holding the bond, and it is collected in inflation.

Kevin Warsh, who became Federal Reserve chair earlier this year, called for a new Treasury–Fed accord in February.

On August 28, in his first Jackson Hole keynote, he argued that the Fed required market signals “as unfiltered as possible”, naming the prices and trading volumes of Treasury securities specifically.

He did not mention the buybacks.

A wider gap than 1929

Callum Thomas, who runs the macro research house Topdown Charts, published a chart last month showing the rolling 10-year return gap between US stocks and US bonds.

It has just passed 15% a year in favour of equities — the widest gap since 1960, and wider than the peak reached in 1929.

Most investors have had no reason to look at bonds for a decade. The gap has never been wider, and stocks have never been easier to own.

And now the Treasury Secretary has decided the bond market is saying the wrong thing.

The first expanded buyback operation ran on September 9. The verdict?

This chart dropped from The Kobeissi Letter as I was writing this piece:

Druckenmiller has already offered his own take: 

Governments defending prices against fundamentals always lose, and the only variable is how much they spend before conceding.

This week's quote:

"Reality is that which, when you stop believing in it, doesn't go away."

— Phillip K. Dick

Invest in knowledge,

Thom

The Benchmark

Read more: 250 Years of American Capital V: Risk, failure, venture and gain

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Part V: Risk, failure, venture and gain

Welcome to the fifth and final edition of this American Capital series.

We started with a bankrupt republic that built a reputation for paying its debts, and a quiet agreement under a Wall Street tree that produced the New York Stock Exchange. 

Seventy-seven years of financial chaos and panics followed, until one catastrophic collapse in 1907 forced Congress to build the Federal Reserve. 

The dollar’s own promise — first tied to gold, then cut loose entirely by 1971 — turned out to be a separate fight, one that ended with money backed by nothing but trust. 

And in the decade that followed, a quiet shift in tax and pension law turned millions of ordinary Americans into shareholders, often without them ever deciding to be.

By the late twentieth century, the country had built almost everything this series has tracked: a currency people trusted, a market people could cheaply buy into, and a legal system that let almost anyone own a piece of it.

One thing was still missing. Someone still had to fund the things that didn’t yet exist.

The Father of Venture Capital 

In 1946, a Harvard Business School professor, Paris-born Georges Doriot, did something no one had really done before. 

He raised money — from insurers, university endowments, investment trusts — and used it to buy small stakes in brand-new companies, most of them founded by engineers and scientists with no track record and no collateral. 

His firm, American Research and Development Corporation, was remarkable for two reasons. 

First, Doriot built it on a simple, almost heretical premise: back the person, not the balance sheet.

Second, he raised money from institutional investors rather than from wealthy families — who were accustomed to lending money and expecting it returned, plus interest, from a business that already existed. 

Doriot proposed something structurally different — investing in many ventures that might fail, on the understanding that one success could cover every failure many times over.

In 1957, ARDC invested $70,000 in a small company called Digital Equipment Corporation — a fledgling computer business. 

By 1971, that stake was worth $355 million — a return of more than 500x.

That single bet didn't just make ARDC’s returns. 

It created the blueprint for the venture capital industry, from which every firm on California’s Sand Hill Road (think a16z, Sequoia and the like) still runs on today: fund a portfolio of long shots, expect most of them to lose, and let the rare enormous winners pay for all of it.

A new map for risk taking

Most financial systems are built to punish failure.

A defaulted loan, a bankrupt company, a bad bet — in much of the world, these carry lasting stigma, and sometimes legal consequences. In parts of Europe, a failed founder can spend years locked out of credit, or barred from directing another company at all. The message, structurally, is: don't try unless you’re already sure.

Venture capital runs on the opposite assumption: that failure is simply the cost of finding the very few ideas worth funding, and that the person whose last company collapsed might be exactly the person worth backing for their next one.

Doriot didn’t just tolerate failure. He built a model that required it. If every company in the portfolio succeeded, it meant nobody had taken a real risk in the first place.

That’s the same instinct this series has been tracking since Hamilton bet that the bankrupt country’s word was worth something…

Since a Brooklyn speculator’s collapse forced Wall Street to reinvent trust…

And since America kept building railroads through decades of currency chaos, funded by relentless foreign investment. 

The failure factory

By the 1970s and ‘80s, Doriot’s model had migrated west, concentrated in a handful of firms on a single road in Menlo Park, California. The pattern held: back founders early, expect most to fail, let an Apple or Google cover the rest.

It became, over the following decades, the primary financing engine for nearly every major technology company to emerge from the United States — and largely nowhere else. 

Not Europe, with its far deeper aversion to personal financial risk. 

Not Japan, where lifetime employment at an established firm long outranked the uncertainty of a startup. 

Not other wealthy, well-educated economies with plenty of capital sitting idle.

This wasn’t because other countries lacked engineers or ideas. It was because almost nowhere else had built a financial culture willing to fund a hundred potential failures to find the one unicorn among them — and willing to call the ninety-nine failures a reasonable cost of doing business, rather than a verdict on the people who tried.

The market eating the world

Today, the United States stock market is worth roughly $75 trillion — very nearly half of the entire value of every listed company on earth.

The dollar still dominates the world’s reserves, at just over 57%, though that figure has slid from more than 70% at the turn of the millennium. 

It remains, by a wide margin, the most trusted paper promise in the global economy — a currency with nothing backing it but confidence, exactly as it’s been since 1971, still the one nearly everyone chooses anyway.

And the venture model that started with Doriot's $70,000 now underwrites some of the largest private valuations in history. OpenAI, Anthropic, xAI and Databricks alone are worth a combined figure not far off the GDP of France — the world's seventh-largest economy — and none of them are public companies yet.

None of this comes free, of course. The US government’s own debt, held by the public, now sits close to 99% of GDP, and current projections put it past 120% within a decade.  

The same country that built the most trusted currency and the deepest capital markets on earth is also, by its own numbers, spending well beyond what it collects and plumbing new depths of debt. 

Just doing it

From a bankrupt republic to a trillion-dollar IPO pipeline, it’s really just been one move, repeated: give up certainty for a shot at something better. 

A country with no credit bet that its word was worth something anyway. A private banker’s library became a public institution. A currency backed by gold became a currency backed by trust and belief. A pension promise became a stake in the world’s biggest stock market. A professor’s $70,000 bet became the model that now decides which companies flourish from the masses of failures that pave the way.

It’s worked for 250 years. There is, of course, no guarantee it works for the next 250.
The dollar’s grip on the world is looser than a generation ago. The debt behind it is larger than almost any point in the country’s history. And the newest bet — that a handful of AI companies are worth more than most nations on earth — hasn’t been tested by a true downturn yet.

You could say that America started out broke. Two hundred and fifty years later, it’s still going for broke — pardon the pun. 

This week's quote:

"Only those who dare to fail greatly can ever achieve greatly."

— Robert F. Kennedy

Invest in knowledge,

Thom

The Benchmark

Read more: Part IV: From Gold to the 401(k)

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Part IV: From Gold to the 401(k)

Welcome to the fourth edition of this American Capital series.

We started with a bankrupt republic that quickly built a reputation for paying its debts, and a quiet agreement under a Wall Street tree that produced the New York Stock Exchange. 

For the 77 years that followed, individual states filled a national-bank-less vacuum by issuing thousands of private currencies of wildly uneven quality. Financial panics hit roughly every 20 years.

Then one catastrophic collapse in 1907, and one banker's response to it, finally forced the country’s hand. 

In 1913, Congress built the Federal Reserve — an institution that could lend to failing banks in a crisis.

The Fed solved the panic problem. But it didn't solve everything.

Because the dollar itself was still tied to something the country didn't fully control: gold.

Paper as a promise of precious metal

A gold standard is a simple idea. 

A dollar isn't just paper — it’s a legal claim on a fixed weight of gold, redeemable on demand at a bank.

The US drifted toward this arrangement well before it was ever law. The Coinage Act of 1873 quietly demonetized silver, pushing the country onto a de facto gold standard. Critics later called this ‘the Crime of ‘73’. The Gold Standard Act of 1900 made it official.

For more than three decades, the promise held. 

Then in 1933, in the depths of the Great Depression, President Roosevelt made it illegal for Americans to own monetary gold. Prices and wages were falling in a deflationary spiral. Economic activity, and of course growth, were stalling. 

So citizens were forced to sell their coins and bullion to the government at $20.67 an ounce. 

The government then promptly revalued gold to $35 an ounce — expanding the monetary base by executive order to stimulate activity, and quietly transferring wealth from ordinary Americans to the state in the process.

Then in 1944, at Bretton Woods, the wartime Allies rebuilt the whole system around that $35 figure. 

Every global currency in the post-war world would peg to the dollar. The dollar alone would peg to gold. It made the US dollar the axis of the global economy — and made every other country's money supply, in effect, a bet on America’s gold reserves.

That bet ultimately went bad. 

By 1971, the US had printed and spent far more dollars than it held in gold, and foreign governments knew it. On 15 August that year, President Nixon appeared on television and suspended the dollar's convertibility to gold — a move he called temporary. 

It was permanent, of course. I've told the story of that night, and of the extraordinary man who executed it, here.

Let the fiat games begin

By the mid-1970s, the dollar was pure fiat — backed by nothing but trust in the government issuing it.

The decade that broke the dollar’s last link to anything solid was the same decade that pushed ordinary Americans towards owning a piece of the market themselves.

A currency with no fixed anchor is a currency that tends to quietly lose value through inflation.

At 3% inflation, for example, your dollar loses about a quarter of its value every decade. 

This means a pension system promising fixed payouts decades from now suddenly looks a lot riskier to whoever's funding it — the payout stays the same number, but that number buys less every year. 

The safer bet becomes giving people a stake in something that can rise with inflation instead of a promise that erodes against it.

The United States of Shareholders

In 1974, Congress passed the Employee Retirement Income Security Act — ERISA. This set the first federal rules for how companies had to manage, and protect, pension funds.

It forced employers to actually fund the retirement promises they’d made rather than treat them as a future problem. This was dry, technical legislation. It was also the first crack in the old system.

In 1975, regulators abolished fixed brokerage commissions on Wall Street — a date now known as May Day (which, funnily enough, is also what they call International Workers’ Day). 

Before this, US securities law required every stockbroker to charge the exact same commission rate on stock trades, set by the New York Stock Exchange itself — regardless of the size of the trade, how much work it took, or how efficient the broker was. A big Wall Street firm and a small discount broker had to charge identical fees by law.

Once that price floor disappeared, the cost of buying and holding investments began a fifty-year collapse.

This is Schwab’s commission per trade, 1975–2019:

Then in 1976, Vanguard founder John Bogle launched the first index fund available to the public. 

The idea was almost insulting to Wall Street at the time: don't try to beat the market, just buy all of it, cheaply, and hold on. Rivals mocked it as ‘un-American’ — a fund for people willing to settle for average. It’s since become the default way most people invest.

Then, in 1978, an almost accidental piece of tax law tied it all together. A benefit consultant working on a bank’s bonus scheme noticed an obscure new clause in the tax code — Section 401(k) — and realised it could let employees defer part of their salary into investments, tax-free, with an employer match on top. 

Congress hadn’t planned on the 401(k) replacing pensions. But within a decade, it effectively had.

In 1989, about 32% of American households owned stock in some form. 

By 2022, that figure had climbed to 58%. 

Over the same rough window, the share of American workers covered by old-style pensions fell from 38% to 20%, while defined-contribution plans like the 401(k) rose from 8% to roughly a third of the workforce — and kept climbing. 

Today, Americans hold more than $10 trillion inside 401(k) accounts alone, spread across about 70 million active participants.

None of them had to decide, in any meaningful sense, to become investors. It happened by default, buried in a payroll deduction most people never read closely.

It’s a similar story in Australia — you can step inside the $457-a-day superannuation machine here. 

The law that handed over a stake

Owning a piece of American industry used to belong to a narrow class of people — those with the capital and the connections to buy in, from the twenty-four men under the Buttonwood tree in 1792 to the British bondholders who financed the railroads. For most of the country’s 250 years, that ownership was concentrated.

Money itself went through its own version of that same story. For nearly a century it was tied to gold, until Roosevelt severed that link in 1933, Bretton Woods rebuilt the world around it in 1944, and Nixon cut it loose entirely in 1971. By the mid-1970s, the dollar answered to nobody but trust.

That same decade, the machine started opening up. ERISA rewrote the rules on pensions. May Day made investing cheaper. Vanguard bet that ordinary people buying the whole market would beat experts trying to pick winners. And the 401(k) turned a payroll deduction into a stake in the market itself.

Stock ownership in America is still heavily skewed toward the wealthy and the old. Although this is changing — just ask the millions of millennials still living at home, dollar-cost-averaging into ETFs instead of saving for a house deposit. But it did something no earlier chapter in this series managed: it opened the machine to people who never asked to be let in.

Next week, the final instalment of this series: the biggest economy in the world, and the next 250 years of American Capital. 

This week's quote:

'We are all inventors, each sailing out on a voyage of discovery, guided each by a private chart.'

— Ralph Waldo Emerson

Invest in knowledge,

Thom

The Benchmark

Read more: Part III: Panic, rescue, and ‘duck hunting’ precipitates the Fed.

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Part III: Panic, rescue, and ‘duck hunting’ precipitates the Fed

Welcome to the third edition of this American Capital series.

Last week, we looked at the era of currency chaos. 

After Andrew Jackson killed America's only national bank in 1836, individual states filled the vacuum. Thousands of private banks issued their own currencies, of wildly uneven quality, and panics hit the financial system roughly every twenty years.

By 1863, wartime pressure had forced Congress to create a single national currency, the greenback. But that fix solved only part of the problem.

There was still nobody to stop the bank and business collapses that followed the recurring crises of confidence. 

It would take one more catastrophic collapse — and one man's private fortune — to finally change that.

Short squeeze blows up in brothers’ faces

In October 1907, brothers Augustus and Otto Heinze, together with a financier named Charles Morse, attempted to corner the market in a mid-sized company called United Copper. 

They planned to buy up enough shares to control the price, forcing short-sellers — investors betting the price would fall — to buy back stock at whatever price the Heinzes demanded.

It failed almost immediately. Short-sellers found shares elsewhere, the price collapsed, and Otto Heinze's brokerage firm went under within two days.

And this was just the beginning. 

The Heinzes controlled a Montana bank and had close ties to several New York trust companies — institutions that operated much like banks, taking deposits and making loans, but with far less regulation. 

Depositors at those institutions started to worry: if the men running their trust had just lost a fortune on a copper bet, what else had they done with the money sitting in the vault?

They started withdrawing. Fast.

The contagion spreads to New York

The United Copper panic reached Knickerbocker Trust, New York's third-largest trust company, when it emerged that its president had personal ties to the Heinze scheme. On 22 October 1907, Knickerbocker's line of depositors stretched down the block. By that afternoon, the trust had run out of cash and shut its doors.

New York had no institution built to stop what happened next. There was a clearinghouse — a private association banks used to settle payments with each other — but trust companies weren't members, and the clearinghouse had no obligation, and no real mandate, to save them.

Fear spread faster than anyone could verify who was actually solvent. Within days, runs hit other trusts across the city. The interest rate for overnight loans between banks — usually around 9-10% — spiked to 70%, then 100%. The New York Stock Exchange itself came close to running out of cash to settle trades.

The country's financial capital was on the verge of seizing up, and there was no Federal Reserve, no Treasury facility, no government mechanism to stop it. 

J.P. Morgan locks the bankers in his library

J.P. Morgan was, by 1907, the most powerful private banker in the United States.

He’d built General Electric and U.S. Steel, and was the closest thing Wall Street had to a central authority, despite holding no official position.

On the night of 19 October, as the panic accelerated, Morgan summoned the city's leading bank and trust presidents to the library of his Manhattan mansion. He’d had his own accountants examine each institution's books, sorting the trusts worth saving from those he judged beyond help.

Morgan locked the doors and kept them in the library until the small hours of the morning, pressuring them to personally commit tens of millions of dollars to a rescue fund for the trusts he'd deemed solvent. 

He pledged a substantial sum of his own money first. Treasury Secretary George Cortelyou, who Morgan had also summoned, committed $25 million in federal deposits to New York's banks. John D. Rockefeller separately pledged $10 million of his personal fortune.

By the next morning, the immediate panic had broken. Knickerbocker itself was allowed to fail — Morgan's examiners had judged it unsalvageable — but the run on the rest of the system stopped.

One private citizen had stepped up and done the job of a central bank. 

The solution becomes a problem

The United States had just discovered that bringing its financial system back from the brink had depended on the willingness, personal fortune, and clout of one 70-year-old banker.

But Morgan wouldn't live forever. There was no guarantee a figure of his stature, wealth, and willingness to act would be around the next time a financial crisis posed such an existential threat. 

So in 1908, Congress created the National Monetary Commission, chaired by Senator Nelson Aldrich, to study how other countries handled this problem and to propose an American solution.

It took the Commission two more years to arrive at an answer — and that answer was drafted in almost total secrecy.

Bankers and a treasury official go ‘duck hunting’

In November 1910, Aldrich invited five men to join him on what was publicly described as a duck hunting trip off the coast of Georgia: banking executives Henry Davison, Frank Vanderlip, and Paul Warburg, along with a Treasury official, A. Piatt Andrew, and one aide.

To avoid being recognised, the men travelled to the train separately and addressed each other only by first names on the journey south. Their destination was the Jekyll Island Club, an exclusive retreat off the Georgia coast, arranged, most historians believe, through J.P. Morgan's membership.

For several days, the group drafted a plan for an American central bank.

The secrecy wasn't paranoia. Americans had a long memory of concentrated financial power, and not a fond one. In 1836, President Andrew Jackson had killed the country's only national bank at the time, convinced it handed too much control to a small circle of wealthy financiers. That suspicion hadn't gone away in the 74 years since. A central bank built by Wall Street's own leading bankers, in secret, on a private island, was exactly the outcome ordinary Americans would have rejected outright if they'd known who was actually writing it.

The participants denied the meeting had taken place for the next twenty years.

1913: The Federal Reserve Act 

The plan that emerged from Jekyll Island became known as the Aldrich Plan. It proposed a National Reserve Association — a central banking authority that would hold reserves for the whole banking system, issue currency, and act as lender of last resort in a crisis. In other words: everything Morgan had done personally in his library, built into a permanent institution.

But it also concentrated control heavily in the hands of the banks themselves.

Congress, after Democrats swept the House in the 1910 midterms and remained deeply suspicious of Wall Street influence, rejected it outright.

But its technical architecture didn't die. Representative Carter Glass and Senator Robert Owen rebuilt it into a compromise that could survive politically: not one central bank controlled by bankers, but a network of regional Federal Reserve Banks — eventually twelve of them, spread across the country — overseen by a Board of Governors appointed by the President.

President Woodrow Wilson signed the Federal Reserve Act into law on 23 December 1913 (see the full document here, if you're partial to lengthy tracts of mind-numbing legalese).

In practice, this gave the new system three powers nobody in America had held since 1836. It could lend to banks in a crisis, acting as the lender of last resort Morgan had been by accident. It could issue a single, elastic currency — able to expand the money supply when the economy needed more cash in circulation, and contract it when it didn't. And it could set reserve requirements, forcing banks to keep a minimum cushion of cash on hand, rather than lending out nearly everything they held, the way free banks had for the better part of a century.

Andrew Jackson killed the Second Bank in 1836, certain the country didn't need a central authority over its money. Seventy-seven years, five panics, and one long night in J.P. Morgan's library later, Congress decided he was wrong.

Next week: the Fed's first real test arrives faster than anyone expected, and a gold-backed dollar starts to buckle under its own promises.

This week's quote:

'I sincerely believe... that banking establishments are more dangerous than standing armies.'

— Thomas Jefferson, letter to John Taylor, 1816

Invest in knowledge,

Thom

The Benchmark

Read more: Part II: Free banking, wildcats, and the railroads built on chaos.

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Part II: Free banking, wildcats, and the railroads built on chaos

Welcome to the second edition of my American Capital series.

Last week, we covered how the US began as a bankrupt republic, quickly earned a reputation borrowing and repaying debt, and then promptly launched a bond market which blew up almost immediately.

This bond market collapse led to the Buttonwood Agreement — a secretive document signed by 24 stock brokers which quietly created the New York Stock Exchange.

For the 77 years following Buttonwood, the United States ran with no central bank.

For much of this period, the country had no single currency either.

What Americans carried in their pockets depended entirely on where they stood — and what they were holding might be worthless two towns over.

No central bank, on purpose

The First Bank of the United States — the national bank Alexander Hamilton had fought to create — lapsed in 1811 when Congress declined to renew its charter by a single vote.

For five years, the country had no national bank at all.

In 1816, Congress reversed course and chartered the Second Bank of the United States. It held federal deposits, issued a currency accepted across state lines, and had the power to rein in smaller banks that lent too recklessly.

But Andrew Jackson, elected president in 1828, hated it.

He saw the Second Bank as a private monopoly, run by wealthy easterners, answerable to its shareholders rather than to voters, and dangerous precisely because it could make or break ordinary state banks with a single lending decision.

He ran for re-election in 1832 partly on a promise to destroy it, and won.

That same year he vetoed a bill to renew the bank's charter. Congress couldn't override him. The charter expired in 1836, and this time nobody tried to renew it.

The United States now had no national bank, no institution to backstop other banks in a crisis, and no plan for what would replace either.

This remained the case for the next 77 years.

Everybody’s a bank now

With no national bank and no national currency, individual states stepped into the vacuum.

Under so-called ‘free banking’ laws, adopted first by New York in 1838 and copied widely afterward, almost anyone could open a bank. Deposit a pile of state bonds as collateral, and you were licensed to print your own banknotes.

You'd buy state bonds the way anyone bought government debt at the time — from the state treasury directly, or on the secondary market from existing bondholders, using your own capital or capital you'd raised from investors. So a group of men wanting to start a bank would pool money, buy a stack of (say) Ohio or New York state bonds, then physically deposit those bond certificates with a state banking authority as collateral. In exchange, the state would authorize them to print banknotes up to some multiple of the bonds' value.

The mechanism was meant as a safeguard — if the bank failed, the state could seize and sell the bonds to make noteholders whole, at least in theory. In practice this is exactly where ‘wildcat’ schemes gamed the system: some operators used low-quality or thinly-traded state bonds whose real market value was far below what the state credited them for, so the ‘collateral’ backing the notes was weaker than it looked on paper.

By the 1860s, about 8,000 different kinds of banknotes were in circulation across the country — each one a private company's promise to pay, backed by whatever bonds that particular bank happened to hold.

So a dollar wasn't a dollar. A dollar was a bet on a specific bank's solvency, discounted by distance and reputation.

If a note came from a bank far from where you were, you had less way of knowing whether that bank was still solvent, and redeeming it for real value (specie, i.e. gold or silver coin) meant a costly trip back to the issuing bank.

The further the note had travelled from its issuing bank, the bigger the discount tended to be.

Merchants coped the same way currency traders cope with unstable currencies today: they consulted published guides — banknote reporters — that listed thousands of banks and told you what each one's paper was actually worth. A note from a solid Philadelphia bank might trade near its face value two streets away. The same note, presented in Cincinnati, might be worth 80 cents on the dollar, if anyone would take it at all.

The rise of wildcat banking

Some stories tell that a handful of so-called ‘wildcat’ banks deliberately set up shop in remote, barely-accessible locations, in places wildcats supposedly outnumbered people.

The idea was simple: issue as many notes as possible into circulation in the cities, and make it as difficult and expensive as possible for any noteholder to actually travel out and redeem them for real value.

Distance was the fraud. By the time you found the bank, if you found it at all, it might already have failed — or never really existed to redeem anything in the first place.

Historians still argue about how common actual wildcat banks were versus how much the term became a catch-all slur for any bad free bank. Either way, the fact that the story took hold and stuck for 180 years tells you something about how little trust the system had earned.

A panic every twenty years

With no lender of last resort, and a currency of variable and uncertain quality, the American financial system broke on a schedule.

There were different triggers each time — cotton prices, railroad overbuilding, a failed brokerage, a run on trust companies — but the same underlying mechanic.

A shock would hit confidence somewhere, noteholders rushed to redeem, banks with genuinely sound assets failed anyway because nobody could convert them to cash fast enough, and the panic spread faster than the truth about who was actually solvent.

In 1857, for example, Ohio Life Insurance and Trust — a Cincinnati firm, not a major bank — collapsed after its New York manager embezzled its funds. Depositors nationwide, with no way to tell who else might be exposed, panicked and rushed every bank at once. Within weeks, 1,400+ banks and businesses suspended payments, and the shock even hit London.

Nobody at Ohio Life touched New York's banks. But the fear took hold regardless.

The Buttonwood Agreement had solved this problem for two dozen men who all knew each other's names. But nobody had solved it for a country of strangers.

And yet, in the middle of all this, America built the largest railroad network on earth.

The chaos that built the railroads

Between the 1830s and 1890, American railroad mileage went from a few hundred miles to more than 160,000 — a network larger than anywhere else on earth. It happened during the exact decades when American money was least trustworthy and the banking system least stable.

Some of that is coincidence of timing, some of it closer to cause and effect. The loose state chartering laws that let almost anyone open a bank also let almost anyone raise capital for almost anything, including railroads that had no realistic chance of ever turning a profit. Speculative capital was easy to raise because oversight was thin.

Money came chiefly from British investors, buying American railroad bonds on the promise of a continent being wired together. Britain, in effect, financed the physical backbone of a country whose currency it didn't trust and whose banks it had no way of vetting.

By 1894, more than 40,000 miles of track — a quarter of the entire network — were in the hands of bankruptcy receivers. Many investors didn't get their money back.

Enter the greenback

By 1863, the Union was two years into the Civil War and paying for it partly by printing its own paper money — ‘greenbacks’ — for the first time. That meant two currencies were now circulating at once: thousands of private state banknotes of wildly different quality, and this new federal paper. Washington needed people to trust and use the new money. Congress finally moved.

The National Banking Acts created a system of federally chartered banks empowered to issue a single, uniform national currency — and then, to make sure people actually used it, imposed a 10% tax on state banknotes that effectively taxed them out of existence.

This wasn't a central bank, per se. There was still no institution to act as lender of last resort, no one to stop a panic once it started. That problem would take another 44 years, and one more catastrophic collapse, to solve.

But for the first time since Andrew Jackson killed the Second Bank, a dollar in one state was recognizably the same in another.

Next week: One man locks the country's bankers in his library, and the United States finally builds the institution it spent 77 years insisting it didn't need.

This week's quote:

"Money is a matter of belief, even confidence in the money-issuing authority."

— Adam Smith

Invest in knowledge,

Thom

The Benchmark

Read more: Part I: Debt, Panic, and a Buttonwood Tree on Wall Street.

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Part I: Debt, Panic, and a Buttonwood Tree on Wall Street

Last week I saw a large heavily tattooed man in his 60s handling a sheet of uncut US dollar bills worth $1 million. 

No, I didn’t witness a bank robbery. 

Rather, I took a tour of the Bureau of Engraving & Printing in Washington, D.C. 

The tour is free, by the way (as in, taxpayer-funded — irony?). 

Cheery, highly-trained, script-following tour guides take you through a series of walkways from which you look down on the machinery that prints much of the Federal Reserve’s $9 to $12 billion in fresh cash each month. 

There are absolutely no photos. You can’t even remove your phone from your bag to check your messages. The BEP has its own police force to throw you out should you violate their visitation rules. 

This is just one fascinating financial experience I’ve had while travelling here. 

I’ve been in Tennessee, Alabama, Louisiana, D.C. and, now, New York — a decent cross-section of America, both geographically and economically. 

Given my visit around the nation’s 250th anniversary, today I’m sharing the first in a series of Benchmark essays investigating 250 years of ‘American capital’. 

Today you’ll learn about how the United States was founded on debt and financial crisis, and how those things spawned the New York Stock Exchange. 

First, something small, but telling, which I’ve noticed since arriving:

Americans are not afraid to talk about money. Nor are they shy about sharing their financial ambitions. 

In Germany, where I live, this is not a thing. No other country I’ve lived in or visited has this quality. 

At a motor race in Tennessee, a young man with a chiller full of iced drinks on his shoulder stops to speak with me. He tells me how he travels around and beyond the state, selling his iced beverages at sports and entertainment events. 

“I love to travel. I love making money. And I love talking to people.”

At a pancake house a few days later, the young waiter asks me how I am this morning, to which I respond and ask him the same.

“I’m tired, honestly. But mornings like these I just think of the money.”

Just this morning, a corruption investigator for Congress explains that while she’d love to live in London again, she knows the money is better here and she has better prospects for “getting ahead”.

There’s no arrogance or boasting. These people are just matter-of-fact and seemingly at peace with their place in the great American economic machine.

A quarter of a millennium since it began, let’s look at where that great machine started. 

A debt-fuelled emerging market

The romantic version of the 1776 Declaration of Independence skips the accounting. 

The revolution was financed by printing money — the Continental Congress had no taxing power, so it issued paper and hoped. 

By the early 1780s that paper had inflated into worthlessness, and ‘not worth a Continental’ had entered the language as a way of calling something garbage.

By 1790 — just 14 years in — the new United States owed roughly $79 million it had no plausible way of paying. 

About $54 million of it was federal, including around $12 million owed to foreign creditors — mainly French and Dutch lenders who had bankrolled the war. Another $25 million or so sat on the books of the individual states.

The country was, in the language we'd use today, a defaulted emerging market with no credit history and no central government worth the name.

Picking up the $79 million tab

Alexander Hamilton, thirty-five years old and the first Treasury Secretary, published his Report on Public Credit in January 1790. 

He proposed that the federal government pay all its debts at full face value — including the state debts, which it wasn't liable for.

This was ferociously unpopular, for two reasons.

The first was fairness. Most of the original war bonds had long since been sold by the soldiers and farmers who received them, often for a fraction of face value, to speculators who'd bought on the chance of the federal government doing exactly what Hamilton proposed. 

Paying at par meant enriching the speculators and doing nothing for the people who'd actually fought. Virginia congressman James Madison proposed splitting the payment. Hamilton refused.

The second was federalism. States like Virginia had already paid down their war debts and saw no reason to fund Massachusetts's. Assumption meant a transfer, and it meant a permanent, powerful national treasury — which was precisely what its opponents feared and precisely what Hamilton wanted.

The deadlock broke over dinner in June 1790, at Thomas Jefferson's table.

Hamilton got his assumption of the state debts. In exchange, the permanent national capital was moved south, to a site on the Potomac.

Washington, D.C., in other words, exists because of a debt deal. 

Paying to borrow to build

Hamilton wasn't trying to clear the debt. He was trying to establish it.

Pay creditors at face value, on time, without negotiation, and you produce something a new country cannot otherwise buy: a reputation. 

Once the world believes you'll pay, you can borrow cheaply forever, and cheap borrowing is the difference between a colonial backwater and a continental project.

But there was a second effect. Paying the debt at par created a large class of wealthy people whose fortunes now depended on the federal government continuing to exist. Hamilton bound the moneyed interest to the union with a coupon.

Original debt holders (soldiers, farmers) had already sold their war IOUs cheap to speculators. 

Hamilton's full-value payout went to whoever held the paper in 1790 — concentrating the windfall in a wealthier class, not the people who'd earned it. Some of these speculators, for instance, were members of Congress who bought up the discounted debt right before the vote. 

In this way, American public credit was invented as a political instrument before it was a financial one.

The rest followed fast. The Bank of the United States was chartered in 1791. The dollar was legally defined by the Coinage Act of 1792. 

Suddenly, there were things to trade: government bonds in several classes, and shares in the new bank.

Which means America had a securities market before it had political parties.
It took about four months to blow up.

Ex-Treasury official dies in debtors’ prison

A former Treasury official named William Duer began speculating on the new government paper with borrowed money — a great deal of borrowed money, some of it from tradesmen and shopkeepers, and some of it, awkwardly, drawn on his old department. 

He was betting that bond and bank stock prices would keep rising — buying now with borrowed money, planning to sell later at a higher price and pocket the difference. 

It was a classic leveraged bet gone wrong — much like the one that unwound last month for Leopold Aschenbrenner’s Situational Awareness hedge fund. 

Prices ran, credit tightened, and in March 1792 Duer’s speculation came apart. He went to debtors' prison, where he eventually died.

Hamilton's response was, in effect, the first open market operation in American history: he used the government's ‘sinking fund’, established for slowly paying down debt, to instead buy securities and put a floor under the market. 

A market collapse could have wiped out the still-fragile confidence in the new government's own securities, right after Hamilton had spent a year building that confidence from scratch. 

Buying in to stop the fall was about protecting that reputation, not just the price.
It's the same instinct the Federal Reserve would formalize 121 years later, executed by a Treasury Secretary with no central bank to call on.

The Duer collapse revealed the problem of counterparty risk. 

Trading happened at public auctions, in coffeehouses, wherever — anyone could call themselves a broker.

Nobody could tell who was solvent and who wasn't. Hamilton's intervention saved the prices. It didn't rebuild trust between traders. 

So just two months later, traders closed ranks. 

The Buttonwood Agreement

On 17 May 1792, twenty-four brokers signed a short agreement outside 68 Wall Street — under a buttonwood tree, which is what Americans then called a sycamore.

They agreed on two clauses. They'd trade preferentially with each other. And they'd charge a minimum commission of 0.25%.

They in effect created a cartel. This cartel would later be known as the New York Stock Exchange.

Trading only with each other wasn't a location rule. It was a vetting system. To be one of the twenty-four meant the other twenty-three had to trust your name on a deal. 

Duer had just shown what happens when nobody can answer that question about a stranger. Buttonwood answered it by removing strangers from the market.

The fixed commission did the rest. Undercutting on price is how you win business from people who don't ask too many questions about who they're dealing with. Fix the price, and the only thing left to compete on is reputation.

Neither clause banned bad behaviour. They just made good behaviour the price of admission.

This closed, mutually vouching network of brokers had just watched a market eat itself — so they did something about it. 

In next week’s instalment of 250 Years of American Capital: Thousands of private currencies. A panic every twenty years, like clockwork. And in the middle of all of it, America builds the largest rail network on earth.

This week's quote:

"A national debt, if it is not excessive, will be to us a national blessing."

— Alexander Hamilton

Invest in knowledge,

Thom

The Benchmark

Read more: 2025's winning trade is losing in 2026. 

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If you only read the headlines, you’d think AI infrastructure and the chip trade were the whole story of this year’s first half. 

But looking at the actual returns, a stranger picture emerges.

Of the 21 major asset classes, nineteen finished the first half in the green.

Only two did not. 

Six months ago, in the first Benchmark of the year, I wrote that 2025 was the Year of the Receipt — a year that started on narrative and promise, and ended on proof. 

Gold won because many investors stopped believing America’s financial promises, and started demanding proof of them.

The U.S. Dollar had its worst year in a decade, which drove capital not only into precious metals but into other country’s stock markets, too. 

Well, the receipts are now in for the first six months of 2026. 

The story for gold, among other fascinating narratives, is now very different. 

(Nearly) all green six months in

You can click the scoreboard below for our full interactive table (h/t Charlie Bilello): 

The key takeaways:

19 of 21 asset classes finished H1 2026 in the green — the only two in the red were Gold (-7.0%) and Bitcoin (-31.4%).

Gold and Bitcoin were 2025's two biggest stories (Gold +63.7%, the best performer of the year; Bitcoin weakening -6.3% after posting new highs) — both flipped to the bottom of the board in H1 2026.

Small caps led everything, up 22.6% — their best first half since 1991.

Convertible bonds (+21.6%) and the Nasdaq (+20.2%) rounded out the top three performers for H1. 

Growth was not just a mega-cap story — commodities, mid caps, value, emerging markets, REITs, and the S&P 500 all posted double-digit gains.

Bonds were the boring middle — Treasury Inflation-Protected Securities, Treasuries, investment grade, and total bond market all clustered near flat (0.8%–1.7%), positive but unremarkable.

Bitcoin’s -31.4% would be a second-worst calendar-year showing on the board (only 2018’s -73% and 2022’s -65% were worse), a sharp reversal after topping the leaderboard in 2024 (+121%).

Gold's -7.0% would mark its first negative year since 2015, if it stayed here. This would end a run of five straight positive years including the +63.7% blowout in 2025.

Gold and Bitcoin are sitting exactly where you’d expect the two hedges against a weak dollar and an unstable financial system to sit — except upside down. In a half where 90% of the field made money, the two flight-to-safety trades were the only ones that lost it.

That's not supposed to happen. Gold has long been the hard asset to own when trust in the rest weakens. Bitcoin in recent years has made inroads with hard asset investors, too.

But when every other asset in the list is going up regardless of the FUD… the underperformance they purport to protect against didn’t show, despite bearish macroeconomic sentiment and Fed announcements. 

The debasement trade debunked?

Gold's chart tells its own story.

The metal opened the year already running hot off 2025’s rally, and kept going. 

By late January it had touched an all-time high near $5,600 an ounce — a nearly 30% gain in four weeks.

The narrative in every note and headline was the same one from 2025, just louder.

Currency debasement. Central bank buying. A Fed under pressure. Geopolitical risk, sharpened by a war that had oil spiking and traders bracing for something worse.

The something worse didn’t arrive. The war didn’t spook the financial markets nearly as much as many expected. And the Fed — under a new chair, Kevin Warsh, confirmed into the role this year — did something gold was not pricing in at all.

The Fed triggers a dollar reversal

At the start of 2026, the bond market had two rate cuts priced in for the year.

By July, it was pricing in one to two rate hikes.

Read that again. 

The market expected two interest rate cuts in January, and now it’s pricing in the exact opposite. 

The reversal is worth almost a full percentage point of expected policy.

With inflation stuck (Core PCE at 3.4%, its 63rd straight month above the Fed's own 2% target) and Warsh telling his first press conference that the commitment to actually hitting that target was “strong, unanimous and unambiguous”.

The dollar, which had spent 2025 quietly collapsing, did what dollars do when real rate expectations move a full point in six months. It rallied to a 13-month high.

Gold, priced in the no longer debasing dollar, gave back its entire January spike and then some.

This is the part of the story that stings a little for those who bought gold at $5,600.

Gold didn’t get sold because the debasement story was wrong. It got sold because the debasement, for now, paused. The metal was pricing in a promise about the dollar’s future that the Fed then declined to keep.

Proof, in other words, showed up. It just wasn't the proof gold’s buyers were positioned for.

Michael Burry vs. the AI industrial complex

One Boise, Idaho company has had one of the stranger six months in corporate America so far this year.

Micron doesn't run on narrative. It runs on DRAM and NAND — unglamorous memory chips that every AI data centre on earth is currently short on. 

On June 24, the company reported quarterly revenue of $41.5 billion, up 346% from the same quarter a year earlier, its fifth consecutive quarterly record.

Every single figure in the report beat Wall Street's estimates, some of them by billions.

This isn't the AI story we've grown used to. A hyperscaler promises transformative returns on capital it hasn't spent yet. Micron was already selling every chip it could make. Sixteen customers had signed multi-year, take-or-pay supply agreements just to guarantee they'd get product. The proof had arrived, audited and filed with the SEC.

The stock had already run more than 240% year to date by the start of July, on its way to a market cap above $1 trillion.

And then, on July 2, Michael Burry — the investor who built his reputation shorting a bubble everyone else insisted wasn't one — disclosed a short position against Micron at $1,051.87 a share. 

Micron, he pointed out, has had 34 separate drawdowns of more than 30% across 42 years of trading, a return on invested capital of roughly 4%, and a habit of destroying capital in one quarter out of every three, historically. He called the current rally a case of fear of missing out meeting a greater-fool market, dressed up as an AI supply story.

Burry is one of the most prominent AI skeptics:

But as far as Micron goes, the revenue is real. So is the cycle. Micron's own history is the best evidence for Burry's case, and its own most recent quarter is the best evidence against it.

A great quarter doesn't retire a bad chart, in the same way a bad six months doesn't retire a good decade. 

The market seemingly spent the first half of 2026 handing out report cards to every asset that had gotten too comfortable with its own narrative — gold's fear story, Bitcoin's debasement story, and now, quietly, memory chips' infinite-demand story.

Some assets got graded down. Micron, so far, has not. That verdict isn't final, of course. We’ll see how these narratives interact over the next five months. 

The rest of 2026

The first half of the year has revealed some major capital rotations amid unexpected macro and monetary policy shifts. 

Gold's debasement story, while intact, went stale as a mainstream, urgent narrative.

The dollar had been sliding for a year. But the day the Fed signalled it might hike rates again, gold quickly weakened in price and demand. 

That's the thing worth watching through the back half of the year. None of this is settled.

As I write this, stocks are near all-time highs yet again.

And yet: 

The Fed's shift from two priced-in cuts to talk of a hike rests on core inflation staying stuck near 3.4%. One soft print between now and September could put cuts back on the table. If it does, the dollar's rally likely stalls, and gold's case reopens almost exactly where it left off in January.

Micron is running on a shorter clock. HBM is sold out on paper through the rest of 2026. Whether that holds depends on whether the sixteen supply agreements signed this year turn into shipped product before South Korea's expanding capacity starts showing up in prices. Burry's short doesn't need Micron's business to collapse. It only needs the next quarter to look less extraordinary than this one.

Bitcoin sits downstream of the same mechanism as gold, minus the metal's excuse of physical scarcity. If the dollar keeps climbing, expect more of what H1 delivered. If it doesn't, the loudest comeback story of the second half might be the one nobody was writing about in July.

If the past 18 months has been anything to go by, then it’s safe to assume that when I write to you with the 2026 full-year wrap, the assets and sectors that win and lose might look very different from expectations and forecasts. 

Key numbers to watch? Core PCE. And the dollar index. 

This week's quote:

"It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."

— attributed to Mark Twain

Invest in knowledge,

Thom

The Benchmark

Read more: What the rai stones of Yap reveal about our financial system. 

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Nobody is going to salvage it. 

And yet, for a century, people have owned it, inherited it, and treated it as real, spendable wealth.

This Benchmark is about a form of money which reveals how much financial systems depend upon consensus and belief. 

Quarrying wealth from a limestone cave

Yap is a small, remote island in Micronesia. It has no metal ore worth mining and no hard stone of its own.

So for centuries, Yapese crews sailed roughly 250 miles by canoe and raft to (relatively) nearby Palau. 

There they quarried limestone from a specific cave system by hand, and carved it into enormous discs — flat, round, with a hole punched through the centre so a pole could be run through for carrying. 

The smallest were the size of a dinner plate. The largest ran to 12 feet across and weighed several tons.

They’re called rai: 

Many Yapese died transporting these discs back to their island across open ocean. 

A rai's value rested not on its size, but on its age, the quality of the carving, and the danger of the journey that produced it — including, grimly, how many lives it had cost. 

A smaller stone with a harrowing human cost could outvalue a larger one which had been easier to come by. The Yapese priced in provenance 900 years before wine collectors and art dealers made a pseudo-science of it.

Rai weren't small change. Nobody used a rai to buy fish. They were reserved for the transactions that mattered most in Yapese life: a dowry, a parcel of land, a political alliance, restitution for a serious wrong.

The stone at the bottom of the sea

The largest rai stones were far too heavy to move once ashore. So when ownership changed hands, the stone remained where it rested. Nobody dragged eight thousand pounds of limestone across the village. The community simply noted, and remembered, that it now belonged to someone else.

This wasn't informal or vague. It was tracked as carefully as any deed — passed down through oral history, publicly acknowledged, disputed if necessary. The record was the asset, the stones its symbol. 

Which brings us to the most famous rai of all. American physician-turned-anthropologist, William Henry Furness, spent two months living on Yap in 1903 and documented what he saw in a book published in 1910.

Among the stories he recorded: a crew was rafting home an unusually large, finely carved stone when a storm hit. To survive, they cut it loose and let it sink into the ocean. 

When the crew made it home and explained what had happened, the community decided not to write the stone off. They agreed it had existed, had been properly made, and had been lost through no fault of the owner's — and that a few hundred feet of water shouldn't affect what it was worth.

The stone kept its value. It kept changing owners. It just remained beneath the waves rather than leaning up against someone’s house on the island. 

The Germans learn how to get things done on Yap

Germany bought the Carolines, Yap included, from Spain at the turn of the century, and colonial officials ran into a problem: they needed the footpaths repaired, and the islanders weren't cooperating. Warnings and repeated commands went nowhere.

So they tried something. An official marked several of the most valuable rai with a black cross, declaring the stones now claimed by the government — with the understanding the marks would come off once the paths were fixed. The stones weren't moved or touched beyond the paint.

The paths got repaired, island-wide. Then the government erased the crosses, and the stones' owners resumed possession of wealth that had never physically left their side.

People only needed to believe the ownership had changed, and then believe it had changed back. 

Like the sunken stone, all this required to work was consensus. 

America’s 1932 ‘black cross trick’

The person who made Furness's book famous beyond anthropology was Milton Friedman — Nobel laureate, and the intellectual godfather of modern monetarism. 
He came across it decades later and used both of Furness's stories to open a 1991 essay on how money actually works.

Most people who tell this story stop at the punchline: primitive islanders, silly system. Friedman didn't stop there. He pointed out that the world's most sophisticated financial system had run its own version of the black-cross trick, a few years later, in a basement in Manhattan.

In 1932, the Bank of France grew nervous that the United States might abandon the gold standard, and asked the New York Federal Reserve to convert its dollar holdings into gold. 

Rather than ship the gold across the Atlantic, the Fed did something simpler: it walked into its own vault, set aside the correct amount of gold in separate drawers, and labelled those drawers as belonging to France. Nothing moved. The label change was the whole transaction.

Friedman's point was not that Yap was quaint. It was that we do the same thing, dressed up in better paperwork.

Wealth can move without money moving

The US dollar is Yap's everyday currency today. But the stones remain. The last one was quarried and hauled home in 1931, and the roughly six thousand still scattered across the island remain in use today for ceremonial purposes. 

Today, there's a similar story playing out with gold. 

Central banks now hold close to $4 trillion in gold between them — for the first time on record, more than they hold in US Treasuries. A large share of it doesn't sit in the country that owns it. It sits in vaults in New York and London, placed there decades ago for convenience, liquidity, and trust in the custodian.

That trust took a serious hit in 2022, when the US and its allies froze Russia's foreign reserves as a sanction. The lesson landed on every central bank simultaneously: an asset held in someone else's vault, at someone else's discretion, is not entirely yours.

Germany is living that lesson in public right now. It still holds 1,236 tonnes of gold — more than a third of its total reserve — in the New York Fed's vault, the single largest foreign gold position held there by any country.

German economists and politicians have spent 2026 pushing to bring it home, citing the unpredictability of the current US administration. The Bundesbank's position, for now, is that New York remains a trustworthy custodian.

France has already quietly done its own version. Between mid-2025 and early 2026, the Banque de France sold off older-format gold bars it held in New York and used the proceeds to buy newer, London-standard bars for storage in Paris — twenty-six separate transactions without a single bar crossing the ocean. The bookkeeping alone produced a gain of roughly €12.8 billion. 

Wealth takes many forms. 

A stone disc on the seafloor.

Gold re-tagged in a Manhattan vault in 1932. 

Or quietly reassigned between New York and Paris in 2026. 

Ninety-four years and thousands of miles apart, and it’s the same thing each time: the object stays put, but the value moves, because enough people agree that it has.

This week's quote:

"Money is the most universal and most efficient system of mutual trust ever devised."

— Yuval Noah Harari (Sapiens)

Invest in knowledge,

Thom

The Benchmark

Read more: $457 million a day: Inside the superannuation machine.

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Having graduated university right as the Great Recession (AKA US subprime mortgages) rendered my career prospects in New Zealand pretty much zero, I took my place among the tens of thousands of Kiwis crossing the ditch. 

I found exactly what the record numbers in 2026 making the same journey are finding: 

A superior economic reality in a culture only marginally different from back home; opportunities to work your way up in, and out into, the world; and a genuine path toward building wealth.

What I also found, and completely neglected to understand until many years later, was that as soon as I started my first full-time job, I also became an investor. 

Since 1992, superannuation has been compulsory in Australia.

I didn't choose it. I didn't understand it. Nobody sat me down and asked if I wanted to become an investor — it just happened, automatically, with my first payslip, at a rate I didn't notice and couldn't have changed even if I had.

That's true for every working Australian resident. You don't opt in. You don't opt out. If you’re earning, you’re investing. 

So in this week’s Benchmark, I’m sharing and breaking down 15 remarkable numbers from Australia’s 33 year compulsory super story. 

Some are impressive. Some are uncomfortable. All are worth thinking about. 

1. Super now takes 300% more of your pay than it did in 1992

The compulsory cut of every payslip is  up from 3% in 1992 to 12% today. No opt-outs. The UK's auto-enrolment lets workers leave. The US has no general compulsory retirement savings at all. Australia's version is rare by design: automatic, non-negotiable, and untouched by 33 years of politics.

2. Employers poured $156.3 billion into super in the year to December 2025

That’s more than Australia's entire defence budget. Or roughly what the whole ASX 200 pays in company tax, combined. It arrives whether the economy is booming or bracing for recession.

3. $457 million flows into super every single day

That’s $3.2 billion a week, rain or shine, recession or boom. The number barely moves regardless of what's happening in the economy that generates it.

4. The total super pool is now bigger than Australia's entire GDP

$4.5 trillion in assets, against a GDP of roughly $3 trillion. Equivalent to about a fifth of the nation's total net worth — every home, mine, business and dollar combined.

5. Australia is on track to hold more than half the world's pension assets

Treasury projects $38 trillion by the mid-2060s. Global pension assets today, across every major market on Earth, sit around $68 trillion. Which means one country of 27 million people is on track to hold more than half that combined total by itself.

6. Australia is about to out-save the UK and Canada — with a fraction of their populations

The country is set to overtake the UK's pension pool in 2030 and Canada's in 2031, becoming the world's second-largest behind only the US. Achieved by a country with a third the UK's population and two-thirds of Canada's. 

7. Large super funds charged $10.2 billion in fees last year — about half of what Australian households spend on electricity

Fees paid within APRA-regulated funds in FY24: $4.4bn admin, $3.6bn investment. Total Australian household spending on electricity for the same period is around $20bn — so the cost of running compulsory super, on its own, comes to roughly half of what the entire country pays to keep the lights on.

8. Once SMSFs are counted, total super fees hit $34 billion — 1.6X Australia's foreign aid budget

That's the whole-of-system estimate for FY25. Most of the gap above the $10.2bn APRA figure comes down to scale economics: SMSFs carry largely fixed accounting and audit costs regardless of balance, so smaller self-managed funds pay proportionally far more to run than large pooled funds do.

9. 9 in 10 dollars paid to run super never touch the actual fund

Roughly 90% of the $9–10bn a year funds pay to service providers goes to external firms — custodians, consultants, asset managers — not the institution managing the accounts. Most of what gets called a ‘fund fee’ is really a payment to someone else.

10. Super fund directors are paid more than the median full-time salary — for a part-time job

Directors make $98,809 a year, on average, across 397 directorships. That's above the ~$90,000 median full-time Australian salary, for a role that is, for most directors, part-time.

11. $18.9 billion of Australians' super money is currently missing

It sits lost or unclaimed across 7.3 million accounts — an average of roughly $2,590 per account, waiting to be claimed.

12. 1 in 4 Australians is quietly paying double fees

23% of Australians hold two or more super accounts, often without realising it — each one charging its own admin and investment fees. 

13. Employers didn't pay $6.25 billion in compulsory super they legally owed

That's the ATO's estimate for 2022–23 — about 6% of total Super Guarantee liability that year. Underpayment is typically caught through an audit or a worker complaint, sometimes years after the fact.

14. Super funds underperformed the sharemarket by roughly 6 percentage points

The All Ordinaries Accumulation Index — a simple, undiversified basket of Australian shares — returned 13.1% p.a. since 1990. Diversified, professionally managed, fee-charging balanced super funds returned 7.2–8% over almost the same window. Part of that gap reflects the defensive assets balanced funds hold to manage risk.

15. $1 invested in 1992 is worth $2.84 today 

The value, in real terms, of $1 in the median balanced super fund since the system began — a 5.2% p.a. real return. Only five financial years have finished negative in 33: FY02, FY08, FY09, FY20 and FY22.

The next wave of unwitting investors?

I had no idea when I got my first fresh-off-the-boat paycheck that I had become an investor.

Many of those entering the workforce today likewise probably have little or no idea about the system, the assets, the returns and the fees — let alone the scale of it all. 

Twelve percent of their pay will be invested in their super fund. 

Perhaps in another 30 years it will be more. 

Hopefully, they’ll quickly acquire the financial literacy and knowledge of the Australian system to understand where their money is going and what it’s doing.

This week's quote:

"The years teach much which the days never know."

— Ralph Waldo Emerson

Invest in knowledge,

Note: All figures and statistics presented here are accurate to the best of my knowledge, but I don't claim to be an authority on superannuation, and this newsletter is, of course, in no way financial, tax, or retirement advice. But you knew that. 

Thom

The Benchmark

Read more: Are we on track for S&P 14,000?

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See, writer Richard Fisher argues that humans have evolved the capacity for long-term thinking, and yet almost never use it. 

We default to the next news cycle, the next quarter, the next candle on the chart — what Fisher calls ‘dangerous short-termism’.

The case against short-termism, in April ‘24: a secular bull market, the kind that comes along maybe twice a century, with two veteran strategists — Robert Sluymer and Bank of America's Stephen Suttmeier — both pointing to the same 16-to-18-year cycle and arguing stocks could climb for another decade. 

According to this view, Sluymer saw the S&P 500 reaching 14,000 by 2034 — about twice as high as it trades today. 

But how does it get there?

Well, you might have heard the phrase ‘markets climb a wall of worry’.

Between 2009 and 2017, financial media declared that ‘the easy money has already been made’ nine times. 

And yet, all nine times, stocks continued their climb. 

Well, today, in mid 2026, we’re revisiting this tension between short-term and long-term thinking about the stock market, and considering whether the easy money has perhaps now, finally, been made…

…or if stocks are currently just taking a minor pause before potentially pushing higher for another eight years. 

Is the S&P 500 following the ‘secular bull market’ thesis?

In April 2024 when I wrote one of the first Benchmark emails, the S&P sat around 5,200.

It closed last week at 7,537.

That's a gain of roughly 45% in about two-and-a-half years. 

Measured against Sluymer's 14,000 target, the index has now covered about a quarter of the distance — in roughly a quarter of the 10 years he gave it.

That's not a prediction the market will move in a straight line to 14,000 — no market ever has. 

But it’s worth noting that the trajectory hasn't fallen apart in the two and a half years since these strategists made their case.

The song remains the same

As I write this, Bank of America is calling for the S&P to retreat to 7,100 by year-end.
They cite ‘speculation hitting extreme levels’ and warn of a valuation ‘snapback’. 

Fundstrat's Tom Lee, who is broadly bullish with an 8,000-plus year-end target, went on CNBC to warn of a 10% to 20% drawdown between August and October — something that will ‘feel like a bear market’ before any rally resumes. 

Strategists elsewhere are comparing this AI-driven rally to the late stages of the dot-com bubble.

This is the exact posture of the nine headlines from that old chart. 

The so-called ‘easy money’ has been made. Hard times lie ahead. 

Four new bear calls in 27 months

Since my 2024 piece, the same claim has been made at least four more times — each with a real, specific trigger.

August 2024, yen carry trade unwind: The Bank of Japan raised rates, a soft US jobs report spooked traders, and the unwinding of the yen carry trade tore through global markets. 

The Nasdaq-100 fell 13% in weeks. 

Fortune's actual headline: ‘How An Obscure Japanese Yen Trade Sparked A Global Market Meltdown — And Why The Worst Could Be Yet To Come’. 

By the end of that week, the S&P had recovered every lost point.

January 2025, $589 billion DeepSeek panic: A Chinese startup called DeepSeek released an AI model reportedly trained for under $6 million. 

Nvidia lost $589 billion of market value in a single session — the largest one-day loss in US stock market history. 

The story was that the entire AI capex boom was about to unravel. 

Nvidia is up roughly 76% since that day.

April 2025, Liberation Day recession calls: Trump's ‘Liberation Day’ tariffs triggered a 12% drop in the S&P over four trading days. 

JPMorgan warned of recession. 

Nine days later, the index rallied 9.52% in a single session — its best day since 2008. 

It was positive for the year by mid-May, at new highs by late June, and is up more than 35% since the low.

February–March 2026, oil crisis & dotcom bubble fears: War broke out between the US, Israel and Iran. Oil spiked soared towards $110. 

The Dow fell into correction, the Nasdaq dropped nearly 13%, and even gold — the asset that's supposed to zig when everything else zags — fell 16% in days. 

‘US tech pullback mirrors late stages of dotcom era’, ran one headline. By April, the market had recovered most of the March losses.

These are just four recent ‘easy money has already been made’ calls. 

And just like the nine in the chart I shared above, stocks brushed each aside and promptly resumed their charge higher. 

The case for bearishness in 2026

None of the above necessarily proves the bears wrong. 

A few months back, I compared the current AI IPO pipeline to the dot-com bubble and bust —  the difference this time being that real revenue, not just narrative, appears to be driving the AI companies’ growth. 

CoreWeave, the company I flagged as the bellwether to watch, has swung more than 50% in either direction since its listing — hardly the price action of a confident market with a steady bid.

Fear, uncertainty and doubt abound. 

And there are genuine risks stacking up right now: valuations are stretched to levels last seen in 1999–2000. 

Pieter Levels’ newly-launched Bubble Detector tool makes it clear:

Five overvalueds and two cautions. Worth noting, for sure. 

The ten largest S&P 500 companies now account for close to 40% of the index's total value, which magnifies the damage from any single stumble. 

Much of the current AI buildout is increasingly debt-financed, echoing the telecom overbuild that preceded the dot-com bust. 

And a new, less predictable Federal Reserve chair has traders pricing in rate hikes rather than cuts for the first time in years.

None of that guarantees anything. But all of it is worth taking seriously.

Say the easy money has been made enough times, and at some point, you will be proven correct. 

It's also worth noting what's different about this cycle compared to the nine calls between 2009 and 2017. 

Those years were mostly about recovering from a financial crisis — the worry was generally always some version of ‘this recovery is fake’. 

The four alarms since 2024, on the other hand, have each had a distinct, external trigger: a central bank decision, a foreign AI lab, a trade policy, an actual regional war. That's arguably a higher bar for the bull case to keep clearing, not a lower one. 

The good thing about bad calls

None of the ‘easy money’ alarms above were foolish calls. 

JPMorgan wasn't reckless to flag recession risk in April 2025. DeepSeek posed a genuinely important question about AI spending. Being uncomfortable and being wrong turned out, each time, to be two different things — and markets have a gift for making them feel identical while you're living through it.

I quoted Warren Buffett in my April ‘24 piece: the market moves money from the impatient to the patient. 

The trickier version of that idea is that patience doesn't feel like a strategy while you're using it. 

It feels like doing nothing while everyone around you is reacting to something — checking prices, reading the same headline and reactions in five different feeds, wondering if this is the one that's real.

But doing nothing, as you’ll see here, can be key to immense investment returns. 

Fisher's point about short-termism isn’t really about markets. 

It’s about a species that's very good at reacting to this week, but very bad at thinking in years and decades. 

This week's quote:

"We suffer more often in imagination than in reality."

— Seneca, Letters to Lucillus

Invest in knowledge,

Thom

The Benchmark

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It was Sir Jim Ratcliffe. Chairman of INEOS. Part-owner of the Mercedes team. And Britain's second-richest man.

Since September 2020, this two-square-kilometre principality, which charges its residents no personal income tax at all, has been Sir Jim’s home. 

Before moving to Monaco, his address was a quiet plot in Hampshire — where he'd submitted planning permission for a luxury home five times, and been knocked back five times.

Sir Jim’s move made almost no noise: it surfaced in a Companies House filing, a director simply updating his registered address for a private jet company. 

Yet with his departure, Britain quietly lost one of its largest individual tax contributors. 

In the tax year before he left, Ratcliffe paid roughly £110 million to the UK Exchequer — the third-largest individual contribution in the country. By some estimates, Monaco will save him £4 billion in income taxes over his lifetime.

Dame Margaret Hodge, former chair of parliament's Public Accounts Committee, put it bluntly: “It seems he is so rich he can't afford to pay his taxes.”

She meant it as an insult, of course. But she inadvertently described the idea I’m exploring in this week’s Benchmark. 

Sir Jim isn't exempt from paying tax. He's simply one of a growing number of people on Earth for whom it has become optional. 

The deal nobody signed, and the weekend it ended

Every government assumes, without saying so, that the people it taxes will still be there next year. 

For most of history, that didn't need defending. It was physics. Wealth was a field, a herd, a granary — you couldn't hide a wheat field from a tax collector. 

That immobility was the foundation of the old bargain: protection in exchange for tax, because there was nowhere else for the money to go. 

But remove that immobility, and the bargain becomes a negotiation — and negotiations favour whoever has more options.

The old bargain, you could argue, ended on Friday 13 August (seriously), 1971.  
At 2:29pm that day, President Richard Nixon walked out of the White House, boarded Marine One, and disappeared.

His own chief of staff had organized the meeting the day before — and given everyone the same instruction: 

Tell no one where you're going. Not your office. Not your family. 

Fifteen of his most senior officials were waiting for him at Camp David, the presidential retreat hidden in the Maryland mountains. Once they arrived, they were ordered not to phone anyone outside the gates.

Two days later, Nixon told the country, almost as an aside mid-speech, that the United States would no longer exchange dollars for gold. 

For 27 years, one dollar had been a claim on a fixed weight of metal in a vault. 
But that Sunday, it was just an idea everyone agreed to keep believing in. 

Nobody in that cabin meant to free capital from the nation-state — they were patching a balance-of-payments crisis. 

But you can argue that severing the dollar-gold link triggered the Age of Sovereign Capital. 

Pay or go: Wealth is migrating more than ever

When an institution stops serving you, there are really only two things you can do: stay and complain, or leave. 

The economist Albert Hirschman — a refugee from Nazi Germany — built one of the more useful ideas in social science out of that choice, naming the options exit and voice. 

His insight: exit looks clean, but it quietly drains away the very people most capable of fixing things from within.

Most citizens only really have a voice. 

But the wealthy are different — for them, exit is an option. One person, one vote is supposed to be democracy's foundation. One billion dollars and a passport drawer full of alternatives is a different kind of vote — and unlike a ballot, it needs nobody's permission to count.

So let’s count some votes. 

Roughly 142,000 millionaires relocated internationally in 2025. The forecast for 2026 is 165,000 — the largest wealth migration ever recorded.

That 2026 figure is triple the pace of just over a decade ago. This trend is accelerating. 

Britain lost more than 16,000 millionaires in 2025 alone — the largest single-year exodus any country has recorded. 

Norway raised its wealth tax, watched enough billionaires leave to notice, then raised its exit tax in response — a government literally trying to make leaving more expensive after the fact. 

The wealthy are no longer making simple relocation decisions.

Henley & Partners — a firm that tracks this — now frames it as building ‘sovereign portfolios’: multiple residencies, multiple passports, multiple jurisdictions held simultaneously. Not exit, but permanent optionality.

When (paying tax) in Rome

This isn't the first time a wealthy class has quietly exited the tax base funding the state that protects it. 

Rome's senatorial class was its wealthiest landowners, and taxes on their estates helped fund the legions protecting the empire they lived in. 

Over the later centuries, that link broke. Emperors, courting powerful families, granted them tax remissions — occasional at first, then routine — until the wealthiest estates were effectively untaxable. 

The legions still needed paying, so the burden shifted onto everyone else, who had no estates to shelter and no emperor courting their favour. It got severe enough that ordinary Romans began fleeing into the protection of the very estates whose owners had caused the imbalance.

Historians don't all weight this the same way — plenty point to military collapse as the dominant story of Rome's fall. But the fiscal mechanism is real: elite tax flight narrowed the base, the narrower base pushed the burden down, and the burden pushed people toward the class that caused it. A doom loop.

Going where they are treated best

The competition for wealthy residents has become an actual marketplace. 

Puerto Rico offers US citizens who relocate a 0% tax rate on capital gains, dividends and interest — a haven the US built inside its own borders to stop capital leaving entirely. 

The rate expires for new applicants from 2027, dropping to 4% — and the IRS is investigating people claiming it without genuinely living there. 

Dubai, Monaco and Singapore actively market themselves to footloose wealth. 
Ireland built a strategy around a 12.5% corporate rate.

According to Henley & Partners:

The UAE attracted approximately 9,800 millionaires last year, bringing an estimated $63 billion in associated wealth — the leading destination for two consecutive years.

The top ten: UAE, USA, Italy, Switzerland, Saudi Arabia, Singapore, Portugal, Greece, Canada, and Australia. 

Nine of the ten operate structured investment migration programs — they have literally built government departments to compete for this capital.

New Zealand, too, is exploring more ways to incentivize wealthy people to establish residency there, as it faces a capital flight and an eroding tax base. 

President Trump launched a ‘Gold Card’ in December 2025 — permanent US residency for a $1 million investment plus a $15,000 processing fee. 

Greece is one of the clearest recent beneficiaries — rising sharply after Spain closed its golden visa and Portugal restricted its real estate investment route. 

When governments close established pathways, demand doesn't disappear, it just relocates. 

The empire taxes back

In 2021, the OECD corralled 140-plus countries into agreeing a global minimum tax — a floor of 15%, designed to give companies nowhere cheaper to hide. This attempt was about four years in the making. 

But on January 5 this year, the United States — the largest economy in the agreement — secured itself an exemption. The country whose participation mattered most opted out of the agreement it helped design.

Europe is trying the opposite approach. 

The European Commission published a report in April examining exit taxes, levied on wealthy residents if they want to take their income elsewhere, as Sir Jim Ratcliffe has done. 

Eight of the EU's 27 members already have exit taxes. The report cites Norway, which raised its wealth tax, watched billionaires leave in numbers too large to ignore, then raised its exit tax in response. Read my Norway tax flight breakdown here. 

These two documents tell you about what nations are trying to do right now. One is trying to give corporate wealth nowhere cheaper to hide. The other is effectively trying to lock the door on a region’s wealthiest residents before it’s too late. 

New tax jurisdiction, who dis?

The old bargain — protection in exchange for tax — was never written down. It didn't need to be. Geography enforced it. Wealth sat in fields and granaries and couldn't outrun a tax collector. 

The state had leverage because capital had nowhere else to go.

But when Nixon severed the dollar from gold, money became disconnected from anything fixed and physical. The silent contract between the individual and the state began to disintegrate. 

Now, the wealthiest build sovereign portfolios instead of paying sovereign taxes. Rome's senatorial class did the same — and the burden that shifted onto everyone else eventually hollowed out the empire from within. 

Governments today are reaching for the same tools Rome's emperors reached for: carve-outs for the powerful and exit taxes to make leaving expensive.

Jim Ratcliffe didn't make an argument when he left Britain. He didn't publish a manifesto. He updated an address on a form, flew to Monaco, and now watches grand prix from his balcony.

This week's quote:

"The proprietor of stock is properly a citizen of the world, and is not necessarily attached to any particular country."

— Adam Smith

Invest in knowledge,

Thom

The Benchmark

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The TL;DR: 

The US Third Army extracted 122 scientists from Jena in eastern Germany, and drove them south to a village called Oberkochen.

The operation subsequently handed the Carl Zeiss company a monopoly on optical precision that every single AI chip now depends on. 

Every EUV lithography machine (the thing that makes the chips) on Earth runs on mirrors ground in Oberkochen — mirrors so flat that if you expanded one to the size of Germany, the highest surface variation would be 0.1mm.

If the Americans hadn’t moved Carl Zeiss to what became West Germany after the war, the Soviets would have had control, and the supply chain for today’s ~$500 billion AI industry might look very different. 

Today I'm sharing the second part to this story; another quietly crucial commercial relationship between a German manufacturer and the Dutch ASML — the company printing billions of transistors onto the slices of silicon that enable all the compute powering AI. 

By the end of this, you will understand why there’s a secret war playing out right now between Germany and the US. 

The AI production Trumpf card

About 130km from Oberkochen, in a town called Ditzingen, there’s a company called Trumpf.

Yes, that’s ‘Trump’ with an f on the end. 

While Carl Zeiss makes the mirrors, Trumpf builds the laser amplifier that makes EUV lithography possible. 

Without it, ASML's $400 million chip-printing machines don't work. 

Without those machines, Taiwan Semiconductor Manufacturing Company can't print the chips. 

Without those chips, Nvidia's GPUs don't exist. 

Without those GPUs, the AI industry is running on something substantially less impressive than what you might be using right now. 

Here’s how the laser amplifier works. 

A generator drops tin droplets into a vacuum chamber. Each droplet is smaller than the laser's own focus spot. A pulsed CO2 laser has to strike each one — 50,000 times per second — ionising the tin into plasma that generates the 13.5nm wavelength light EUV lithography requires.

To reliably hit something smaller than its own beam, Trumpf's engineers developed a pre-pulse: a low-power shot that flattens the droplet into a disc first, giving the main pulse a wider target.

Trumpf calls the whole process ‘high-tech clay pigeon shooting’.

That's underselling it.

There is no other company on Earth that builds this laser amplifier. 

So ASML has a single supplier for the most critical system inside the most critical machine in the AI supply chain — and that supplier is a privately held German company that very few investors know about. 

Germany’s quiet stranglehold on chip production

When I wrote about Zeiss, I framed it as a hidden monopoly. That was correct, but incomplete.

Zeiss and Trumpf aren't two separate chokepoints. They're two legs of the same structure.

The third leg is ASML itself. 

The Dutch company has taken a 24.9% stake in Zeiss's semiconductor division for roughly €1 billion, committed around €220 million in R&D support and another €540 million in investment support. IP is shared openly. 

ASML executives have described the relationship as a ‘virtually merged company’.

So Zeiss, Trumpf and ASML together form a European tripartite commercial alliance through which the entire AI chip supply chain must flow.

ASML can’t make the chips without Trumpf’s lasers, and they can’t use those lasers without Zeiss’ mirrors. 

But small-town Germany is a long way from Silicon Valley.

Which, if you’re the US, is a problem. 

From liberating Europe, to fighting it

Here is what the US Army's 1945 Zeiss extraction actually accomplished: it moved the intellectual property and R&D capacity, but not the institution.

Washington got the scientists and the blueprints. But Carl Zeiss — as a company, as a culture, as a compounding institution — remained German. 

So did everything that grew up around it, including Trumpf, founded a decade later up the road in the same state. 

For the next eight decades, the US approach to these businesses was one of containment. 

Export controls, diplomatic pressure, restrictions on what could be sold to whom. 

It worked, mostly. 

But it didn't change the fact that a family-owned company in a small German market town was the sole supplier of the most critical laser in the AI supply chain.

This year, the strategy has shifted.

The US Department of Commerce has committed up to $150 million to a startup called xLight, chaired by Pat Gelsinger — until recently the CEO of Intel. 

xLight is building a free-electron laser specifically designed to replace Trumpf's CO2-on-tin-droplet system — with a government target of producing first test wafers by 2028.

This is a direct attempt to make the company in Ditzingen redundant, and replace it in the AI supply chain. 

Simultaneously, Commerce Secretary Howard Lutnick has been pressing ASML — warning executives that Washington has evidence an EUV machine was diverted to China in breach of export controls. 

ASML denies. No EUV system has ever shipped to China, the company says. No evidence has been made public.

So there is pressure on the integrator from the outside. And an active attempt to replace Trumpf  from the inside. 

Bearing in mind that the US government took a 9.9% stake in intel last year...

You might say Trump is trying to trump Trumpf.

Seriously, though…

The 1945 operation used trucks and soldiers. 

The 2026 version uses a federal cheque, a former semiconductor CEO, and an unverified accusation delivered in a private meeting. 

The objective is the same — to wrest control of critical technology from a foreign power. 

Trumpf's most recent numbers tell you something about what Washington is up against. 

Revenue fell 16% in FY2024/25, to €4.3 billion. The EUV division specifically fell 23%, to €724 million. 

In a listed company, like Intel, that's a restructuring conversation — activists circling, analysts demanding answers, a board under pressure to cut what isn't earning.

But for Trumpf, it's just a bad year.

Trumpf is 90% owned by the Leibinger family, chaired by Nicola Leibinger-Kammüller, with the remaining 10% held by the Berthold Leibinger Stiftung — a foundation. 

There is no earnings call. No activist building a stake. No analyst asking whether the EUV division is earning its capital allocation. 

The company that holds the laser monopoly at the centre of the AI supply chain has never once had to justify that position to a public market. They make their money from their clients, not from the capital markets. 

That's how they built their position in the first place. Trumpf spent the better part of two decades developing a laser that the market couldn't value, for a technology — EUV lithography — that most analysts considered commercially unviable well into the 2010s. A public board might have killed the programme. The Leibinger family didn't.

It was a similar story with Carl Zeiss. Nikon and Canon — both listed — assessed the atomic-precision optics problem and concluded it was physically impossible. Presumably because no public board could justify funding three decades of uncertain R&D to shareholders who needed the position to work this year.

Zeiss, insulated by its foundation structure, funded it anyway. It took thirty years. But it worked.

Washington is now trying to replicate sixty years of that kind of compounding institutional patience with $150 million and a two-year mandate.

So the secret war for the AI supply chain has been raging since 1945. It's never been louder than it is right now. And right now, its most important battle is being fought over a laser, in a town most people have never heard of.

This week's quote:

"The supreme art of war is to subdue the enemy without fighting."

— Sun Tzu

Invest in knowledge,

Thom

The Benchmark

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B was one of the first people ever to try Navexa, the investment performance tracking platform which brings you this newsletter. 

In doing so, B was also the first person to request that our platform support performance tracking not just for stocks, but for digital assets, too. 

Reason being, he had some Bitcoin and stocks he wanted to properly track and report on (something which, surprisingly, brokers, exchanges and wallets don’t make easy). 

So we built the capability into the product, and B duly added the trades he wished to properly track. 

Six trades, to be exact:

Three Bitcoin buys, and three ASX-listed stocks (two in the mining space, and one in the blockchain space). 

Now here’s where B’s story gets intriguing. 

Shortly after the last trade he entered in his portfolio, he stopped keeping track. 

He moved overseas for a career opportunity, did a bunch more investing and trading, changed his tax jurisdiction (which included navigating exit taxes...), and generally forgot about his Navexa account. 

Which brings us back to our dinner a couple of weeks ago. 

B told me that all these years later, he still receives weekly and monthly portfolio update emails regarding those trades he made between 2013 and 2018. 

His Navexa portfolio has become a window into an alternate timeline in B’s life — one in which he only made those six trades, and did nothing else. 

Eight years since the last trade in the portfolio, this is what could have been:

A $722,051 capital gain — more than 918% a year since inception — from $8,242 of starting capital. 

The three ASX stocks, combined, are down $4,151.88.

One of them — AVZ — isn't just down. It's gone. 

At its peak, AVZ Minerals was valued at $2.8 billion. Its lithium project in the Democratic Republic of Congo got tangled in a two-year ownership dispute, the stock was suspended in May 2022, and in May 2024 — having never traded again — it was formally struck from the official list of the Australian Securities Exchange. 

The BTC position — bought in three small, almost accidental instalments for a combined outlay of just $2,165 — would now be worth $728,368.90.

And that’s the key here: would.

Because like I said, this account stopped reflecting B’s actual trades and investments almost 10 years ago. The reality is that he, in his words, ‘got chopped up’ by trading his Bitcoin for other digital assets, and then trading again, and again, buying and selling and incurring all the fees and friction which doing so entails. 

His Navexa account is now a testament to what could have been. The update emails a weekly and monthly reminder that if he’d only sat tight all these years, his barely $2,000 BTC investment would be worth the best part of a million dollars, having peaked at more than $1,400,000 in late 2025. 

As B said to me at dinner: ‘All I had to do was nothing.’

Why dead investors tend to outperform the living

I haven’t engineered this story for the sake of a newsletter.

It’s not just true. It’s common. 

There’s a legendary, possibly mythical, impossible to accurately source, Fidelity internal review of which client accounts had performed best between 2003 and 2013. 

The answer wasn't the day traders. It wasn't the ones with the most sophisticated advisers, or the most rebalancing, or the most attention. 

The best-performing accounts belonged to investors who had died. 

The second-best belonged to people who had simply forgotten they had an account.

This has nothing to do with dying or forgetting, really. It has to do with time. 

Because long term, markets tend to reward this same pattern.

A $10,000 investment in the S&P 500 between 1996 and 2025 turned into $192,167.

That’s about 10.3% a year, compounded for 30 years. 

Miss just the 10 best days of that period, and the return falls by $106,677, with a CAGR of about 7.4%.

Miss the best 30 days, and it falls by $161,044 compared to remaining fully invested. 

Missing just these 30 days across the 30 years effectively cost nearly everything.

It takes the annualized performance down to just 3.83% a year — barely ahead of inflation, and a fraction of the 10.27% the ‘fully invested’ portfolio generated. 

There’s a cruelty in this mechanism: the best days don't arrive during calm times. 

The overwhelming majority of the market's best days happen during, or immediately after, its worst ones. 

To dodge a crash, one must likely dodge a rebound, too, since they are usually the same event wearing different faces, a few days apart.

This is why we have the maxim: time in the market beats timing the market. 

In the scenario above, as in B’s alternate timeline portfolio, all one had to do (having first made intelligent investment decisions — which is a whole other story), is nothing. 

Why doing nothing feels irresponsible

So if the data is this lopsided, why doesn't everyone just buy and forget?

Because doing nothing has never felt like a strategy. It feels like negligence.

There's a well-documented asymmetry in how we process regret. 

If you act and it goes badly, that's a mistake — painful, but explicable. You took a swing. Gave it your best shot. Better to have tried and failed, and so forth. 

If you don't act, and it goes badly anyway, that failure feels worse, somehow, even though the financial outcome might be identical. 

Inaction regret has a particular sting to it: the nagging sense that you could have done something, and chose comfort instead.

So we act. 

We rebalance, we rotate, we take profits, we cut losses, we add the ‘promising’ small cap, we trim the position that's ‘had a good run’. 

We tell ourselves we’re stewarding our wealth, when many times all we’re doing is meddling and muddying the water for no real reason. 

B’s alternate timeline portfolio, and the Hartford Funds graphic, show you the profound power of doing nothing, and allowing time to work its compounding magic.

Getting out of our own way

The uncomfortable truth here is very simple.

B's story shows that single highest-returning decision in this entire portfolio was not a decision at all. It was the absence of one.

Forget research, conviction, timing, rebalancing, trying to read technical indicators or trade the news. 

His alternate timeline account sits there, tracking every dollar and percentage point of growth he could have captured, a ghost of compounding that could have been, a monument to the one move that costs nothing, requires no skill, and that almost nobody can bring themselves to make.

This week's quote:

"Don't just do something, stand there."

— attributed, perhaps apocryphally, to Jack Bogle, founder of Vanguard

Invest in knowledge,

Thom

The Benchmark

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This is the Česká Národní Banka — the Czech National Bank. 

And today, in the spirit of my attending a conference centred on sound money and financial sovereignty, I’m going to tell you about three times this bank has been robbed. 

Robbery #1: The Nazis

In 1939, this institution was known as the National Bank of Czechoslovakia. 

On March 15 that year, German troops marched into Prague through snow and rain. 

This photo was taken around the corner from the hotel in which I am writing to you:

Within days, Germany’s Reichsbank had its eyes on the National Bank's gold reserves. 

The gold was worth about $1.1 billion in today's money.

But the physical gold wasn't in Prague. It was held, as was standard practice, at the Bank for International Settlements (BIS) in Basel — the so-called central banker's bank — and at the Bank of England in London.

So the Reichsbank made a request: Transfer the Czech gold from the National Bank's account to theirs.

The Bank of England complied.

This happened despite the British government having frozen all Czech assets held in the UK following the invasion. 

The governor of the Bank of England, Montagu Norman, was subsequently asked by the Chancellor whether the bank was still holding Czech gold. His reply carefully avoided answering the question.

The gold moved anyway. About £4 million went to banks in Belgium and Holland. The rest was sold in London.

Labour MP George Strauss stood up in the House of Commons and called the BIS "the bank which sanctions the most notorious outrage of this generation".

The institution that was supposed to be neutral — above politics, the bedrock of international financial trust — had looked at the ledger, and chosen the side with power. 

When sovereignty collapsed, the assets went with it. 

The gold didn't disappear because the vault was broken into, but because the people controlling the ledger made a decision.

And that was just the state's wealth. 

For citizens, the theft was quieter: the Czech koruna was pegged to the Reichsmark at a rate that overvalued the mark by some 60%, meaning every German in the Protectorate bought Czech goods, assets, and labour at a discount — paid for by everyone holding koruna.

Robbery #2: The Communists

Fourteen years after the Germans marched on the city, Prague was under different management.

The Communist regime had been in power for five years. 

The economy was struggling. Behind closed doors, party officials had been quietly preparing a monetary reform — a currency redenomination that would, in effect, wipe out private savings accumulated under the previous system.

On the evening of May 29, 1953, Czechoslovakia's president, Antonín Zápotocký, went on national radio.

He told the public the currency was strong. That there would be no monetary reform. That their savings were safe.

That same evening, the shops closed.

The next day, a different voice came over the same radio — Prime Minister Viliam Široký, announcing the reform Zápotocký had denied hours earlier. The president hadn't even delivered the betrayal himself.

The reform took effect on June 1. 

Old currency could be exchanged for new — but at a rate of 50 to 1 for amounts above a basic threshold. Savings accumulated over a lifetime were reduced to almost nothing overnight.

The old and new currencies were both the Czechoslovak koruna (Kčs) — same name, new notes.

The new 1953 banknotes were printed in Moscow. So the money that replaced people's savings wasn't even printed in Czechoslovakia.

Here’s the before/after:

In the West Bohemian city of Plzeň, 20,000 workers poured into the streets. Most of them were employees of the Škoda factory. They had just received their monthly salaries in currency that was suddenly nearly worthless.

It was the first major public protest in any Soviet satellite state since the Communist takeover.

The man with the keys to the ledger had lied, on purpose, the night before he changed it.

The protests were crushed. Hundreds were arrested, and in Plzeň, the military moved against the same workers the regime claimed to represent.

But the deeper damage wasn't measured in arrests. An entire generation learned, in a single morning, that savings were not theirs to keep — that prudence could be undone by decree. 

For the next four decades, Czechs hid wealth in goods, in property, in anything the state couldn't reprint. 

People’s trust in money, once broken, didn't return with the regime's fall. It simply moved elsewhere.

Robbery #3: The Bureaucrats

The third robbery is the quietest. And in some ways the most instructive.

On January 1, 1993, Czechoslovakia ceased to exist. The Czech Republic and Slovakia became independent states — the Velvet Divorce, named for the Velvet Revolution that had ended Communist rule just four years earlier.

The two governments signed a currency union agreement. The Czechoslovak koruna would remain the shared currency of both new states for at least six months while each side prepared for an orderly transition.

At least that was the promise. It lasted five weeks.

The problem wasn't bad faith. The problem was that everyone could do the maths. 

The Czech economy was stronger, which meant a future Slovak currency would almost certainly be weaker — and if you were holding koruna in a Slovak bank, the rational move was to shift it into a Czech one while the two currencies were still the same thing.

So that's what people did. Deposits flowed west. Companies delayed payments to Slovak partners and accelerated payments to Czech ones. The expectation of separation drained the union, which forced the separation. The promise was being arbitraged to death by ordinary depositors doing simple arithmetic.

On February 8, the union was dissolved. Payments between the two countries stopped. Border controls were tightened to stop people moving cash. Citizens were given four days to present their banknotes for stamping. Stamped notes were valid in your new country. Unstamped notes were not.

Four days.

Nobody lost their savings in 1993. There was no villain, no lie, no jackboot — economists still cite it as the model currency separation.

But Slovaks who went to bed in January holding the same koruna as their Czech neighbours woke up in February holding something else. Within months, the new Slovak currency had devalued by around 10%.

No one was robbed. Their money was simply redefined — by a border they didn't draw, on a deadline they didn't set.

What will Prague teach us about Bitcoin in 2026?

Three times in 54 years, someone rewrote the rules of money in this city.

Each time, the people holding the ledger made a choice that ordinary savers couldn't see coming, and couldn't stop. 

The threat wasn't always a foreign army. Sometimes it was a friendly voice on the radio the night before. Sometimes it was a bureaucratic deadline most people didn't hear about in time.

The specific failure mode, across all three episodes, is the same: the ledger was controlled by people whose interests, when it came to it, were not the same as the public’s.

It didn't matter how solid the building looked. It didn't matter how trusted the institution was. It didn't matter that the gold was supposed to be ring-fenced, frozen, protected by diplomatic convention. 

When the moment came, whoever held the account details held the power.

Sovereignty over your assets was always, ultimately, borrowed from the state. 

Even today, you can dig into the fine print of many banks’ terms and conditions only to discover that ‘your’ money in the bank is really theirs. 

Bitcoin — the asset we're in Prague this week to discuss — is the first monetary system in history where this particular failure mode doesn't exist.

Not because the people involved are more trustworthy. They aren't. The industry around Bitcoin is full of humans making promises, and humans break promises when their incentives change — as the last decade of exchange collapses and abandoned pledges has demonstrated repeatedly.

The difference is narrower than the evangelists claim, and more important than the sceptics admit: the protocol itself makes no promises that depend on anyone keeping them. The supply is fixed by mathematics, not policy. The ledger is held by everyone, which means it can be captured by no one. There is no governor to lean on, no president to lie on the radio, no account at the BIS to quietly reassign.

Everything built on top of Bitcoin can fail the old-fashioned way. But the base layer cannot.

Whether that distinction matters is, in the end, a question about history. And Prague has rather a lot of it.

A city that has watched its ledger captured by force, rewritten by lies, and dissolved by arithmetic might reasonably conclude that a ledger no one controls is worth at least a conversation.

Which is perhaps why, this week, tens of thousands of people are here to talk about it. 

This week's quote:

"The struggle of man against power is the struggle of memory against forgetting."

— Czech novelist Milan Kundera

Invest in knowledge,

Thom

The Benchmark

Read more: What if this is only 1996 for AI, not 1999?

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And you see charts like this…

And perhaps you think…

It's too late. The ship has sailed.

A generational bull market in tech stocks has, against a backdrop of relentlessly bleak macroeconomic and geopolitical news, stormed higher and higher for the past four years.

The biggest companies on Earth are now worth trillions.

ChatGPT has more weekly users than all but two countries have people.

Every earnings call has become an AI earnings call.

Nvidia keeps setting new records for consecutive knock-out quarters.

The trade looks crowded and the valuations look stretched. And in the back of your mind — or in the front, if you follow this sector daily — a voice says the easy money was made long ago, by those who moved early.

This, Reader, is the heady cocktail of FOMO and FUD — and a lot of investors are drinking it right now. They watch others ride the unstoppable money machines higher, equal parts envious and fearful. 

Surely nothing this profitable can last?

History agrees, up to a point. Roaring bull runs end sooner or later, and the ones that go vertical tend to correct just as violently (see below...).

But this AI market has already proved a great many people wrong a great many times.

So in this week's Benchmark, I'm going to share 12 facts that pose the question:

What if 2026 isn't the equivalent of the Dot Com Bubble's final phase in 1999...

But the equivalent of 1996?

Just three years separate 1996 from 1999 on the calendar. 

But on the adoption curve, they're a world apart.

This is the normal distribution of tech adoption: 

This is the NASDAQ composite through the 2000 dot com crash: 

And this is the percentage of American adults using the internet between 1995 and 2014:

As you can see, the adoption chart doesn’t register the tech stock crash at all. 

So people talking about an AI bubble might really be talking more about an AI stock bubble. 

But in terms of adoption, it’s possible that this is 1996; very early days. 

So the feeling that you're late is worth questioning. 

In 1996, Netscape had already gone public. 

‘The internet’ was taking over magazine covers. 

People were already whispering about a bubble. 

And yet Amazon hadn't listed. Google didn't exist. Barely one percent of humanity had ever been online.

Anyone who felt late in 1996 was early by a decade.

Here are 12 numbers that suggest the same might be true for AI in 2026:

1. Compounding hyperscaler spending

Four companies — Microsoft, Amazon, Alphabet and Meta — will spend roughly $700 billion on capital expenditure this year.

Nearly double last year.

Up from barely $200 billion in 2024.

They are pouring the roads, ports and power stations of the AI age at a pace the world has never financed before.

2. The fastest-adopted product in human history

ChatGPT crossed 900 million weekly users in February.

It doubled in twelve months.

It reached 100 million users in two months. Instagram took two and a half years.

3. Nine out of ten people are not using AI yet

Those 900 million weekly users represent about 10% of the world's adults.

Closer to 15% of the people already online.

The fastest-growing product in history, and it still hasn't reached the other 90%.

Consider the car:

4. Four in five people have never even typed a prompt

ARK Invest puts it plainly: Only roughly 20% of smartphone users have ever used an AI chatbot.

And a chatbot is the easy part.

Actual AI agents — the ones doing multi-step work — sit far below even that.

5. Everyone is talking. Almost no one has shipped.

Ask companies, and 88% will tell you they 'use AI'.

Ask the US Census Bureau, which measures what firms actually run in production, and the number is about 10%.

The gap between those two figures is a signal. 

6. Ninety-five cents of every ‘transformation’ dollar hasn't come home yet

Of the companies that have deployed AI, just 5.5% report a real earnings impact.

MIT found the same thing from the other direction: Roughly one AI pilot in twenty ever reaches the bottom line.

7. A $700 billion engine that barely turns the economy

Of the 2.2% the US economy grew in 2025, only about 0.2 points came from all that AI investment.

Goldman Sachs' chief economist has a blunter word for it: ‘basically zero’.

The reason is almost funny — most of the gear is imported. As he puts it, America's AI boom is mostly adding to Taiwanese and Korean GDP, not its own.

8. The gun, not the finish line

This is the same Goldman that projected AI could add 7% to global GDP over a decade.

Both things are true at once.

The promise is enormous. The delivery has barely begun. 

9. The last time this happened, it took forty years

Electricity was commercialised in the 1880s. Factories rushed to install it.

And for four decades, productivity barely moved.

The gains didn't arrive until the 1920s — once a generation of managers stopped bolting motors onto steam-era factories and redesigned the whole building around the new technology.

Forty years from the switch to the payoff. 

10. Each wave hits faster than the last

The telephone needed 70 years to reach half of America.

The PC, 26.

The cellphone, 16.

The smartphone, six.

11. If AI was the iPhone

When smartphones sat where AI chatbots sit today — about 20% penetration — the year was 2010.

The iPhone was three years old.

We were far closer to the beginning than to the 82% we would eventually reach.

12. A prodigy that trips on the stairs

At the July 2025 International Mathematical Olympiad, three AI systems hit gold-medal level for the first time: Google DeepMind, OpenAI, and Harmonic, each by a different method. 

The two headline ones were Google DeepMind's Gemini (the Deep Think version) and OpenAI's reasoning LLM, both solving 5 of 6 problems for 35/42 — exactly the gold threshold. 

Only about 10% of the elite human contestants won gold that year.

And yet…

Show a leading AI model an ordinary analogue clock and it reads the time correctly about one in ten times — worse than a random guess on some clock faces.

This is what a technology looks like before it grows up.

So…

Is it late, or early?

The hype might suggest late. But the adoption and investment numbers say early. 

Twenty percent of phones, 10% of firms, basically nothing in the GDP figures yet — that's probably not a market running out of room. 

Which is not to say AI stock prices are cheap. They might be wildly expensive; vertical charts have a way of correcting. The bubble talk could prove right. 

But a stock bubble and a dead technology are not the same thing. 

The internet crashed 78% in 2000 and still went on to transform the world.

This week's quote:

— Attributed to Vladimir Lenin

Invest in knowledge,

Thom

The Benchmark

Read more: Office workers digging their own graves.

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September 19, 1977, to be precise. 

A morning announcement from Youngstown Sheet & Tube in Youngstown, Ohio: Five thousand jobs, terminated, effective immediately.

The locals called it Black Monday. 

Within a decade, the Mahoning Valley would lose 50,000 steel and steel-related jobs. 

The population of Youngstown would halve. 

Today, nearly 40% of the people who remain live below the federal poverty line.

The pattern repeated up and down the Great Lakes.

Pittsburgh manufacturing employment peaked in the 1950s: 382,000 jobs. 

Today: About 83,000. A 78% decline.

General Motors in Flint, Michigan, employed 80,000 people there at the peak. 

Today? Fewer than 7,500.

Detroit became the only American city ever to grow past one million residents and then contract back below it.

The Packard alone employed up to 40,000 people. 

It went from producing beautiful machines like this one I saw on the street this week: 

To becoming one of the most photographed ruins in Detroit:

This American industrial decline took thirty years. 

It happened slowly enough that the country had time to give it a name (the Rust Belt), make movies about it, study it, debate it, retrain its workers (badly), and then, eventually, mostly look away.

The defining image was that of a closed factory gate. 

Today, the gate is closing again. 

But it’s not in automotive factories and steel plants. 

And it’s happening about four times as fast. 

The canary in the Cubicle Belt

“I was literally digging my own grave.” — Geoff McGehee, 54, recently laid off from Sears Home Services, where he integrated AI into the customer-service operation that subsequently replaced him.

The Wall Street Journal published a piece this week headlined 'Phoenix Built an Empire of Cubicle Jobs. AI Is Coming to Tear It Down'.

The numbers in it deserve a closer look than they will probably get.

Phoenix's customer-service workforce peaked at 92,970 in 2021. 

By 2025, it had fallen to 68,930. 

That’s a 26% drop in four years. 

It took the entire 1980s to deliver a hit of that scale to Youngstown steel.

Sixteen and a half million Americans work in office and administrative-support jobs.

That number is down from 18 million at the end of 2019. 

The US Bureau of Labor Statistics projects another 4% decline over the next eight years — the steepest fall of any major employment category it tracks.

Phoenix is the canary. Or, more precisely, the cubicle is.

The story of how Phoenix became the back-office capital of America is not accidental. 

American Express opened its first regional Phoenix office in the 1960s. 

Long-distance phone lines and early computer networks meant payroll, claims processing and customer-service work no longer had to sit next to the executives who depended on it. 

Phoenix had cheap land, low taxes, no unions, sunshine, and an airport. 

The 1980s classified pages of the Arizona Republic were stuffed with ads for insurance-claims adjusters, customer-service supervisors, associate auditors.

By 2019, for the first time in its history, the Phoenix metropolitan area had more customer-service representatives than manufacturing workers.

The Cubicle Belt was the replacement economy for the Rust Belt. It absorbed the workers, the children of workers, and the American promise that you could move up in life without a college degree.

Now it, too, is going.

The quiet collapse of digital manual labour

The Rust Belt happened in public. Factories closed on specific dates. Workers stood outside locked gates with picket signs. 

But the Cubicle Belt is going quietly. There is no Black Monday for call centers.

Companies aren't closing the buildings. They just aren’t hiring anymore.

Stanford's Canaries in the Coal Mine study, published last year, found that employment for 22-to-25-year-olds in the most AI-exposed occupations has fallen 13% since late 2022. For young software developers specifically, the drop is closer to 20%.

Wages, importantly, did not fall. There just aren’t any new jobs. 

The new pattern is attrition. Not gates closing — doors just no longer open. 

The Phoenix piece in the Journal describes this exactly: ‘Mass layoffs are rarely the cause. Instead, companies have taken advantage of the industry's high churn, cutting head count by not replacing workers who quit or were fired.’

You will not see this on the evening news. You will see it in the quarterly headcount line of a 10-K filing, three years from now, when someone notices the trend.

Manufacturing decline took 30 years. 

David Autor, the MIT economist whose research named the original China Shock, has been explicit about the difference: 

‘The greatest similarity is that this could happen quickly in certain areas, in certain activities, and it'll be extremely disruptive and scarring for the people who lose that work.’

Already, the medical-transcription profession has effectively disappeared. 

Translation work has collapsed. 

Tufts University's American AI Jobs Risk Index, published in March, projects 9.3 million US jobs vulnerable to displacement within two to five years, with a plausible upper range of 19.5 million (nearly the population of Australia). 

Phoenix is listed by name in the Tufts data among the metro areas projected to lose between $10 billion and $70 billion in annual household income.

For context: the entire Youngstown economy in 1977 was a rounding error against this.

The retraining myth

When the Rust Belt collapsed, Washington's policy response was the Trade Adjustment Assistance program — federal retraining, income support, job placement. People have been studying this for decades. The evidence is unambiguous; it largely did not work.

The most rigorous evaluation (Mathematica, 2012) found that TAA participants had lower employment rates than the comparison group of laid-off workers for three years running. 

Research by Autor and Gordon Hanson found that most trade-displaced workers ended up on Social Security disability rather than in new careers.

Jamie Dimon, the CEO of JPMorgan Chase, said the quiet part out loud earlier this year. On stage with Dario Amodei — the CEO of Anthropic, one of the leading AI labs and the company whose technology is automating the very work Dimon's bank employs hundreds of thousands of people to do — Dimon admitted that the government's promise to reskill manufacturing workers, decades ago, “didn't work”.

This is the same template now being readied for white-collar workers. 

State retraining programs. Federal grants. AI literacy bootcamps. 

The historical hit rate of ‘retrain the displaced worker’ is poor. 

There is no reason to believe it improves when the displaced worker is 54, has 30 years of customer service experience, and is now competing with a 22-year-old AI literacy graduate for the same shrinking pool of work.

From coal mines to codebases, to where?

In December 2019, Joe Biden told a New Hampshire crowd that included coal miners: “Anybody who can go down 3,000 feet in a mine can sure as hell learn to program as well.”

It was widely mocked at the time, of course. But it captured the policy template perfectly: When an industry collapses, point its workers toward the rising one.

Today, the rising one of 2019 — entry-level coding — is the most AI-exposed occupation. 

According to Anthropic, these are the most exposed: 

The miners were told to learn to code.

So what do you tell the coder?

The Cubicle Belt probably will not collapse on a Monday. 

It will fade out quarter by quarter in headcount disclosures, in regional unemployment data revised and then forgotten, in the slow disappearance of the entry-level rung that turned high-school graduates into call-centre supervisors into sales associates into something resembling a middle class.

Phoenix developers are already tearing down vacated call centers. 

Where the cubicles used to be, they are pouring concrete for data centers — the physical infrastructure that runs the AI replacing the workers who used to sit there. 

This week's quote:

"However much we may welcome the fruits of advancing technology… no one dare overlook or deny the fact that many individuals will suffer personal, mental, and physical hardships as the adjustments go forward."

— Joint Economic Committee of Congress,
Automation and Technological Change, 1955

Invest in knowledge,

Thom

The Benchmark

P.S. If you’ve read this far, thank you for your time! I put a fair bit of my own into writing The Benchmark each week, and some readers recently have been kind enough to share their appreciation. You're welcome to connect with me on LinkedIn where I post about the stories and insights in the newsletter. 

Read more: 28 years later: Australia's capital gains gambit

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In 1987, Ireland was broke.

Unemployment was above 17%. The country was haemorrhaging people — 70,000 left in that year alone. 

The national debt was approaching 120% of GDP. A generation of young Irish people assumed they would spend their working lives somewhere else.

Then the government made a bold tax decision.

Ireland set its corporate rate at 12.5% — the lowest in Europe — and cut capital gains tax from 40% to 20%. The message was simple and explicit: If you want to deploy capital, Ireland will treat it better than anywhere else on the continent.

Capital responded the way capital tends to respond to that kind of invitation.

Foreign direct investment flows rose from 2.2% of GDP in 1990 to 49.2% by 2000. 

Intel, Microsoft, Apple, Google, and Facebook built their European headquarters in Dublin. GDP growth ran between 7.8% and 11.5% a year for five straight years. 

In other words, the so-called Celtic Tiger wasn't an economic miracle. It was the outcome of an incentive structure.

The lesson is simple. Capital goes where it's treated best.

Australia has just proposed to make it considerably more expensive to deploy capital.

28 Years Later

On 12 May 2026, Australian Treasurer Jim Chalmers announced the most significant tax reform package in more than a quarter century.

The 50% Capital Gains Tax discount — introduced by John Howard in 1999 — will be replaced with an inflation-indexed discount from July 1, 2027. A minimum 30% tax on capital gains will apply. Negative gearing — where you deduct investment property losses against your personal income — will be limited to new residential builds.

The government’s stated aim is housing affordability. The 1999 discount turbocharged speculative property investment, house prices and wages uncoupled entirely, and the home ownership rate among 25-34 year olds fell 7 percentage points over twenty years.

This chart from SBS shows you the divergence playing out New South Wales:

On those terms the reform is defensible; the 1999 change was a mistake. Before Howard's discount, house prices rose roughly in line with incomes. After that, they didn't. Hence the change.

But for high-income investors on the 47% marginal rate, the effective CGT rate roughly doubles under the government’s proposed new system.

The reaction has been as you’d expect — check out this collection of Australian front pages from The Guardian: 

That makes Australia's top CGT rate one of the highest in the developed world.

And it won’t just apply to property. It will apply to everything. 

But if it’s all about improving housing affordability, the changes are necessary — this is the government’s argument. 

Capital gains tax is, in their view, the single lever with which they can bring runaway property prices back within reach of those citizens who can’t afford to enter the market. 

Let’s explore that idea on the other side of the Tasman Sea. 

The land of the tax-free capital gain

New Zealand, my home country, has never had a broad capital gains tax. Not even after its own Tax Working Group — chaired by former Finance Minister Sir Michael Cullen — formally recommended one in 2019.

Then-Prime Minister, Jacinda Ardern, killed it. “While I have believed in a CGT,” she said, “it's clear many New Zealanders do not”.

Who would have thought? 

New Zealand kept its benign tax environment for property investors. No CGT.

Unrestricted negative gearing. The full treatment.

The International Monetary Fund subsequently ranked New Zealand at the top for housing unaffordability in the OECD. Its house price-to-income ratio hit 142 in late 2021 — among the highest ever recorded in the developed world. My country also has one of the highest homelessness rates in the OECD.

So Australia had a generous CGT regime and still had a housing crisis. 

New Zealand had no CGT and still had a housing crisis. 

Cullen's own review actually conceded — a CGT would have only a limited, and possibly even inflationary, impact on house prices. 

The primary drivers were supply constraints: zoning, infrastructure, planning systems built for a smaller country.

So you can argue that CGT is not the primary lever. In either direction.

It’s also important to contextualize the Australian CGT proposal within a broader trend of nations attempting to tax themselves wealthy. 

When trying to raise $146 million loses you $594 million

The clearest modern data point on what happens when you raise the cost of holding capital comes not from Australia or New Zealand, but from Norway.

In 2022, Norway's government raised its wealth tax by a modest 0.25 percentage points — from 0.85% to 1.1%. It projected the change would raise an additional $146 million annually.

Instead, individuals worth $54 billion left the country. The result was a $594 million annual loss in tax revenue — four times the projected gain. 

More than 100 of Norway's top 400 taxpayers, representing half that group's total wealth, now live abroad, mainly in Switzerland. I wrote about the mechanics of the country taxing itself poorer here. 

To be clear: Norway's wealth tax and Australia's CGT reform are different instruments. A wealth tax is an annual levy on the stock of assets; CGT is triggered only on realization. The lock-in effect of higher CGT — investors holding assets longer to defer the tax event — is different from the capital flight dynamic of an annual wealth tax.

But the underlying principle holds. When the expected after-tax return on capital in a jurisdiction falls materially, capital reprices its options, even if it doesn’t leave overnight. 

Canada learned this lesson. The country proposed a CGT inclusion rate rise in 2024. The backlash was swift enough that it was cancelled in 2025 — and Canada's international tax competitiveness ranking rose upon cancellation.

The property narrative as a Trojan Horse?

While the Australian government claims it has designed this reform with young Australians and prospective property owners in mind, the reality is that it impacts everybody. 

Within days of the budget, Australian startup founders launched an open letter to the Prime Minister. The signatories — including co-founders of Linktree, me&u, and others — made a specific and pointed argument: The CGT discount isn't just a property subsidy. It's the economic logic that makes startup equity worth sacrificing for.

‘People bet their careers that in return for their sacrifice today, they will be rewarded through stock options when that startup becomes the next big tech success story,’ one founder wrote. 

‘By axing the 50% CGT discount, Treasurer Jim Chalmers has launched a direct attack on that incentive to innovate.’

The government acknowledged the problem. Chalmers flagged potential carve-outs for high-growth companies, describing the startup sector as ‘the hope of the side when it comes to dynamism and productivity’. 

Startup founders haven’t been the only group to react strongly to the government’s proposals. 

Only time will tell if and how the changes might morph before passing into law. 

Where does the capital go now?

This is the question that matters for investors — and it doesn't have a clean answer yet.

Some capital will likely now flow into superannuation, where the tax treatment remains concessional. 

Some into new residential builds, which retain both the CGT discount and negative gearing under the new rules — a deliberate supply-side nudge. 

Some possibly offshore, gradually, as Australian founders and investors weigh up Singapore, Dubai, and other jurisdictions where capital is treated better. 

Perhaps the proposed reforms will restore something that was genuinely broken in 1999. 

Perhaps Howard's discount was a policy mistake with a 28-year hangover. 

Perhaps Jim Chalmers is right to unwind it.

But Ireland's, New Zealand's, and Norway's stories are worth keeping in mind. 

Ireland’s transformation began with a government that understood one thing clearly:

Capital has options. Treat it well, and it builds things. Tax it punitively, and it finds somewhere else to go.

New Zealand's crisis is a reminder that the property problem is more complex than just tax. 

Norway's lesson is the sharpest of all: A modest increase in the cost of holding capital, applied to a small number of people, produced a revenue loss four times larger than the projected gain. The government reached for more. It got less.

Australia is not Norway, of course. The proposed CGT change is not a wealth tax.

The capital flight risk is real, but not acute. At least not yet. 

What is acute is the signal. A top CGT rate approaching 47%, applied to shares, startups, and business assets alike, tells capital something about the cost of building, investing, and taking on risk in Australia.

The government is attempting something genuinely difficult — rebalancing a tax system without triggering the very capital flight it's trying to redirect. 

Whether it threads that needle might depend less on the policy itself, and more on what investors decide to do next.

This week's quote:

"For every complex problem there is an answer that is clear, simple, and wrong."

— H.L. Mencken

Invest in knowledge,

Thom

The Benchmark

Read more: The $3.12 trillion (or more) flood primed to hit the stock market.

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I argued that the financial world had split in two: The old world — debt, policy, paper — crumbling under its own weight, and the new world — compute, code, energy — ascending.

I made the case that smart money was moving toward the engines driving the new; the hyper-efficient hyperscalers rewriting the DNA of the entire connected world with artificial intelligence. 

Companies like OpenAI, Anthropic, Databricks and xAI.

Just these four companies have a combined valuation of about $3.12 trillion — nearly the GDP of France, which ranks seventh in the world. 

That’s about 5.4% of the S&P 500.

An average valuation of $624 billion apiece, while those in the index average just $116 billion. 

These numbers bring us to the topic of today’s Benchmark:

Most of the companies powering the biggest technological leap since the internet are not listed on the stock market. 

At least, not yet. 

So what might happen if and when the hyperscaler cohort starts publicly trading?

New > private > public

The stock market exists, in theory, to give the public access to the best businesses in the world.

For most of modern financial history, that contract held. 

When railroads transformed the 19th century economy, you could buy railroad stocks. When oil rewired the 20th, you could buy oil majors. When the internet changed everything, you could — eventually — buy Amazon, Google, Apple.

The pattern was pretty much always the same: 

Transformative technology. Private phase. Public phase. 

Right now, in May 2026, we’re on the precipice of the public phase for the AI hyperscalers. xAI/SpaceX could list as early as July. 

Which could mean an historic flood of cash into the stock market. 

The four most anticipated IPOs of 2026 represent a combined estimated value of $3.12 trillion. 

To put that in context: the entire US IPO market in 2021 — the most active year in a generation — raised around $300 billion. 

This pipeline could be ten times that. And it's concentrated almost entirely in AI.

OpenAI is targeting a $1 trillion debut. 

SpaceX and xAI, now merged, are eyeing $1.75 trillion combined. 

Anthropic — the company whose tools I’m currently using to research and assemble this very newsletter — has a valuation of $380 billion right now, which as I write this could be about to more than double:

Databricks — a less public, enterprise-focused AI business — has crossed a $5.4 billion annual revenue run rate, growing at 65% year-on-year. It is preparing to list in the second half of this year.

All this value is locked in the private market. But potentially not for much longer. 

So it’s worth examining some examples of waves of new companies and capital going public. 

2026 = 2000? 

The standard dot-com cautionary tale goes like this: Zero-revenue companies. Rampant, unchecked speculation. A bubble that was always going to pop, and promptly did, as you can see:

The NASDAQ hit 5,048 on March 10, 2000, then shed 78% in just over two years, hitting 1,114 on October 9, 2002.

So would a wave of AI hyperscaler public listings create a similar event?

First, Pets.com had no revenue. 

Anthropic has $14 billion in annualized revenue and growing. 

OpenAI is on track for $25 billion. 

These aren't dreams dressed up as businesses. These companies are driving a trend, rather than chasing it. 

The more important dot-com parallel isn't about the quality of the companies. It's about what a concentrated wave of massive listings does to market structure.

Between 1999 and 2000, hundreds of companies went public in the United States. 

The problem wasn't that they were all frauds. It was capital rotation. Every dollar that chased a new tech listing had to come from somewhere. 

It came out of existing positions — industrials, financials, consumer staples. 

For a time, this looked like genius. Then the rotation reversed, and the unwinding wasn't just a tech correction. It reshuffled the entire market.

In 2000, the companies going public were mostly pre-revenue stories asking markets to fund a dream. 

In 2026, the companies preparing to list are already generating billions. The dream has partially arrived. 

Which means the capital rotation, when it happens, will likely be validated by earnings, as opposed to narrative — at least initially.

That changes the dynamic. But it doesn't answer the harder question: 

Can markets actually absorb what might be coming?

The largest IPO in history (so far)

In December 2019, Saudi Aramco (which has a strange connection to my high school) went public at a $1.7 trillion valuation — the largest IPO in history.

They raised $29 billion, and briefly touched a $2 trillion valuation.

But the stock has been largely flat to down in real terms since then. Current valuation is about $1.8 trillion. 

Which means that, what was at the time the world's most profitable company, with government backing, listing on a friendly domestic exchange…

… hasn’t performed amazingly well in the seven years since it listed. 

So what might happen given that the four major hyperscalers we’re considering here represent a combined valuation of about twice Saudi Aramco’s?

The mechanics of absorption at scale are underexplored in the current conversation about AI IPOs. Everyone's just debating whether the valuations are real. 

Few are asking where the money will come from. 

If OpenAI enters public markets at a trillion dollars, index funds will eventually be forced to own it. 

Because once a company crosses the threshold for S&P 500 inclusion, every passive fund rebalances. So does every superannuation fund. So does every retirement account tracking the index.

Tesla's inclusion in December 2020 was, at the time, the largest single addition to the S&P 500 in history. Index funds and ETFs bought up about $220 billion. Many passive funds had to do so immediately upon the stock listing. 

Tesla entered the S&P 500 at a market cap of around $650 billion, having IPO’d 10 years earlier. 

OpenAI is targeting a $1 trillion IPO valuation — roughly 1.5X Tesla's size at inclusion.

But the more striking comparison is the index weight. Tesla entered at about 1.69% of the S&P 500. At $1 trillion, OpenAI would enter at somewhere around 1.7-2% of the current S&P 500 — similar weight, but on a much larger index, meaning the absolute dollar amount of forced buying could dwarf the Tesla IPO.

It’s worth noting, by the way, that Tesla’s valuation today is about 2.5X what it IPO’d at. Its stock price is up about 11X. 

But AI hyperscaler IPOs Saudi Aramco and Tesla were not.

Luckily, we already have a relevant AI IPO to look at. 

CoreWeave: The hyperscaler IPO guinea pig

CoreWeave’s, er, core business is simple: 

It owns massive clusters of Nvidia GPUs, houses them in data centres, and charges AI companies by the hour to use them. 

OpenAI is its largest customer — which is both its greatest strength and its most cited risk. One customer representing that much revenue makes investors nervous.

CoreWeave went public on the Nasdaq in March 2025, raising $1.5 billion at a $23 billion valuation. It was the largest US tech IPO in years at the time. 

Since then?

The stock has swung violently. 

At one point it traded 52% below its post-IPO high. 

The markets couldn't decide whether CoreWeave was critical AI infrastructure or an over-leveraged GPU rental business dressed up in a compelling narrative.

You could argue that it's both. And that ambiguity might be a problem for all the AI IPOs in the pipeline. 

The order of this IPO queue matters. 

If CoreWeave stabilizes and Databricks lists cleanly in the second half of this year, the path could open.

Institutional appetite could build.

The narrative around these businesses could solidify and shed the 2000 comparisons.

OpenAI and Anthropic could enter as headliners to a well warmed-up audience. 

But should Databricks stumble — or if the public offering reveals something the private valuation was obscuring — the queue could get very long very fast.

The locked room opens either way. The question is whether it opens onto a welcoming market, or a crowded exit.

History suggests the flood, when it comes, is never as orderly as the companies in the queue would like.

The dot-com wave created a generation of investors who learned — often painfully — how to value internet businesses. This wave will create a generation who learns how to value AI businesses.

How will history look back at the 2026 AI IPOs?

The question nobody can answer yet is whether public markets are ready to absorb the new world's best businesses — or whether the act of absorbing them will reshape markets in ways nobody has fully modelled.

CoreWeave is probably the data point to watch. 

Not because it's the most important company in the pipeline. But because it's the first. 

How it trades over the next six months could reveal more about what's coming than any analyst note or IPO prospectus.

If the flood comes and markets absorb it cleanly, history might look back at 2026 as the year the new world finally became investable.

If it doesn't — if the weight of more than $3 trillion in private valuations entering public markets triggers the kind of rotation and reshuffling that 1999-2022 did — we'll look back at it differently.

Either way, we are monitoring this situation. 

This week's quote:

"Prediction is very difficult, especially about the future."

— Niels Bohr

Invest in knowledge,

Thom

The Benchmark

Read more: Shipping a barrel of oil from New Orleans to Los Angeles costs more than four times what it does from Houston to London.

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Why? 

The answer has nothing to do with oceanography, trade winds, or the relative efficiency of British ports. 

It’s down to a 106-year-old American law that most people have never heard of.

This Benchmark is going to explain why this law exists, how it works in practice, and what it might challenge about your economic assumptions. 

Welcome to the Jones Act.

SCabotage

In 1920, Congress passed the Merchant Marine Act. Buried inside it was Section 27, written by Republican Senator Wesley Jones of Washington State. 

Jones represented a Pacific Northwest economy with a deep interest in protecting its shipbuilding industry, and he embedded in the Act a rule that has remained almost unchanged ever since.

The rule is called ‘cabotage’, and it works like this.

If you want to move cargo by water between two ports in the United States, you must use a ship that meets four specific conditions. It must be:

• Built in the United States.

• Owned (at least 75%) by US citizens or permanent residents.

• Flagged in the United States.

• Crewed by a majority of UScitizens or permanent residents.

No exceptions — unless Washington says so (we will come back to this crucial point). 

The original logic was sound enough, in a post-WWI world. 

The US had spent the Great War in a cold sweat about its dependence on foreign shipping to supply its forces. 

If the next war came, Washington wanted a deep bench of domestically owned and operated vessels it could commandeer. A protected merchant marine was, in effect, a strategic reserve.

Today, the fleet that protection was supposed to build numbers just 56 Jones Act-compliant vessels capable of carrying petroleum between US ports. 

For perspective, the US moves roughly 20 million barrels of petroleum products per day. This would require somewhere in the range of 300 to 400 tankers in continuous rotation.

Made (expensive) in America

Here is how the math works in practice.

A US-built commercial vessel costs roughly four to five times more to construct than an equivalent ship built in South Korea or Japan. 

The Jones Act doesn't just require US-built ships — it has ensured that the US shipbuilding industry, protected from global competition for a century, never needed to become cost-competitive. 

So the ships are expensive, there are very few of them, and the operators who own them have significant pricing power over anyone who needs them.

Moving refined fuel from Texas to Florida on a Jones Act tanker cost roughly $3.29 per barrel in early 2025. 

The same shipment on an international tanker would have run about $1.23 per barrel. 

On a single trade route, that gap generates over $550 million in additional annual costs.

That sounds like a lot, until you consider what happens in Puerto Rico.

Next-level red tape

Puerto Rico is a US territory. It has no land borders. Everything that arrives on the island arrives by air or by sea. 

Under the Jones Act, any ship arriving from another US port must meet all four conditions. 

Since the island's population of 3.2 million is not large enough to justify much investment in a dedicated compliant fleet, Puerto Rico imports most of its goods at international cargo rates — or at the inflated domestic rates whenever Jones Act ships are available.

A 2019 analysis placed the cost to the island's economy at over $1.1 billion a year, with $367 million falling specifically on food and beverages. 

A more recent paper puts the cost to Puerto Rican consumers alone at $692 million a year. 

For a population with a median household income about half that of the mainland, that is not a rounding error.

I’ve explored geographic macroeconomic chokepoints in The Benchmark before.

The Strait of Hormuz controls 20% of global oil flows. 

Qatar controls 40% of global helium exports. 

But this situation isn’t geographical. It’s legal. 

Puerto Rico can’t receive American LNG at all.

There are no Jones Act-compliant LNG tankers in existence. 

The US is the world's largest LNG exporter.

It has major terminals on the Gulf Coast.

And yet it cannot legally ship a molecule of that gas to its own territory by domestic vessel.

New England faces a similar problem. 

During cold winters, the region regularly runs short of heating fuel. 

Pipeline capacity from the Gulf Coast is constrained. 

The obvious solution — ship LNG north by tanker — is effectively unavailable via the domestic route for the same reason: no compliant LNG tankers. 

So what do they do?

New England instead imports LNG from Trinidad and Tobago, or even from Russia in previous years. 

American gas, sold abroad, is sometimes re-imported to American shores because the domestic legal architecture makes the direct route nonviable.

So you can see who loses with the Jones Act. 

Who benefits?

The winners are a small, specific group: 

US domestic shipyards (primarily in the Gulf Coast and Pacific Northwest).

The handful of US-flag carriers who operate compliant vessels.

Maritime unions who negotiate generous wage rates on those vessels.

The portions of the defense establishment that value having a guaranteed domestic fleet available for military requisition.

These are real and not trivial interests. 

Why the government must keep breaking its own law

The Jones Act confesses its own costs every time there is a crisis.

After Hurricane Katrina devastated the Gulf Coast in 2005, the Secretary of Homeland Security waived the Jones Act for 18 days to allow foreign vessels to carry petroleum to affected areas. 

After Hurricane Sandy hit the Northeast in 2012, it was waived again for a week to ease the movement of petroleum products to New York and New Jersey. 

After Hurricanes Harvey and Irma in 2017, the Trump administration issued a seven-day waiver covering Texas, Louisiana, and Florida. 

Each waiver is issued for the same reason; in a supply emergency, there are not enough Jones Act-compliant vessels to move the fuel that people need, and the legal requirement must be suspended to allow foreign ships to fill the gap.

This means that a law that was built to guarantee a robust domestic merchant marine, ready for emergency logistics, is suspended every time there is an actual emergency.

The fleet it was supposed to build is too small to do the job. 

The waiver record is a recurring admission by the government that the Jones Act creates fragility in exactly the situations it was designed to prevent.

This is not just an American thing

Cabotage laws exist across most of the world, and the Jones Act is not even the most extreme version. 

Australia's coastal trading regime requires foreign vessels to obtain temporary licenses to operate domestically — licenses that domestic operators can challenge and block, making the system nearly as restrictive in practice as the US model. 

Brazil's cabotage rules reserve coastwise shipping for Brazilian-flagged vessels, and while the country has invested heavily in expanding its domestic fleet, the cost premium over international shipping remains significant. 

China maintains strict coastal shipping restrictions as a matter of both economic and national security policy, reserving its enormous internal waterway and coastal trade entirely for Chinese-flagged carriers.

Strangely, the European Union offers a contrast. 

The EU liberalised its intra-community maritime trade in 1993, allowing any EU-based shipping company to operate coastal routes within any member state — not just their own. 

The result is a competitive, multi-operator market that keeps capacity flexible and prices lower than they would be under a single protected domestic fleet. 

The EU fleet today represents 35% of global tonnage despite the bloc accounting for only 15% of global GDP — a direct consequence of competition rather than protection.

Not all chokepoints show up on a map.

Why Germany holds the keys to the AI arms raceThis week's quote:

“If the highest aim of a captain were to preserve his ship, he would keep it in port forever.”  

— Thomas Aquinas

Invest in knowledge,

Thom

The Benchmark

Read more: Why Germany quietly controls the keys to the AI arms race.

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While everybody focuses on the battle for Berlin, the US Third Army heads south into Thuringia, capturing the eastern German city of Jena. 

Jena is home of the Carl Zeiss company. 

Carl Zeiss is the undisputed global leader in precision optics. Rangefinders, periscopes, cameras — nobody makes better gear than Carl Zeiss. 

The problem with this, however, is that when the allied powers have agreed how they will divide the conquered Germany between them, Jena is deep inside the Soviet zone. 

So days before the handover, the US military, realizing it cannot afford to leave this engineering advantage to the Soviets, transports 122 key scientists and engineers, along with several truckloads of top-secret archives and blueprints, out of Jena. 

They move them deep into what will become the American zone. 

Specifically, to the quiet, unassuming village of Oberkochen, in the country's south west. 

There, the specialists and IP the US have extracted from Jena set about building a new Carl Zeiss factory.

Not many people likely know this story from 1945. 

Fewer still likely understand why the entire artificial intelligence industry depends on this one factory, in this one tiny German town, in 2026. 

But in the next few minutes, you will. 

Welcome to this week’s Benchmark. 

The insane reality of the AI supply chain

This is a vacuum chamber at the Carl Zeiss factory in Oberkochen. 

The speed at which artificial intelligence can ‘think’ depends on what happens in this room. 

AI runs on parallel processing. This is a computing method that increases speed and efficiency by simultaneously executing multiple tasks across multiple CPU cores.

The ‘braincells’ of these cores are transistors. The more transistors you can fit on a computer chip, and the less distance between them, the better your computer can think. 

Which means the smaller your transistors, the more brain power you have. 

This is the current AI hardware hierarchy:

NVIDIA designs GPU architectures like ‘Rubin’ and ‘Blackwell’. But they own zero factories. They are really a ‘fabless’ IP entity, entirely dependent on the physical layer.

For the hardware, they depend on Taiwan Semiconductor Manufacturing Company. TSMC is the world’s only high-volume builder of 3 nanometer and 2 nanometer ‘logic’. These are the processors that go into NVIDIA’s chips. 

Again, though, TSMC is just a service provider. They assemble what they sell. But to do that, they need supplies they cannot produce themselves. 

They, in turn, depend on a Dutch company called Advanced Semiconductor Materials Lithography. ASML is the only provider of Extreme Ultraviolet lithography systems. 

The world’s most precise printing press

Think of EUV (Extreme Ultraviolet) lithography as the world’s most precise printing press. 

Instead of printing words on paper with ink, this is the process of printing billions of transistors onto a slice of silicon using light.

For decades, we used regular ultraviolet light to make chips. But as we tried to make chips smaller and more powerful, that light became too fat. 

It's like trying to write the entire dictionary on a postage stamp with a felt pen.  

This is where EUV comes in.

EUV light has a much smaller wavelength. 

A tiny beam of light allows engineers to draw patterns that are only a few atoms wide. 

Brilliant. Problem solved. 

Not so fast. Because there is, as always, a catch. 

EUV light is delicate. It can be absorbed by almost everything — including the air we breathe, and, crucially, glass.

To keep the light from disappearing, the machine must create very particular conditions. 

Which is why ASML’s lithography machines are not, as you can see, small or simple pieces of equipment:

The newest generation of these machines is called the Twinscan EXE:5200.

This is the machine required for the next generation of chips the AI industry needs to keep up with demand. 

As of April 2026, these bad boys run to about $400 million per unit — and require about another $100 million on top of that for shipping and installation. 

And a large part of the reason why is that you can’t use regular glass lenses with EUV light. 

You need mirrors. Very special mirrors. 

Enter Carl Zeiss. 

The world’s finest mirrors

The mirrors ASML depends on come from Carl Zeiss. 

Zeiss SMT manufactures EUV mirrors using a process called Ion Beam Figuring. 

They start with a 1,000kg block of zero-expansion glass-ceramic, then use an atomic ‘sandblaster’ to shave off individual atoms. 

This achieves a surface so flat that if expanded to the size of Germany, the highest bump would be just 0.1mm. 

These mirrors are so flat that a single misplaced atom can ruin the entire $400 million lithography machine.

Each mirror takes about a year to grind. 

Zeiss SMT mirrors must be flat to within 0.1 nanometers — an atomic-scale requirement that defies traditional mechanical polishing.

Which is why Zeiss is so valuable to the AI supply chain. 

Each ASML lithography machine requires up to 16 of them — which accounts for much of their $400 million price.

Each specialized mirror set costs tens of millions.

But ASML owns a 24.9% stake in Carl Zeiss — so buying their mirrors is an investment, not just an expense. 

Zeiss is the sole provider because they won a 30-year war of attrition. 

While rivals Nikon and Canon abandoned EUV optics as physically impossible, Zeiss spent billions inventing Ion Beam Figuring to polish their mirrors to this grade. 

Crucially, Zeiss also built the proprietary ‘metrology’ tools — the only machines capable of measuring that precision. 

This is their moat. Competitors can’t catch up because they can’t even see the microscopic errors they need to fix. 

In other words, Zeiss owns the only ‘eyes’ capable of seeing the future of lithography. 

Smaller than ever is bigger than ever

AI is basically just a massive amount of math. 

To do that math faster, you need more math units, or transistors, on a single chip. 

To do that, you need more finely-produced circuits. Which means machines capable of more precise lithography. 

The current 2nm chips are hitting physical limits.

They consume too much power and generate too much heat for AI to perform any better than it already does. 

Which is what the AI industry is racing to solve right now. 

The next leap will be to 1.4nm.

The physical chip will remain the size of a fingernail. What changes is the resolution — packing billions more transistors into that same space. 

The chip features will become about six atoms wide.

For scale, a strand of DNA is 2.5nm.

Shifting to 1.4nm provides a 15% speed boost or 30% power reduction. You can pack 20% more transistors into the same space. 

But greater precision requires more focused EUV. 

And more focused EUV requires flatter mirrors than ever to steer the light beams which create the atomic-scale patterns on the silicon.

Since each mirror set takes over a year to grind, Zeiss is the physical bottleneck for the entire AI revolution. 

Which is why…

Taiwan vs. USA 

TSMC currently dominates the semiconductor market, building chips for Apple and NVIDIA. 

But they are delaying their shift to the latest ASML machines to save on costs. 

Intel, on the other hand, is racing to be the first to install the EXE:5200 at its Oregon factory. 

They’re betting everything on the 1.4nm frontier. 

Intel hopes to overtake TSMC’s technology. 

And they’re not alone. 

The US government took a 10% stake in Intel in 2025 for $8.9 billion, deploying taxpayer dollars in an effort to secure domestic 1.4nm chip manufacturing. 

As of April 2026, Intel’s resurgence has pushed the stake’s value to over $41 billion.

Today’s battle for AI supremacy has its origins in the dying days of World War II in Germany…

...and it rages on — a fierce collision of cutting-edge (so to speak) tech, insatiable demand for computational power, and a remarkably exclusive, high-stakes supply chain reaching from southern Germany to Silicon Valley via the Netherlands and Taiwan, and perhaps, soon, Oregon. 

This week's quote:

“The working hand should have no other function than to precisely implement the shapes and dimensions of all the design components determined beforehand by computation.”  

— Carl Zeiss, 1816 – 1888

Invest in knowledge,

Thom

The Benchmark

Read more: Bitcoin: 21 Truths in 2026

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In light of recent events, and the fact that many readers hold Bitcoin, it's high time we dig back into one of the most compelling financial stories of our, and possibly all, time. 

On that day nearly two years ago, Bitcoin broke out 6% in a single day to hit a high of $71,946, having chopping around for weeks.

The day prior, the still-new US Spot Bitcoin ETFs brought in about $241 million, signalling growing institutional demand. 

Twenty-four-hour trading volume was $46.9 billion. 

Exchange reserves — the amount of Bitcoin available on exchanges as opposed to in digital wallets — had just hit a seven-year low. 

MicroStrategy, as it was known back then, held just 214,400 BTC worth $15 billion.

One month earlier, the April halving had cut new BTC supply from 900 to 450 a day.

Here's the chart from that day:

As I write this, Bitcoin is trading for $76,000 — just $4,000 higher than May 21, 2024. 

Except this time, it’s not a strong one-day rally that’s led us here. 

Having reached six figures for the first time in its history in December 2024, and going on to make a new all-time high of $126,198 10 months later…

Bitcoin is down about 40% from its high, having made a downside wick below $54,000 in February — a 57% crash from top to bottom. 

Here's the chart now:

Exactly 23 months to the day of the previous Bitcoin-focused Benchmark, the daily ETF inflows are $238 million — almost identical to back then. 

Daily trading volume is slightly lower (but not much), about $38 billion.

The number of Bitcoin available on exchanges is likewise barely different — 2.21 million, down from 2.3 billion. 

These reserves have been trending down over the past couple of months. 

Part of the reason for this is that one thing, besides the direction by which we’ve arrived at this 70-something thousand price range two years on, has changed significantly.

Same, but different

Early in 2024, Spot Bitcoin ETFs were new. 

Institutional investors were initially slow to experiment and allocate. 

In May 2024 the Bitcoin ETFs held $58.5 billion.

Today, they hold more than twice that. 

BlackRock’s IBIT holds $55 billion on its own. 

Strategy is no longer a software business with a Bitcoin treasury. It’s a fully-fledged Bitcoin company. 

On May 21, 2024, they held 214,400 BTC worth $15 billion.

Right now they own 815,061 BTC worth $61.56 billion — about 3.9% of the total supply. 

In fact, just yesterday, Strategy scooped up another 34,164 Bitcoin. 

While the $2.54 billion that represents is no small amount of money, here’s the real reason I’m bombarding you with all these numbers today:

When Michael Saylor buys 34,164 Bitcoin, it destroys 34,164 individual investors’ chance of ever owning a single Bitcoin. 

Bitcoin being so infamously volatile, the most popular pastime among investors, traders, critics and commentators alike is to argue over price. 

Predictions, reactions, I-told-you-sos. 

But what does any of that matter?

Because if I’d ignored the in-between facts, and just shared with you that Bitcoin was at  $71,946 23 months ago, and ‘only’ a few thousands dollars higher today…

Then you’d be forgiven for thinking that nothing has changed. 

But the reality is that a lot has changed in Bitcoin since then. 

Which is why today’s Benchmark is going to focus on 21 truths about perhaps the most controversial investment asset in the history of capitalism. 

This isn’t about where price might or might not go, or when. 

It’s about the central promises and concrete realities of Bitcoin in 2026. 

21 Bitcoin truths

The following 21 statements are either objectively true, or true to the best of my knowledge/research. 

They span four categories:

1. Bitcoin’s physics & mathematics 

2. The economics of human action 

3. Financial sovereignty & risk 

4.The future of the Bitcoin network

Should you have a differing opinion, or correction, on any of these, you’re welcome to write back to me by replying to this email. 

Truth #1: There will only ever be 21,000,000 Bitcoin.
Unlike gold — where a price increase incentivizes more mining — Bitcoin's supply is inelastic. No amount of demand or human effort can create more than the code allows. As for the supply of dollars? Hard facts on that here. 

Truth #2: Bitcoin will only ever grow more difficult to mine.
Every 2,016 blocks (roughly every two weeks), the Bitcoin network automatically adjusts how difficult it is to mine. If more people mine, it gets harder; if fewer mine, it gets easier. This ensures the network stays alive regardless of external economic conditions.

Truth #3: Bitcoin’s supply halves about every four years.
Every 210,000 blocks (approximately four years), the new supply of Bitcoin is cut in half. These halvings create regular supply shocks which cannot be reversed. In April 2026, we are in the era of 3.125 BTC per block. The next halving will be in mid-2028.

Truth #4: One can only create Bitcoin using energy.
To create Bitcoin, you must expend real-world electricity. This unforgeable cost connects the digital world to the physical world. It is impossible to print Bitcoin out of thin air, like fiat currency.

Truth #5: Bitcoin is the most powerful computer network in the world.
In terms of raw computational power, nothing else on Earth comes close to Bitcoin. 

There are over 18,000 reachable 'full nodes' globally. These are small computers run by individuals that check every transaction. They ensure that even the most powerful government cannot cheat the rules of the network.

The interconnected clusters of NVIDIA-based AI data centres (led by Microsoft/OpenAI, Google, and Meta) constitute the second-largest concentration of silicon.

Truth #6: Bitcoin is neutral & permissionless.
Bitcoin does not care about race, religion, or politics. No bank can de-bank someone or stop them from sending BTC to anyone else.

Truth #6: Bitcoin lowers time preference.
Bitcoin rewards capital preservation over immediate consumption. This creates a structural incentive for long-term saving over impulsive spending.

Truth #8: One Bitcoin divides into 100,000,000 Satoshis.
This ensures the network remains functional for micro-transfers regardless of the price. Even with a high market exchange rate, the system facilitates small-scale commerce for billions of participants.

Truth #9: The Bitcoin ledger is transparent.
Every transaction since 2009 is recorded on a public blockchain. Anyone can audit the total circulating supply and verify the movement of funds in real-time without institutional permission.

Truth #10: Every Bitcoin is created equal.
There was no pre-mine or reserved supply for a central group when Bitcoin launched in 2009. Every coin in circulation was produced through the same mining process.

Truth #11: Bitcoin is the highest-performing asset in modern history.
Since its first trade in 2010, Bitcoin has delivered an annualized return (CAGR) exceeding 60%, significantly outperforming the S&P 500, gold, and real estate.

Truth #12: Bitcoin global adoption has reached the early-majority phase.
As of April 2026, approximately 500 million people worldwide own Bitcoin — roughly 6% of the global population. This growth rate mirrors the early adoption curve of the internet.

Truth #13: Bitcoin solves the ‘double-spend’ problem for digital property.
Before the Bitcoin protocol, digital information could be duplicated infinitely. Bitcoin created the first and only form of absolute digital scarcity.

Truth #14: Bitcoin transforms wealth into portable information.
Private Bitcoin keys can be encoded as a 12-word mnemonic phrase. This effectively means a user can transport any amount of value anywhere in the world simply by memorizing a string of text.

Truth #15: Bitcoin carries zero counterparty risk.
As a bearer asset, holding BTC in a private wallet does not rely on a third party to fulfill a promise. Unlike a bank deposit, its existence is not a liability on someone else’s balance sheet.

Truth #16: Bitcoin never sleeps.
Bitcoin trades 24/7/365. Without a central bank to manipulate the price or interest rate, the market constantly determines its value in real time.

Truth #17: Bitcoin is reaching institutional maturity.
In 2026, institutional entities and Spot ETFs hold approximately 6.5% of the total circulating supply. This reflects Bitcoin’s integration into the global financial infrastructure.

Truth #18: The Bitcoin blockchain is pure objective truth.
The ledger provides a sequential record of every confirmed transaction. It cannot be edited or erased. It serves as a permanent, mathematical archive of historical fact, accessible to all.

Truth #19: Bitcoin transactions are final and irreversible.
There is no central authority with the technical capability to reverse or undo a confirmed transfer on the base layer. This shifts responsibility to the individual user.

Truth #20: Bitcoin decouples the unit of account from political authority.
Just as the world eventually separated Church and State, Bitcoin separates the creation of money from the government. It functions as a neutral protocol for value — much like the laws of mathematics — that no nation can manufacture or manipulate.

Truth #21: Only about 0.1% of the world population can ever own 1 BTC.
While 94% of all Bitcoin is already in circulation, the final 6% will take another 110 or so years to distribute. Between lost coins, Satoshi’s stash, and massive institutional reserves (BlackRock, Strategy, etc.), it is mathematically impossible for more than 0.1% of the world's population to ever own one full Bitcoin.
There you have it. 

This week's quote:

“If you don't believe it or don't get it, I don't have the time to try to convince you, sorry.”

— Satoshi Nakamoto

Invest in knowledge,

Thom

The Benchmark

Read more: Is this the reason why the 2020s feels like the 1940s?

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He cared little for mainstream thinking about markets, and had no company or department line to tow with his research or predictions. 

His predictions were both bold and fascinating. 

Because if most investors look at the financial world through a short-term lens, clinging to interest rate announcements, election results, earnings reports and the like…

This guy seemed as though he had a crystal ball. 

Specifically, he believed that every boom and bust, in every market, stemmed from an 18-year cycle in land prices that has held true for hundreds of years. 

While that might sound strange, his work demonstrated that there did, in fact, appear to be an observable cycle at work. 

He either had an uncanny ability to predict major financial events, or there was something in his cycle theory. 

The number of accurate predictions he made seemed unlikely to have come from luck alone. 

So when I encountered another, bigger cycle theory last year — one that goes far beyond just financial markets — I was, perhaps, more open to it than I might have been otherwise. 

By the end of this Benchmark, you can tell me whether you see evidence of a repeating, predictable pattern, or simply conveniently arranged dates and events. 

Heads up: Some of what follows might seem a bit out there. 

What if history has a biological clock?

Harvard-educated policy analyst William Strauss and Center for Strategic and International Studies economist Neil Howe first collaborated in 1991, on a book called Generations. 

The book mapped US history from 1584, and led them to found a consultancy business which advised the military and businesses on the shifting ‘social mood’ that precedes market and kinetic shocks.

This work led them to publish The Fourth Turning in 1997. In this book, they laid out a profound thesis; that human history has a biological clock. 

They argued that history moves in a feedback loop that resets every 80–100 years, about the length of an average human lifespan. 

This cycle moves in four distinct seasons, or ‘turnings’ which last about 20 years.   

1. The High (Spring)
An era of institutional strength and weak individualism.

2. The Awakening (Summer)
An era of cultural revolt against the established order.

3. The Unraveling (Autumn)
An era of institutional decay and triumphant individualism.

4. The Crisis (Winter)
An era of systemic reset and institutional liquidation.

Strauss and Howe refer to this whole cycle as the ‘Saeculum’. You can also think of it like the Ouroboros — the snake eating its own tail, in an ongoing cycle of creative destruction. 

The Fourth Turning’s core narrative is that society must periodically undergo a crisis (The Fourth Turning) to clear away the exhausted institutions and ‘unpayable promises’ of the previous cycle.

2026: Right on cue? 

The useful and/or entertaining part about cycle theories is that they allow you to contextualize events and themes in the world today. 

To try to make sense of what seems like unpredictable chaos. 

One of the core concepts of this particular theory is that each season of this cycle marks a significant change in the relationship between the individual and the institution. 

Banks. Governments. Universities. 

There are times when the individual places great trust in, and feels very satisfied with, the institutions which govern them. 

There are others when that trust breaks down, and the individual doesn’t like or believe in those same institutions. 

That time is the Crisis, or Winter, of Strauss and Howe’s cycle. 

Which, according to them,  is where we are right now. 

The institution is piling pressure on the individual. The economic numbers bear that out:

The US dollar has lost 97% of its purchasing power since the creation of the Federal Reserve in 1913 — and 99% when you compare it with gold. 

Inflation has destroyed about one-third of the dollar’s value since 2020 alone. 

For the first time in history, the US will shortly spend more on paying the interest on its debt than on its entire defence budget (which is nearly $1 trillion). 

At the time of writing, the conflict in the Middle East is putting huge pressure on oil supply and fuel prices, which is only feeding distrust and dissatisfaction in the institutions which the individual funds via taxation. 

In fact, aggregate public confidence in centralized institutions has hit a historic low of 16%. 

According to Gallup, this mirrors trust levels last seen during the height of the Great Depression in the 1930s.

Which brings us back to the cycle itself. 

We’ve been here before

Another cool thing about cycle theories is that you can map them onto the past. 

Strauss and Howe reckon that this fourth turning will conclude between 2026 and 2033. 

We’re right at the end of the 80(ish)-year cycle, in other words. 

So what about last time?

The previous fourth turning resolved in the 1940s. 

The Great Depression had severely damaged the relationship between the individual and the institution. 

Debt-to-GDP hit 106% in 1946 — the previous all-time high before our current 2026 breach of 124%.

This era marked the transition from coal and steam to oil and mass production. 

World War II served as the forced R&D lab for the Age of Oil which powered the subsequent 80-year boom.

The 1944 Bretton Woods Agreement liquidated the old gold-exchange standards and installed the US dollar as the world’s reserve currency. 

Institutional trust bottomed in the 1930s but was regenerated by the war, leading to the highest levels of civic unity in US history by 1946.

There are many parallels. 

If you go back to the fourth turning before that?

The 1860s were a period of crisis, too. 

People stopped believing in the government entirely. 

Federal debt had grown by more than 4,000% in just five years, jumping from $65 million in 1860 to nearly $3 billion by 1865.

The Legal Tender Act of 1862 introduced ‘Greenbacks’ — the first unbacked federal paper money. 

Eleven states tried to quit the U.S. so they could stop following its laws and paying its debts.

This led to the American Civil War, and multiple historic shifts. 

This era saw the decisive move from Wood to Coal as the primary driver of industrial GDP — a technological shift which defined the next generation. 

Investing in a Fourth Turning market

So if history moves in these (relatively) clear four seasons, how do you approach the current fourth turning as an investor?

The Benchmark is in no way a vehicle for financial or investment advice. 

But if you think there’s something to this particular cycle theory, it’s interesting to look at the last such time. 

During the last Fourth Turning (1929–1946), the winners weren't necessarily the ones who made the most money.

They were the ones who didn't lose everything in the initial crash… and then owned the right real-world assets for the recovery.

Examples of assets that performed well:

Gold mining (Homestake Mining): The stock went from $65 in 1929 to $495 by 1935 — a 660% increase while the rest of the market crashed.

Cash (Deflation): Prices dropped by 25% between 1929 and 1933. Because everything got cheaper, $1.00 in 1933 had the same buying power as $1.33 just four years earlier.

Cheap escapism (Coca-Cola): While most companies went bankrupt, Coke’s net income stayed rock solid, moving from $10 million in 1928 to $14 million by 1934.

Essential staples (P&G): Procter & Gamble was one of the few companies to maintain 100% of its dividend payments to shareholders every single year of the Great Depression.

Military industry: U.S. war production spending went from $1.5 billion in 1940 to over $80 billion by 1944. Companies like Boeing saw their workforce grow from 4,000 to over 50,000 in that same window.

Beyond the reset

If this all feels heavy, remember the core promise of the Fourth Turning: Winter is not the end.

According to this theory, we’re living through the 'liquidation' phase of history. 

The unpayable debts, the broken institutions, and the outdated 'spreadsheets' are all being audited at once. 

It’s messy and volatile. 

The resolution of this cycle — likely coming by the early 2030s — is what Strauss and Howe call the 'Great Gate'. 

It is the moment we stop arguing about the past and start building the new social contract for the next eighty years.

For the investor, the goal isn't just to 'win' the winter; it's to survive with capital and sanity intact so you’re ready to build when the Spring arrives. 

This week's quote:

“Denial is the most predictable of all human responses. But, rest assured, this will be the sixth time we have destroyed it, and we have become exceedingly efficient at it.”

— The Architect, The Matrix Reloaded

Invest in knowledge,

Thom

The Benchmark

Read more: The inflation of inflation.

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An iPhone, to be exact. 

But you don’t know how much an iPhone costs. 

So I offer to go and find out for you. 

I find an Apple Store. I go in there, and…

They’re all out of iPhones (this is, of course, hypothetical). 

So I go next door to another store. 

I find the first phone that looks like an iPhone.

I note down the price, come back, and tell you. 

An iPhone costs this much, I say. 

I don’t tell you I couldn’t actually find an iPhone, and that this number is the best I could do in the circumstances. 

And because you don’t know this crucial detail, you now believe an iPhone costs, let’s say, several hundreds of dollars less than it actually does. 

The problem is obvious.

When you go out to buy your new iPhone, you’re in for a nasty surprise;

You will be paying far more than I’ve led you to expect. 

This Benchmark isn’t about phone prices, though. At least, not directly. 

The situation I’ve just described is what’s happening with inflation numbers. 

Perception and reality are important with inflation. 

This is the core problem with inflation statistics: They are treated as objective facts, when in reality they are constructed measures shaped by incentives, methodology, and narrative control.

Systematic wealth erosion: The basics

Inflation is simply the process by which money buys less over time.

That framing sounds intuitive.

Our money buys less over time — we should just accept that’s how our monetary system works. 

Correct or not, inflation is a reality.

Economists measure inflation by tracking changes in the average price of everyday goods and services, usually through a consumer price index (CPI). 

When that index rises, the purchasing power of each unit of currency falls. 

It’s not that the price of goods has spontaneously risen. It’s that the money we use to buy them has been diluted. It’s worth less than it was before. 

Inflation can also result from non-monetary drivers like supply shocks, taxation, regulation, monopolistic pricing and other factors.

When people talk about ‘the inflation rate’, they’re referring to the annual percentage change in the CPI.

This is shorthand for how quickly money is losing (or gaining, if we’re talking deflation) its real-world value.

Day to day, week to week, we don’t really feel inflation. 

Like death by a thousand cuts, it’s a creeping phenomenon.

Inflation’s impact is best observed on longer time frames. 

Here’s a couple of visuals to illustrate the brutal reality. 

What cost $1,000 in 1913 cost $32,808 in 2025. 

It doesn’t get much starker than that. 

Remember, this isn’t because the thing you’re buying is worth 3,180% more.

It’s because the money you’re buying it with is worth that much less. 

Inflation is the systematic erosion of purchasing power, as demonstrated here:

The most politicized number of all?

Governments paint inflation like some external force against which they are fighting.

Their primary policy weapon? Interest rates, set by central banks.

Because interest-rate decisions are justified almost entirely by inflation data, controlling the inflation narrative effectively controls monetary policy.

Interest rates are the most direct lever governments and central banks have over economic behaviour.

By raising rates, policymakers increase the cost of borrowing across the economy.

Mortgages become more expensive. Business investment slows. Consumers defer spending. Asset prices cool. Demand weakens.

Interest rates act quickly. They’re highly visible. They don’t require legislative approval. 

Central banks can deploy them unilaterally, signalling resolve to markets and voters alike.

That’s why rates are the default tool. 

Interest rates are also easy to understand for most people. In countries with high property ownership rates, interest rates have an immediate, tangible impact on mortgage repayments. 

But inflation is almost always the antagonist.

Governments and central banks position interest rates against the big bad wolf of rising prices.

In 2025 especially, we saw highly public statements about inflation and interest rates from the highest-profile politician of all.

Inflation affects elections, wage negotiations, pensions, bond yields and debt servicing costs. 

Governments benefit when they can claim to have driven inflation lower.

So how a government portrays inflation, and shapes the narrative around it, is hugely important. 

Which is why it’s worth getting into the weeds of how they calculate and report on inflation numbers. 

What’s in the basket?

The Consumer Price Index is exactly that; an index. 

Just like the S&P 500 only tells the story of 500 of the biggest companies in the United States, and not the whole economy…

The CPI comes from a basket of items which the government selects and weights in a very particular way. 

They would likely tell you this selection and weighting is representative and makes perfect sense. 

A less-biased observer would likely tell you something different. 

Look at shelter, for example. 

Housing accounts for roughly a third of household spending in the U.S. 

It is, by far, the largest real-world expense for households.

So you’d think the CPI would measure those expenses exactly as people experience them. 

But, CPI is more about measuring consumption than asset prices. 

So rather than count house prices, mortgage repayments, deposits, interest payments and so forth…

The U.S. CPI uses ‘Owner’s Equivalent Rent’ — a survey-based estimate of what homeowners think they could rent their own home for.

An estimate of an estimate, in other words. 

So CPI treats homeownership as if homeowners are renting from themselves.

This is just one example of how the most politicized number of them all gets distorted. 

Between early 2020 and mid-2022, U.S. house prices rose by roughly 40% on a peak-to-peak basis.

For the biggest household expenditure of all, that’s huge. 

Over the same period, the CPI-U shelter component only rose by roughly 15%.

While mortgage payments can double overnight…

Rents adjust much more slowly.

And, for the CPI, you have to wait, too, for the OER survey to catch up. 

Australia saw a similar divergence. 

Real house prices rose approximately 30–35% over the same period, while CPI housing measures increased by only 8–12%, depending on the index used.

That's a 20-25% understatement.

While CPI might be internally consistent, it is misaligned with actual, lived, inflation.

Deflating inflation: Rotation and hedonics

Aside from creatively interpreting and representing major CPI items like housing, there are a couple of other key ways you can cook the books — intentionally or unintentionally — when measuring inflation. 

Firstly, there’s rotation. 

This is where you quietly remove or down-weight items as they become more expensive. 

Example:

Beef prices rose sharply in the early 2000s.

Households couldn’t afford to buy as much. 

They started buying chicken instead. 

So the Bureau of Labor Statistics updated the CPI weights. 

CPI weights shifted away from beef and toward chicken.

While the new item contributes to a lower inflation print…

It doesn’t reflect the reality that the item it replaces became too expensive in the first place. 

The CPI basket therefore tracks utility-equivalent substitutions, not the rising cost of maintaining prior consumption patterns.

This process is known as substitution bias, and while defensible in theory, it systematically dampens reported inflation over time.

Second, there’s hedonic adjustment. 

Let's go back to my phone scenario for a moment. 

The U.S. CPI adjusts smartphones for quality improvement. 

When a new phone comes out with a faster processor, better camera, or more storage, CPI treats part of the price increase as a quality improvement, not inflation.

Your new phone now costs $300 more, let’s say, but CPI records little to no inflation — because the device was judged to deliver more utility.

Rotation and hedonic adjustment give statistical agencies significant discretion over how inflation is recorded.

Over long periods, these methods tend to bias inflation readings downward.

Most of this piece references the most influential economy in the world, the U.S.

Yet, they don’t make the top 10 countries with the most transparent CPI process, as measured by OECD statistical quality frameworks, CPI methodological transparency, and institutional independence of national statistical agencies.

Here’s the current top 10:

🇨🇭 Switzerland
🇩🇰 Denmark
🇸🇪 Sweden
🇳🇴 Norway
🇫🇮 Finland
🇸🇬 Singapore
🇨🇦 Canada
🇦🇺 Australia
🇳🇿 New Zealand
🇳🇱 Netherlands

Institutional incentives and narrative control

Inflation is possibly the most politicized number in economics for good reason. 

Governments have plenty of reasons to want to shape the CPI number.

They also have plenty of ways to do so. 

They design the basket that measures inflation. 

They weight what’s in that basket. 

They decide what to substitute for what — like measuring theoretical rent instead of the actual cost of housing. 

And, of course, they decide when to release data, and how to shape the press releases and media narratives that form around this all-important, ever-changing number. 

Statistical agencies like the BLS or ABS operate within government-defined institutional and political constraints.

They are taxpayer-funded, politically exposed, and incentivised to preserve credibility and stability.

And while central banks are meant to be independent of the governments they serve…

They depend completely on these numbers. Inflation is the number one enemy, remember. 

Monetary policy flows, in large part, from inflation alone. 

Statistical magic

Inflation and CPI are massively important. 

But it’s important to understand that the way these numbers are measured and represented isn’t neutral. 

There’s a lens between the true economic situation, and the narrative the public receives. 

In this way, you can think of inflation numbers as having their own unique inflation — the inflation of fact, accuracy, truth. 

When house prices rise 40% and the government statisticians are saying the number is less than half that…

It’s worth looking closer. 

For households, investors, and policymakers, this gap matters. 

Wages are negotiated against CPI. Pensions are indexed to it. Bonds are priced off it. 

When inflation is systematically understated, real purchasing power erodes faster than the numbers suggest — and trust in the system erodes with it.

This week's quote:

“Inflation is the one form of taxation that can be imposed without legislation.”

— Milton Friedman

Invest in knowledge,

Thom

The Benchmark

Read more: Switzerland just took a stand in the War on Cash.

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More than half the nation’s voters turned out to cast their vote, nearly three quarters of them in favour of protecting physical money. 

If you didn’t know this had happened, I don’t blame you. There are plenty of other events dominating the media at the moment. 

But this is an important moment in financial history. 

According to Bloomberg, ‘the vote marks a rare moment of circumspection on the nature of money that sought to take the electoral temperature rather than simply rely on consumer behavior to judge the views of citizens’.

Cash use has been declining in Switzerland — from 70% of all transactions in 2014 to just 30% in 2024.

But the Swiss, respected the world over for their sophistication and elite socioeconomic status, remain staunchly fond of their francs. 

They even use coins dating back to the mid 1800s to this day. 

But while the Swiss government has given its people a voice in how they store and spend their money, other nations are tightening their grip.

Three countries currently engaged in ‘monetary cleansing’

There are about 40 nations actively pushing in the opposite direction right now. 

These are three of... note? 

1. Israel: Criminalizing Cash

While many countries today enforce transaction limits, Israel has moved beyond this, targeting the act of simply holding cash.

As part of the 2026 budget legislation, the Israeli government proposed a law to criminalize the possession of more than NIS ₪200,000 (USD $54,000) in cash by private individuals. 

This means that at ₪199,999, you’re an honest citizen. But one shekel more and you’re a criminal. 

The Israeli government also imposes cash transaction restrictions of ₪6,000 with dealers, and ₪15,000 for private transfers. 

Also in 2026, they are considering abolishing the ₪200 bill (pictured below), which would make it more difficult for citizens to store large sums of money physically. 

2. Denmark’s Demonetization Model

Denmark is forcing capital onto digital rails through the total withdrawal of high-value notes.

The Danish central bank has decreed that as of May 31, 2026, all 1,000 Danish kroner banknotes will officially become worthless. 

By removing the highest denomination, they’re effectively narrowing the cash economy.

Because if you hold these notes and you don’t deposit them into a traceable bank account before May 31, they cease to be worth anything. 

On top of this, Denmark allows most retailers to refuse cash payments entirely during nighttime hours, and the government has signaled a move toward allowing even more sectors to go 100% digital-only.

So the trend is clear; go digital, or risk losing your money and ability to transact. 

3. Albania’s ‘Cashless 2030’ Mandate

Albania has launched one of the world's most direct anti-cash operations.

Cashless Albania 2030 is a program to completely remove physical money from the Balkan country’s economy. 

By the end of 2026, the Albanian government wants every single merchant in the country, no matter how small, to have electronic payment devices installed. 

As in, don’t take card? Risk getting shut down. 

The program aims to eliminate cash transfers in public institutions this year, too. So citizens will no longer be able to pay for state services or taxes with physical money.

On top of this, Albania is also slashing its cash-payment ceiling to L500,000 Lek (~USD $5,300) as a step toward becoming cashless by the end of the decade. 

Driving dark capital into the light

Why are these, and other, nations putting so much energy into forcing capital out of cash and into digital?

Official narratives are about what you’d expect; anti-money laundering, crime prevention, financial security. 

But there are, of course, other aspects to this trend which governments and central banks are less eager to broadcast publicly. 

In Israel’s case, the cash crackdown is connected to existential fiscal survival.

While a ‘stable’ government deficit is generally considered to be around 3% or less, Israel’s shot up to nearly 7% a couple of years ago as it spent more on defense and military reservist payments. 

To keep their credit rating from worsening, they need to turn this around. Which means they need to collect more tax to cover the extra spending. 

By switching to a ‘cash is crime’ policy, the government can bring the approximately ₪2 trillion (~USD $530 billion) suspected to be ‘black capital’ currently outside the tax net.

For context, this 'missing' capital is nearly four times the size of Israel's current annual budget deficit.

Denmark’s war on cash, though, is part of a broader Digital Social Model. 

Danmarks Nationalbank, the central bank of Denmark

Not only does the Nordic country struggle with a two-speed economy — domestic growth lags its global pharmaceutical exports — but they have an aging population which requires funding, and therefore tax revenue. 

Getting cash out of mattresses and into the high-velocity, taxable digital grid allows the Danish government to better deal with both of these challenges. 

For Albania, the ulterior motive to its Cashless 2030 drive is bigger than just the national budget. 

The Balkan nation is attempting to join the European Union. 

And if you want in, you have to meet strict fiscal conditions. 

So when nearly a third of your economy is likely operating in the shadows, untraceable and untaxable, you need to make huge structural changes if you want a shot at becoming EU-compliant (and accessing the bloc’s €6 billion Western Balkans growth fund). 

The not-so-invisible hand

As of early 2026, the War on Cash is raging across about 40 nations. 

While the methods vary — ranging from daily spending caps to the total deletion of high-value banknotes — the path is consistent: Moving from a physical and private to digital and surveillable. 

The nations I’ve profiled today give you an idea of how, and under which narrative, governments and citizens are dealing with this. 

But they are just four examples; the March 2026 Swiss referendum, Israel’s and Albania’s mandate to bring ‘dark capital’ within range of taxation, and the economic and demographic challenges Denmark is trying to overcome by demonetizing cash.

There are many other cases — some extreme — playing out in the world right now. 

In Greece, for example, it’s now illegal to pay for anything worth more than €500 in cash (the most restrictive such law in the EU). 

In China, the e-CNY (Digital Yuan) is now a core part of the economy. 

In Tier-1 cities, the infrastructure is so heavily optimized for QR and biometric payments that physical cash has effectively been starved out of daily utility — no explicit ban required. 

The United States, on the other hand, is currently pushing legislation that protects cash. 

Not only is there no active federal push to abolish cash, but legislative energy is focused on mandating cash acceptance.

New York State, for example, just passed a new law requiring nearly all retail and food establishments statewide to accept cash for in-person transactions.

Businesses that refuse face civil penalties of up to $1,500 per violation.

Depending on where you’re reading this, you might have your own experience or opinion on physical money’s role in your local economy (taxable or otherwise). 

Reply to this and let me know. 

This week's quote:

“The shadow economy is the true laboratory of globalization. It is the only place where the laws of supply and demand are never interrupted by the hand of the state.”

— Loretta Napoleoni, Author of Rogue Economics

Invest in knowledge,

Thom

The Benchmark

Read more: The mathematical law that explains why 80% of a nation's wealth is typically held by 20% of its population.

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Thom here — co-founder of Navexa. 

In 2024, I wrote 37 essays for a project we called The Benchmark. 

Thousands of people read my weekly pieces on stocks, tech, financial history and the economy, many of whom wrote in to say they enjoyed and valued what they read. 

You might have been one of them (your email address was in the list of subscribers).

So I wanted to let you know — if you didn't already — that I'm writing The Benchmark newsletter again this year:

If you enjoyed my emails then and you'd like to again, just click here and you'll be back on the list (we're using a different email provider for the newsletter now).

I just sent out my latest, about 10 'macro chokepoints' that quietly control the world. 

Invest in knowledge,

Thom

The Benchmark

P.S. if you're already subscribed, or you don't wish to subscribe, no need to do anything. 

An NBC News headline this week reads:

Here’s the crude oil chart so you can see the volatility the journalist refers to:

The price of oil is arguably the single most important price in the world. 

Because when oil gets more expensive, so does everything else. 

Fuel, freight, fertilizer, food — and those are just four items starting with the same letter, but all of them are deeply connected and critical to daily life pretty much everywhere in the world. 

So why the volatility? 

With conflict breaking out in the Middle East this month, Iran closed the Strait of Hormuz, a narrow sea passage separating the Gulf of Oman and the Persian Gulf. 

This closure triggered a supply squeeze; about 20% of the world’s oil and petroleum shipments pass through the strait. 

The supply squeeze triggered a price increase (which OPEC is now trying to arrest by releasing reserves into the market).

The price increase has already led to downstream economic effects worldwide.

Depending on where you’re reading this, you might already have felt them. 

But while oil is always going to grab the mainstream headlines at times like this, there was a less visible supply squeeze that caught my attention. 

Marty Bent’s excellent Bitcoin Brief on March 3 ran the following headline:

It caught my attention for two reasons. 

First, who knew Qatar possessed helium, let alone controlled enough of it to significantly threaten the world’s largest chip fabricators? Not me. 

Second, what other uniquely tight macroeconomic chokepoints exist in today’s world?

While the Strait of Hormuz and oil dominates the headlines right now, there are actually many cases of ‘geographic determinism’ which we’d never normally think about (until it’s too late). 

These are situations in which a nation’s or region’s location happens to give it huge leverage in particular commodity markets. 

So here’s the top 10 cases in which control of vitally important minerals, gases, raw fuels and refinery facilities is ultra-concentrated — in descending order. 

#1: Heavy Rare Earth Elements (HREEs)

What it is/does: These chemical elements, such as dysprosium and terbium, are critical for creating high-strength permanent magnets that maintain their magnetic properties at the extreme temperatures found in modern engines.

Level of control: 99% of global chemical processing and separation is centralized in China. While other nations mine these elements, China holds a near-total monopoly on the refining infrastructure required to turn ore into industrial-grade material.

Main buyers: Drivetrain motors for electric vehicles, high-performance wind turbines, and advanced defense systems.

Key buyers: Major EV manufacturers (Tesla, BYD), renewable energy firms, and defense contractors like Lockheed Martin.

#2: Gallium

What it is/does: A soft metal that, when combined with nitrogen or arsenic, creates semiconductors that are significantly more efficient than silicon at handling high-frequency signals and high voltages.

Level of control: 98% of global primary production is controlled by China. Following the 2024-2026 export restrictions, Western supply has become extremely fragile, relying heavily on limited domestic recycling.

Main buyers: 5G base station transmitters, advanced AESA radar systems for fighter jets, and fast-charging power adapters.

Key buyers: Telecommunications giants (Ericsson, Nokia), aerospace firms (Raytheon, Northrop Grumman), and consumer electronics OEMs.

#3: High-Purity Quartz (HPQ)

What it is/does: This ultra-pure natural mineral is the only material that can be fused into the silica crucibles used to grow the monocrystalline silicon ingots required for computer chips.

Level of control: 90%+ of the world's highest-grade natural HPQ originates from two mines in Spruce Pine, North Carolina. There are virtually no other natural sources on Earth that meet the purity levels required for advanced semiconductor manufacturing.

Main buyers: Manufacturing the ‘master vessels for all semiconductor and high-efficiency solar wafer production.

Key buyers: Global semiconductor foundries (TSMC, Intel, Samsung) and the world's largest solar cell producers.

#4: Niobium

What it is/does: A transition metal used as a ‘micro-alloying’ agent; adding a tiny fraction of niobium to steel dramatically increases its strength, toughness, and resistance to extreme heat.

Level of control: 90% of global production is controlled by Brazil, with the Araxá mine alone providing 75% of the world's total supply.

Main buyers: High-strength low-alloy (HSLA) steel for jet engines, automotive frames, and large-scale industrial pipelines.

Key buyers: Jet engine manufacturers (GE, Pratt & Whitney), automotive OEMs focused on lightweighting, and global infrastructure firms.

#5: Cobalt

What it is/does: A dense metal that acts as a stabilizing agent in battery cathodes, allowing them to store more energy safely without overheating or catching fire.

Level of control: 74% of global supply is mined in the Democratic Republic of the Congo (DRC). Furthermore, 80% of the global refining capacity for this cobalt is located in China.

Main buyers: Cathodes for lithium-ion batteries in electric vehicles and mobile devices.

Key buyers: Battery cell manufacturers (CATL, Panasonic, LG Energy Solution) and major tech firms (Apple, Tesla).

#6: Nickel

What it is/does: A versatile metal that provides corrosion resistance to steel and is the primary ingredient in high-performance battery chemistries that enable long-range driving.

Level of control: 70% of global output is controlled by Indonesia. The Indonesian government strictly manages this supply through mining quotas and export bans to maintain high global prices.

Main buyers: Stainless steel production and High-Nickel (NCM) battery cells for EVs.

Key buyers: Global steel mills and the EV supply chains of automakers like Tesla and the Volkswagen Group.

#7: Manganese

What it is/does: An industrial element essential for removing oxygen and sulfur during the steelmaking process; it is impossible to produce high-quality steel without it.

Level of control: 70% of the world's high-grade manganese resources are concentrated in the Kalahari Basin of South Africa.

Main buyers: Steel alloying and the production of increasingly popular lithium-manganese-iron-phosphate (LMFP) batteries.

Key buyers: The entire global steel industry (ArcelorMittal, Nippon Steel) and next-generation battery developers.

#8: Platinum Group Metals (PGMs)

What it is/does: A family of six rare metals, including platinum and iridium, that act as highly efficient catalysts for chemical reactions, particularly in cleaning exhaust and producing hydrogen.

Level of control: 80-85% of known global PGM resources are located within a single South African geological formation known as the Bushveld Complex.

Main buyers: Automotive catalytic converters and the ‘green hydrogen’ economy (electrolyzers and fuel cells).

Key buyers: Global automotive OEMs and companies building out the industrial hydrogen infrastructure.

#9: Helium

What it is/does: A non-renewable noble gas with the lowest boiling point of any element, making it indispensable for achieving the ultra-low temperatures required for advanced physics and manufacturing.

Level of control: 40% of the global export market is now controlled by Qatar. As the United States decommissions its historical federal reserves, the world has become geologically dependent on Qatari natural gas byproducts.

Main buyers: Cooling superconducting magnets in MRI machines and rocket engine pressurization.

Key buyers: Healthcare systems, aerospace companies (SpaceX, NASA), and semiconductor manufacturers.

#10: Oil & LNG

What it is/does: These are the primary fuels that power global transport, heating, and industrial electricity generation.

Level of control: 20% of global daily petroleum and liquefied natural gas (LNG) must pass through the Strait of Hormuz. While many countries produce oil, this 21-mile-wide passage is the only exit for the world's most productive energy exporters.

Main buyers: Powering global logistics, power grids, and heating systems.

Key buyers: Energy-hungry Asian economies, specifically China, Japan, India, and South Korea, which are almost entirely dependent on this route.

Supply and demand (and control)

These are 10 macro chokepoints worth knowing about today. 

All the resources that make the world go round, must, one way or another, get around the world from their source to their market. 

Whether it’s oil, helium, rare earth elements or some other critical — and geographically concentrated — resource, it’s useful to understand the relationship not only between supply and demand, but also between supply and control. 

This week's quote:

“He who controls the spice controls the universe.”

— Frank Herbert, Dune

Invest in knowledge,

Thom

The Benchmark

Read more: What if inflation is a feature, not a bug?

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I’ve written recently about fiat currencies’ appalling failure rate throughout history, and how successive cuts between paper money and gold have marked precipitous falls in purchasing power for everyday people. 

Today, we’re going to explore the other side of the devaluing coin. The steadily devaluing coin, that is — as opposed to the hyperinflation victims that collapse  economies. 

Because when we criticize fiat currency, it’s usually an inflation criticism. 

As in, how can it possibly be a good thing that the cash in my bank account this year will be worth 33% less 10 years from now?

It’s easy to look at that fact and jump directly to arguing fiat is evil, unfit for purpose, a mechanism of state oppression, a symptom of fiscal excess and so on.  

But making this argument involves making a huge assumption:

That fiat currency’s purpose is to be a store of value. 

As you’re about to see, fiat’s purpose is entirely different — especially today. 

So let’s look for the good in the fact that the cash in our accounts loses economic power by the day. 

Money: What is it good for?

There are three main use cases for money. 

1. Medium of exchange: Money can be a go-between. It allows individuals, businesses, institutions and governments to trade. 

2. Unit of account: Money can be a yardstick. It’s a common language of economic calculation, which allows us to compare the value of different things. 

3. Store of value: Money can be a time machine. It lets you store value you create, for future use. 

Different forms of money suit different use cases to a greater or lesser extent. 

Gold is an excellent store of value, for example. It’s rare and therefore difficult to inflate by increasing supply. It never rusts or decays. 

You could argue it’s a decent unit of account, too, given all the fiat currencies that used a gold standard.

But you could not argue gold is a good medium of exchange. Because not only is there relatively little of it, but it’s heavy and bulky, which makes settling transactions in physical gold exceedingly difficult. 

Whereas cash, on the other hand, is a great unit of account and medium of exchange — especially in the digital form we’re used to these days. 

Compared to gold, you can settle transactions fast and with almost no physical work. 

It’s this distinction which brings us to the Triffen Dilemma. 

The paradox of competing economic interests

We often talk about a nation taking its currency off the gold standard as a fatal fiat flaw. 

Because history shows that up to 99.9% of currencies fail to survive once the link between the paper and the precious metal severs. 

This perspective leans heavily on assessing fiat currency in terms of its suitability as a store of value. 

But when you’re supplying the world’s reserve currency, as the US does, store of value is not first, or even second, priority. 

The priority is to be the globally-accepted medium of exchange and unit of account.

On the one hand, this is the store of value trend for the dollar:

On the other, here’s the dollar’s global dominance over 120 years — expressed as a percentage of currency reserves held across the world. 

From 0.0% in 1900 to 59% in 2020. 

In 2026, USD dominance is steady at about 57%. 

By definition, a reserve currency has to be everywhere.

Which means you need a lot of it. 

Which means maintaining a currency as a store of value isn’t as important as increasing its supply and usage. 

This is the paradox which Belgian-American economist Robert Triffin described in the 1960s, as the world shifted to a US Dollar standard.

Triffen noted that a country whose currency is the global reserve had to supply the world with its currency in order to fulfill foreign exchange and reserve demand. 

To do this, the reserve currency nation must run a trade deficit — it must buy more than it sells, so that more of its currency flows out than in. 

The Triffen Dilemma expresses the fact that you must expand money supply and diminish purchasing power to maintain or strengthen reserve currency status.

The dollar bug is the feature

The US Dollar has lost a third of its purchasing power over the past decade. 

But, it remains the reserve currency for most of the world (read about the previous title holders and potential challengers). 

Securing reserve status was President Nixon’s objective when he took the dollar off the gold standard in 1971. 

By removing the condition that every dollar be backed by physical gold reserves — remember, difficult to produce and difficult to exchange — Nixon gave the US carte blanche to flood the global economy with dollars. 

In this context, inflation isn’t some nefarious means of confiscating wealth from citizens. 

It’s a pressure-release valve, allowing liquidity-on-demand dollars to keep America’s trading partners using her currency. 

Consider, for example, if the US had remained on the gold standard, and not printed a single dollar beyond its physical gold reserves.

The dollar might not have lost so much of its value. But nor would it have the economic dominance and reach it does today. 

And there’s more to the pro-inflation narrative than just reserve currency status. 

According to Austrian economist Ludwig von Mises, a steadily-devaluing fiat currency serves another, higher, purpose. 

Inflation as innovation incentive

Von Mises was a leading economist from the Austrian School of Economics, a group who emphasized the importance of a price system and free markets.

He viewed the stock market as the heart of the capitalist system, and the centre of innovation. 

Its the place where entrepreneurs raise capital to fuel progress. 

The place where investors deploy capital to generate a better return than by holding cash. 

In this way, a free floating fiat currency which steadily loses purchasing power acts as an incentive. 

It drives innovation and attracts investment. 

Because holding cash is pretty much a guaranteed way to lose wealth, whereas investing it makes growing wealth possible. 

Medium of exchange > store of value

Fiat currency is not designed to be a store of value. 

It’s designed to facilitate trade and stimulate economic growth. 

Other assets have other purposes. 

Consider Bitcoin. 

Because there’s a finite supply of 21 million coins, there can be no inflating the supply beyond that hard cap. 

This makes Bitcoin ‘cool’ money. 

Similar to gold, there is no structural pressure to move it. 

This could, in theory, lead to a liquidity trap; money might only ever enter the network, and never leave.

The absolute scarcity might mean it would never make sense to sell an asset whose price only ever increases over time. 

Fiat, by comparison, is ‘hot money’. 

The slow bleed of purchasing power (inflation) provides the pressure and incentive to spend and invest. 

So yes, the US Dollar has lost 99% of its purchasing power. 

There’s no arguing that it’s not a terrible store of value — even if it is one of the few fiat success stories.

But the argument for a slow-bleeding dollar is nothing to do with storing value. 

Leave that to gold and bitcoin.They are scarce, inflexible assets designed to act as time machines for storing energy as capital. 

Steadily-inflating fiat is, from this perspective, fuel for trade, innovation and growth — and, in the case of the US Dollar, reserve currency status. 

This week's quote:

“Only money that goes out of date like a newspaper, rots like potatoes, or melts like iron when exposed to the heat of the furnace, can be a suitable medium of exchange... for such money will not be hoarded.”

— Johann Silvio Gesell

Invest in knowledge,

Thom

The Benchmark

Read more: Edison and Ford invented Bitcoin in 1921?

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In December 1921, two of the most influential technologists in history took a trip together. 

Thomas Edison and Henry Ford drove to Muscle Shoals, Alabama, to see the unfinished Wilson Dam.

The Dam had been under construction since 1918, when the United States government had sought to build and power two nitrate plants. 

The idea behind building the plants was to protect US explosives production during World War 1. 

But by Edison and Ford’s 1921 visit, the war was over. 

Investment and progress on the dam had stalled. The government was caught between issuing debt or outsourcing the project to a private company to finish the job. 

Which was a shame, because the dam had the highest potential for generating hydroelectric power east of the Rocky Mountains. 

This was why, earlier that year, Ford had made an offer to the Secretary of War.

He wanted to lease the Muscle Shoals nitrate plants and the unfinished Wilson Dam for a period of 99 years, for a price of $5 million. 

And it was this intersection, between energy and money, that Edison and Ford pondered as they wandered the banks of the Tennessee River that December. 

As two of the most influential minds of the past two centuries conferred about solving the Wilson Dam problem, they arrived at a solution few today, let alone then, could come to terms with.

An ‘energy currency’ backed by 1,000,000 horsepower

By 1921 the Wilson Dam was a ‘stranded asset’.

Fiscal conservatives in Congress were unwilling to raise taxes for public works. 

The only ‘acceptable’ way to finish the dam was through traditional banking and interest-bearing bonds. In other words, the government wanted to sell debt to banks to raise money.

Specifically, they wanted to sell 30-year bonds at 4% interest to private banks and investors. 

They wanted to raise $30 million this way.

This is where Edison and Ford entered the chat. 

Edison noted that borrowing $30 million at 4% interest would eventually cost taxpayers $66 million — an absurdity he called “the terrible thing about interest”.

Ford took it further, arguing that ‘money brokers’ were the true cause of war and poverty. 

Instead of renting money from banks, Edison and Ford proposed a resource-based currency system:

Edison proposed that the government bypass the bond market entirely by issuing $30 million in non-interest-bearing currency directly to the workers and suppliers finishing the dam.

This new currency would not be backed by gold, but by the ‘imperishable wealth’ of the dam’s capacity to generate 1,000,000 horsepower.

Unlike pure ‘printing press’ money, Edison’s plan tethered the value of the currency to the physical energy output of the Tennessee River.

By issuing the money themselves, the government would save taxpayers $36 million in interest that would have otherwise gone to private ‘money brokers’.

Ford intended to use this currency to fund his ‘75-mile city’, or ‘Detroit Park’, a local economy where the unit of account was the very electricity his factories produced.

He viewed finishing the dam as a way to ‘disarm the world’ by taking the power of money creation away from banks and giving it to productive industry.

Edison and Ford articulated their alternative money theories in The New York Times on December 4 and 6, 1921.

It’s important to note that this remarkable story played out long before the US ended the convertibility of the dollar to gold.

The status quo was that paper currency represented a certain amount of gold.

But even this, which many investors today argue governments should restore, Edison found fault with. 

He famously dismissed gold as a “relic of Julius Caesar”. He argued its value was a fiction maintained by money brokers to control national debt.

So how did this go down with the government of the day?

The energy dollar wars

Edison and Ford’s proposal triggered a decade of political warfare. 

They were, after all, arguing for a wholesale rethinking of the nature of capital, right as the US was trying to reckon with the aftermath of the biggest global conflict to date. 

Edison’s ‘Energy Dollar’ logic and Ford’s celebrity captured the public imagination. But they faced a formidable opponent in Senator George Norris of Nebraska.

Norris viewed Ford’s $5 million bid for a $130 million site as an outrageous attempt at a private monopoly. 

He blocked Ford’s bid for years, arguing that the Tennessee River’s resources belonged to the public and should be used as a ‘yardstick’ for fair electricity prices.

Meanwhile, fiscal conservatives and banking interests lobbied against Edison’s currency theory, fearing that ‘interest-free’ money would destroy the debt-based financial status quo. 

Frustrated by the political gridlock, Ford withdrew his bid in 1924.

The stalemate only ended in 1933 when the Great Depression provided the political momentum for the New Deal — a colossal stimulus program designed to relieve poverty and restore economic activity in the US. 

The government finally bypassed both the private ‘energy dollar’ proposal and traditional banking debt by creating the Tennessee Valley Authority (TVA) — a public corporation that finished the dam as a state-owned utility.

Did the Wilson Dam spawn the Bitcoin White Paper?

A century later, Edison and Ford’s trip to Muscle Shoals looks less like a failed industrial bid and more like the first whitepaper for a thermodynamic monetary standard. 

They correctly identified that fiat currency is a liquidity crisis waiting to happen when it is unmoored from hard assets. 

One can argue that Bitcoin is the technical fulfillment of the ‘energy dollar’. 

It replaces the centralized ‘75-mile City’ with a global, decentralized network that uses energy as its secure consensus. 

Because it replaces the "fiction" of gold and the "interest trap" of banks with a thermodynamic proof-of-work; mining Bitcoin and verifying transactions on the blockchain require specific amounts of compute.

This ensures that every unit of currency represents a literal, unforgeable expenditure of physical energy.

Bitcoin’s white paper even looks like it was published 100 years ago:

By tethering a currency's value to the physical work of the Megawatt, Bitcoin creates an ‘energy-secured digital scarcity’ that cannot be inflated by ‘money brokers’ or government decree. 

Consider, for example, that between 2014 and 2024, the US dollar lost 33.3% of its purchasing power — and far more on longer timelines. 

This goes some way to explaining why US house prices, in US dollars, continue to rise. 

And why, these same house prices, expressed in Bitcoin, continue to fall. 

Another visualization of this paper-versus-energy dynamic:

Energy dollars in action in 2026?

Edison and Ford’s idea might have been shot down by the politicians 100 years ago.

But that doesn’t mean it died.

Look around today, and you’ll find a world coming more than ever to terms with energy as its true reserve currency. 

Bitcoin fulfills Edison's vision of an ‘energy dollar’ by using proof-of-work to tether a currency's value to the physical consumption of the megawatt.

Perhaps this is why the highest-profile innovator and technologist of today is prepared to make statements like this:

Why Nations like Norway and Saudi Arabia are aggressively converting finite energy resources (oil and gas) into long-term, multi-generational digital and global reserves to protect against the decay of fiat currency:

And why modern energy firms are increasingly using Bitcoin mining to act as a ‘buyer of last resort’ for excess electricity, allowing remote or ‘stranded’ energy sources — much like the 1921 Wilson Dam — to be instantly converted into global capital:

This week's quote:

“Nothing is more powerful than an idea whose time has come.”

— Victor Hugo

Invest in knowledge,

Thom

The Benchmark

Read more: Welcome to the fiat currency graveyard

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Rare is the person who’s not seen the footage of John Fitzgerald Kennedy’s assassination in Dallas in 1963. 

But you’re more rare if you can name the man sitting directly in front of JFK in the limousine that day.

And rarer still if you know the pivotal role this man played in financial history. 

And if you’re not this rarer-than-rare person, then you will be in the next few minutes. 

Because I’m about to take you on a strange ride through financial history.

This is a story of governments, currency, gold, and an economic pattern that has repeated not just for centuries, but millennia. 

Let’s start with the lesser-known man in the limo that day in Dallas. 

“Our currency… your problem.” 

On November 22, 1963, John Connally, then Governor of Texas, survived one of the most notorious and controversial presidential assassinations in history. 

That’s him, sitting right in front of JFK:

The bullet that hit Connally was, according to some, a bullet that had struck the president first.

It could have been Connally’s end, too. 

But he survived and recovered from his wounds, and went on to find himself at another pivotal moment in 20th Century history just eight years after Dallas. 

Fast forward to 1971, and Connally was no longer Governor of Texas, but Treasury Secretary for President Richard Nixon. 

By this point, the world had been doing business in US Dollars for 27 years, since 1944, when forty four nations had signed the Bretton Woods Agreement. 

They’d done so on the understanding that the Dollar was convertible to gold. 

But by ‘71, the US had printed way more dollars than it had the gold to back.

European central banks had realized this. 

They’d begun redeeming their dollar reserves for gold bars. 

So President Nixon announced a ‘temporary’ suspension of gold convertibility. 

At the G10 meeting in Rome four months later, the European finance ministers confronted Connally.

They’d agreed to a gold standard. Now, their USD holdings were losing value rapidly, untethered to the precious metal. 

The ministers demanded the US get its house in order and stop, effectively, exporting inflation. 

Connally’s response?

“The dollar is our currency, but it’s your problem.”

America had shifted from co-operation to unilateralism. 

"Worth just as much tomorrow."

At 9pm Eastern Standard Time on Sunday, August 15, Nixon appeared on television from the Oval Office. 

The timing was deliberate. 

The markets around the world were closed. It was prime viewing time in America. 

The president announced (emphasis added): 

“I have directed Secretary Connally to suspend temporarily the convertibility of the American dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States.”

He blamed “international money speculators” for holding the American dollar “hostage”. 

And he made two claims which have not aged well in the slightest.

“Your dollar will be worth just as much tomorrow as it is today. The effect of this action will be to stabilize the dollar.”

If you’ve spent any time on Fintwitter (X), you’ve probably seen the charts, like this one: 

It’s effectively a before/after of what’s come to be known as the ‘Nixon shock’. 

The dollar that the president proclaimed would stabilize and hold its value?

According to official inflation data, the US dollar has lost about 87% of its purchasing power.

What you could buy for $1.00 in 1971 costs about $7.85 now. 

And in gold terms? 

In 1971, $35 bought an ounce. 

At the time of writing, 55 years later, an ounce of gold trades for more than $5,000. 

So much for a ‘temporary’ measure to stabilize the dollar.

And so much for John Connally if he thought that the JFK assassination would be the only controversial historic flashpoint he’d be caught up in. 

What they sold to the public as an emergency measure to protect their currency, was in reality the only option they had to get themselves out of the liquidity crisis they’d created by printing more dollars than their gold reserves could back. 

But the more interesting thing about this event, in my opinion, is the fact that the Nixon Shock was not the first time a country had decoupled its currency from gold. 

In fact, this is a pattern which has been repeating for millennia. 

1933: When owning gold became illegal

Nixon was hardly blazing a trail when he ordered Treasurer Connally to suspend the dollar’s convertibility to gold. 

You could argue he was, in fact, following a very old script. 

Because governments have a standard playbook for dealing with liquidity crises. 

History proves this.

In 1933, for example, the US was in the grips of the Great Depression. 

The Federal Reserve wanted to print money to “stimulate” the economy.

But the gold standard stood in the way. So, President Roosevelt issued Executive Order 6102.

The order made it illegal for US citizens to own monetary gold (coins, bullion, certificates).

The government forced citizens to sell their gold to the Federal Reserve for $20.67 an ounce.

Then, they revalued it to $35.00 an ounce.

That sequence of events, just to be clear:

It suddenly becomes illegal to keep your gold. So you sell to the government. They nearly double its value after the fact. And the paper money they ‘bought’ it with is suddenly worth 69% less. 

This solved the liquidity problem by effectively picking the public’s pockets. 

Again, though, this wasn’t anything new. 

1931: Britain stems the gold bleed

Two years earlier, on September 21, 1931, the Bank of England committed the original “rug pull”.

At the time, the Pound Sterling was the world’s undisputed reserve currency.

But the UK was bleeding gold. 

Just as foreign investors and central banks had grown eager to redeem their dollars for gold in the runup to 1971, they were doing the same to the English. 

Britain was facing the prospect of an empty gold vault, and the collapse of its own gold standard. 

So what do you think they did? 

They severed the link, of course. 

The Pound immediately collapsed by 25%, and today has lost more than 99% of its value against gold.

And just as in 1971, the government sold this to the public as a short-term workaround, rather than a permanent change. 

When Chancellor Philip Snowden introduced the bill to the House of Commons on September 21, 1931, he didn't call it a permanent default. He introduced it as “a Bill for the temporary Amendment of the Gold Standard Act, 1925” but with the convenient loophole:

'Unless and until His Majesty by Proclamation otherwise directs'. 

It fits the oldest rule in political economics (often attributed to Milton Friedman): 

“Nothing is so permanent as a temporary government program.”

Devaluation in our DNA?

If you really want to see the roots of this pattern, you have to go back much further.

The Roman Empire didn't have paper money to “delink” or central banks to “revalue”. 

But they had the same liquidity crisis: The state’s debts exceeded its ability to pay.

So, they invented the ancient version of Quantitative Easing: Coin Clipping.

Under Emperor Augustus (27 BC), the Denarius — the reserve currency of the ancient world — was roughly 95% pure silver.

By the time of the “Crisis of the Third Century” (around 270 AD), that same coin was less than 5% silver. 

It was essentially a bronze slug dipped in a silver wash.

The technology changes, but the mechanism remains the same:

When the bill comes due, and the vault is empty, the state chooses to dilute its currency rather than default on debt.

No magic bullets

So now you know about the man seated in front of JFK the day the president was assassinated. 

He wasn’t just caught up in one of the 20th Century’s defining political and cultural moments.

He was involved in arguably the most important monetary one. 

John Connally was the man who, under President Nixon, took the US Dollar off the gold standard, and made clear to America’s trading partners that she cared little for their objections. 

The story here might give you an interesting fact to drop the next time you find yourself talking about the JFK assassination. 

Because it’s arguably far more important than who the man on the grassy knoll might or might not have been. 

The history of governments decoupling their currencies from sound money, and of — in every case I’ve just shown you — triggering almost total collapse of purchasing power, goes back millennia. 

There is no magic bullet for redeeming a fiat currency from a liquidity crisis brought on by debt or reckless moneyprinting. 

Just an irrefutable litany of proof of the fact that no currency in history has ever held its value (let alone gained value) once its ‘gold standard’ has been killed. 

This week's quote:

"We cannot afford to be a nation that prints more than it earns, or promises more than it can back." — John F. Kennedy (paraphrased)

Invest in knowledge,

Thom
The Benchmark

Read last week's email: Why gold beat every other asset in 2025.

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The scoreboard for 2025 is in.

If you only read the headlines, you might think Nvidia and Bitcoin were the only games in town.

But if you look at the actual returns, a different story emerges.

For the first time in 15 years, the oldest asset on earth beat the newest ones.

Why?

Because 2025 started on narratives and promise, but ended focused on proof and pragmatism.

So in this, the first official Benchmark email of 2026, we’re talking receipts.

What signals did 2025 send us about stocks, Bitcoin, precious metals and — crucially — the world’s reserve currency?

Let’s start with one of my favourite investing charts of the year.

Gold: On top for the first time in 15 years

This is the Bloomberg readout of the best performing assets over the past 15 years.

You can see that for 11 of these latest 15 years, Bitcoin was the top performer.

Despite all the ‘Bitcoin is dead’ proclamations, ‘rat poison squared’ labels and criminal/fraud associations…

The numbers don’t lie: Bitcoin has been the strongest investment asset. No other has had more than a single year on top.

But look again, and you’ll notice that last year another asset — one which hasn’t graced the top of the charts at all in the previous 14 years — stopped Bitcoin from racking up a fourth hat-trick.

Gold came out on top, with a 64% return for 2025.

That’s more than double the performance of the next best asset last year, which was also perhaps not what you might have expected; developed markets excluding the United States.

And gold didn’t just thrash stocks. It thrashed the currency we price stocks in.

This is perhaps the most important signal from 2025, which we’ll come back to shortly.

Before we get into the reasons why, and where Bitcoin and AI stocks slipped to in the end-of-year rankings, let’s run through the list.

S&P 500 eclipsed, Bitcoin ends down after new ATH

If gold won the, er, gold medal in 2025, developed markets excluding the U.S. and emerging market stocks took silver and bronze, respectively.

The last time gold was on top? 2010.

Back then, the S&P 500 was just beginning its grinding recovery after the 2008 crisis and crash:

So gold being on top sort of made sense.

The subprime mortgage contagion had spilled into the economy and stock market.

Confidence and prices were low.

And Bitcoin?

In 2010 it had no established monetary value. It was effectively monopoly money, used only by a handful of cypherpunks and developers.

There were no exchanges until March.

That was the year in which Laszlo Hanyecz bought two Papa John’s pizzas for 10,000 BTC, valuing each coin at about $0.0041.

BTC ended 2010 trading for about 30 cents.

The following year, it entered the chart above for the first of its 11 #1 appearances to date.

But in 2025, the situation was significantly different.

Stocks made all-time highs.

Bitcoin did too, pushing past $120,000 for the first time in its short history.

So what happened?

Early 2025: Buying into promise

Heading into 2025, many investors were happy to buy into promise.

Take artificial intelligence.

The story of this transformative new tech, and the colossal companies developing and distributing it, functioned like an engine driving stocks higher.

Nvidia spearheaded the AI infrastructure theme.

Early in the year, the feeling around Nvidia and the other ‘AI darlings’ was one of almost reckless abandon.

Demand seemed infinite. Price irrelevant.

Headlines declared things like:

‘Nvidia Stock Forecast: Blackwell Will Steal the Show in 2025’ — Markets Insider, January.

And ‘Why Nvidia Stock Could Double in 2025’ — Nasdaq, January.

Investors felt that if they didn’t buy now, they might be left behind.

Bitcoin and crypto (because Bitcoin, as any Bitcoiner will gladly tell you, is not crypto) had a similar froth to them at the start of ‘25.

The White House had turned orange, with Trump’s ‘24 election win. There was finally a pro-crypto president in power.

Talk quickly turned to a strategic reserve.

Senator Cynthia Lummis introduced ‘The Bitcoin Act’.

Michael Saylor changed his company’s name from MicroStrategy to Strategy as it evolved into a full-blown Bitcoin treasury company, rather than a software company holding Bitcoin.

Bitcoin’s price flirted with $120,000.

The bold predictions — $250,000 by Christmas, and many far more optimistic — quickly followed.

So coming into 2025, AI and Bitcoin were riding high on a powerful narrative wave.

But that’s the thing about narratives; they can change fast.

Late 2025: Buying into proof

By the summer, anxiety began to creep into the market.

Investors began to question the seemingly infinite optimism.

The huge AI infrastructure investments — many between the key protagonists like Nvidia, Open AI and Oracle — which had fuelled the euphoria initially, began to raise red flags.

Blind optimism gave way to questions:

Is this sustainable?

How much demand will there really be for AI?

Is the market concentration in the AI theme setting us up for another dot com crash?

Is it even possible to generate enough energy to create all this new computational power?

This last question is something I’ll be covering in The Benchmark this year. Because it’s perhaps the most important story in 2026.

But back to the market getting the wobbles in 2025:

The persistent tariff news and geopolitical shocks didn’t shore up confidence.

Nor did the fact that U.S. debt grew another $2.2 trillion to hit $38 trillion.

And by Q4, Goldman Sachs and others noted a ‘rotation away from AI infrastructure’.

Capital fled the hardware builders (Nvidia) and looked for the software winners who could actually use the chips to make money — another big story to watch in 2026.

Probably no other single tech stock typifies this development than Oracle:

In early 2025, OpenAI signed a deal to rent cloud capacity from Oracle.

This was a $300 billion commitment over 10 years.

When Oracle reported earnings in September, they destroyed expectations.

The stock surged ~40% in days.

For a brief moment in September 2025, Larry Ellison surpassed Elon Musk to become the richest man in the world.

The problem was, this happened right at the moment his company started burning billions in cash to fulfill its OpenAI contract.

Oracle’s debt ballooned from ~$96B to ~$130B.

Its free cash flow flipped negative in Q4.

This is perhaps the most illustrative moment of the market’s shift away from narrative and towards fact in 2025.

As it did so, the NASDAQ shifted gear from ‘relentless rally’ mode and ‘sideways grind’ mode.

Bitcoin's trajectory was similar:

The promise of a new exponential golden age gave way to uncomfortable questions.

Investors who began 2025 optimistic about a seemingly certain parabolic move higher found themselves feeling strangely nervous when the BTC price did make its new ATHs.

Questions around the Bitcoin treasury model grew louder as more and more companies piled on the bandwagon, issuing debt purely to buy the digital asset.

The long-held belief in the ‘four-year cycle’ began to lose its hold on the market.

The realization that institutional adoption and favourable regulation doesn’t equal ‘number go up’ dawned.

And in the end, the year in which many were calling for $200,000, $300,000 and even $500,000, Bitcoin turned in a remarkably unremarkable 12-month performance:

While the parallels are clear between the AI and Bitcoin stories in 2025, the bigger takeaway — as evidenced by the Bloomberg readout, is this:

A year that started out 'risk-on' became a flight to safety

The chart again:

Why did Gold win?

If stocks were at all-time highs, and the economy wasn’t crashing, why did investors rush into the ultimate safe haven asset?

Because 2025 was the Year of the Receipt.

We shifted from running on narrative to requiring proof.

It happened in tech and it happened in Bitcoin and crypto.

The hope for new highs and a fresh burst of exponential growth dissipated.

Stocks couldn’t keep ripping higher in the face of real-world concerns. Nor could digital assets.

Gold emerged as the best performer, because investors aren’t just anxious about the financial markets…

They’re worried about the world at large.

Debt and geopolitical risk is one thing.

But let me show you perhaps the most important — and perhaps most overlooked — chart of 2025:

The U.S. Dollar had its worst year in nearly a decade.

While everybody was watching the stock and crypto markets…

The currency which they all use to measure those markets quietly crashed.

It explains everything else on the leaderboard:

Gold ripped higher because investors lost confidence in the Dollar.

International Stocks beat the S&P 500 because their currencies grew relatively stronger — the same was true for commodities.

The market buying gold could be interpreted as the market selling America.

Not because they feared a market crash, necessarily, but because the reserve currency itself lost nearly 10% of its economic power.

Currencies — especially reserve currencies — are another subject I write about in The Benchmark.

They’re not as exciting as the stock, crypto or precious metals markets, so they tend not to get the same coverage.

But as you can see, they’re important.

Here’s a piece on the history of reserve currencies I wrote earlier.

That’s your 2025 market wrap.

This week's quote:

‘Gold is money. Everything else is credit.’ — J.P. Morgan

Invest in knowledge,

Thom
The Benchmark

Share The Benchmark: If you've enjoyed reading, forward this email to someone you know would appreciate it.

New here? Subscribe to The Benchmark here. It's free and always will be.

‍

The most dangerous words in investing might hold
the answer to why the financial world seems to be collapsing and booming at the same time. 

Hey ,

Thom here — co-founder of Navexa. 

I've got different kind of email for you today.

Everything is better, and worse, than ever. 

Asset prices are at, or near, all-time highs.

But so is government debt, housing unaffordability and the cost of living. 

One moment, you’ll hear about AI coding company Cursor hitting $100 million in annual recurring revenue within 24 months…

The next, you read that the Great Depression is playing out again like clockwork 100 years hence.

One commentator argues we’re at the (disruptive) dawn of a new golden age of technology and abundance. 

While another shows credible evidence this is really a late-stage capitalism ‘melt up’...

And we’re poised to plummet off an economic cliff into a financial dark age. 

Which means one side must have it all wrong, right?

Maybe. 

But, maybe not. 

You don’t have to look far to find pretty convincing reasons to believe both sides. 

I’ll show you strong evidence for each in a moment. 

You’ll see the bad news and the good news.

But more importantly, you’ll see a third point of view:

That the bad news relates largely to the old world.

While the good news relates to the new world.

The systems we built to measure prosperity in the economy of the 20th Century are now signalling their own decay.

Meanwhile, the engines of the next economy — AI, energy, and code — are roaring to life.

PART I: The Old World Collapsing (The Doom Data)

If markets, as they say, climb a wall of worry, then they’re climbing dangerously high right now.

Feeds saturated with doom. Headlines forecasting collapse.

Annotated crash charts predicting a second tech bubble litter every platform:

The Buffet Indicator — the market’s favorite over-valuation gauge — is higher now than at any point since 2008: 

Inflation still runs hot despite tariffs, trade wars, and a weakening dollar:

There’s confronting evidence that everyday people are increasingly strugglingin an economy that’s only making it tougher:

While the U.S. — issuer of the world’s reserve currency — now looks disturbingly close to broke.:

On top of this, Big Tech stock dominance is concentrating stock market performance down to just a handful of companies — which is exactly what happened just before the 1929 crash that kicked off the Great Depression:

In many ways, there’s never been so much pessimistic fuel to power investors’ fears and anxieties. 

So it’s no surprise that, despite stocks having just made new highs, and the Federal Reserve just cut interest rates, many investors are worried about the market right now. 

All of the above charts and indicators come from expert analysis and hard data. 

And yet…

PART II: The New World’s Ascent (The Boom Data)

The S&P 500 and the NASDAQ hit new all-time highs throughout 2025.

They’ve both nearly doubled in the past half a decade:

These rallies, by the way, are happening against a backdrop of quantitative tightening, as opposed to the low/no interest rate policies that fuelled the market’s post-2008 run up.

The pessimist calls this money-printing disguised as growth.

But the optimist could just as quickly point out that this growth is down to a new breed of businesses and technology…

That the Nvidia-led artificial intelligence arms race isn’t just transforming consumer and commercial tech faster than any previous step-change…

That it’s actually driving an unprecedented surge in infrastructure spending, as the world scrambles to prepare for a compute and energy-driven future we could barely have comprehended just 24 months ago:

That the people screaming about the critically overstretched market, and the about-to-burst tech bubble, are actually just making noise, when the signals show good times ahead: 

And that, while Google searches might indicate unprecedented levels of economic hardship…

On balance, people living on Earth today are far better off than they’ve ever been:

There’s plenty of proof for both stories.

It just depends on what you want to believe.

Yes, stocks are trading at eye-wateringly high levels. 

Yes, search traffic indicating severe financial stress is spiking. 

Yes, the US national debt looks like it will only keep piling higher. 

But…

Money is flooding into AI and AI infrastructure stocks.  

Corporate earnings, unlike with the 2000 tech bubble, are in some cases keeping up with the rising valuations of today’s mega tech stocks.

Some even make the case that the stock market is pretty much trading at a ‘fair value’ trend, and is nowhere near as frothy as it was pre-2000. 

And, despite spiralling debt and rampant inflation, the world is trending towards eliminating extreme poverty. 

But here’s the truth hiding in plain sight: 

Everybody is correct.

The market is overextended — valuations are stretching, debt is ballooning, and the Buffett Indicator is screaming déjà vu.

And yet, at the same time, it’s booming like never before. 

AI spending is exploding even under tightening liquidity.

Microsoft, Amazon, and Google are investing record amounts of capital to expand data center capacity — not just because they can, but because they have to.

The indicators everyone trusts are still measuring the old financial world.

But a new one has started trading underneath it.

That’s why every signal seems contradictory — GDP says slowdown, while Nvidia posts 200% revenue growth; bond markets price a recession while Nasdaq hits new highs.

When you look for a single truth in all this contradiction, confusion is guaranteed. 

But when you accept that the financial world is, in fact, now two worlds…

You start to see the pattern.

One world runs on credit, policy, and paper — the machinery of the 20th century.

The other runs on compute, code, and collateralized energy — the machinery of the 21st.

PART III: The Crossroads Where The Old & New Financial Worlds Meet

Once famously derided by Warren Buffett as ‘rat poison squared’, and dismissed by respectable investors the world over as a fraud, a ponzi, and various other damning things…

Bitcoin is now in the midst of mass institutional investor, corporate, and government adoption. 

Governments are holding and/or acquiring more, Bitcoin:

About 140 publicly-traded companies now hold Bitcoin on their balance sheets, or have become outright ‘Bitcoin treasury’ companies, like Michael Saylor’s Strategy:

The same trend is now showing up in Ethereum and Solana, two competing networks. 

Treasury companies are now going public with their plans to buy and hold vast quantities of digital assets:

By August last year, Bitcoin accounted for almost 2% of total global money. 

While BlackRock’s IBIT quietly became the fastest ETF in history to cross $80 billion in assets under management: 

And there’s a growing chorus of voices, both on and far from Wall Street, signalling that we’re now living in a new paradigm — one in which fiat currencies reach the end of their useful life, and the world returns to sound money (except this time secured by energy-backed digital networks, instead of precious metals).

While the old financial world looks and feels as though it’s collapsing into obsolescence. 

The new one is travelling in the opposite direction. 

So if we’re living through the Great Depression AND the Roaring ‘20s at the same time… how do you navigate what’s coming?

Yes, we are in many ways in a New Great Depression. 

The debt. The currency debasement. The clearly spiking financial emergency search queries. 

Property is more out of reach for people than it has ever been. 

The Buffett Indicator and other metrics are screaming that something bad is imminent. 

And yet, you can’t deny these are boom times, too. 

What if this is just year three of 12 for the current bull market in stocks?

What about when you look at the trendline of the NASDAQ’s performance instead of just getting hung up on the parallels with the Dot Com bubble?

Or the colossal AI earnings and infrastructure investment playing out right now…

The fact that extreme poverty is rarer today than it has ever been…

Or the fact that Bitcoin has gone from Wall Street punching bag to Wall Street favourite in just 16 years. 

You can find plenty of evidence for both narratives. 

Because these are two concurrent truths. 

One is the reality of credit, policy, and paper — the crumbling foundations of the old world.

The other is the theoretically infinite promise of compute, code, and collateralized energy — the systems of the new.

The tension between them is where the opportunity, volatility, risk and reward will flow from for the foreseeable future. 

If you’ve read this far…

And you’ve found these ideas resonating…

Then you’re probably going to like my free weekly email about money, markets, and the stories we tell ourselves about both.

Before I share the details, let me quickly explain where this project came from.

In July 2020, I wrote an essay with a friend who’s a blockchain engineer:

The piece explored the idea that fiat currency, and the governments that continuously debase them, tend to lose on a long enough timeline. 

We considered Bitcoin’s place in that equation.

At the time, BTC wasn’t even worth $10,000 USD, and a long way from its relative mainstream popularity today.

While we didn’t make any predictions on price (in hindsight, I wish we had), you can see in the chart what the original crypto asset has done since we published. 

But perhaps the more important chart is this one:

Our 2020 piece wasn’t so much about Bitcoin as about the undeniable impact that inflation and money printing has on people’s economic power. 

More specifically, it was an exercise in perspective; on what we can learn about the financial and economic world when we zoom out and consider big trends and concepts. 

This piece became the genesis of a project I experimented with in 2024.

I wrote 37 essays for a project I called The Benchmark. 

The Benchmark is, simply, a financial newsletter I would want to read. 

We made it available to our business’s email list.

About 2,000 people began to read my essays each week. 

I covered ideas like:

• Whether the US stock market’s movements simply come down to periods of expansion and contraction that last about 16 to 18 years... and there have only been two secular bull markets since the 1920s — one in the 1950s and 1960s, and another in the 1980s and 1990s.

• The imminent $700 quintillion gold discovery could destroy the precious metal’s scarcity and render it common. 

• How an 1873 railway industry crisis holds clues to the potential risks of the current mania/anxiety around artificial intelligence stocks.
  

• Why what makes perfect financial sense to me might seem insane to you. 

I received many positive messages about the stories and insights I shared in The Benchmark. 

From private investors in Australia to chief investment officers in Texas, former hedge fund managers in Washington, D.C., and crypto traders in the UAE. 

Now, with the financial world appearing many times more exciting and fraught than it did way back in 2020…

I’m publishing The Benchmark again. 

And this essay is my invitation to you to become a subscriber. 

Here’s what you can expect when you do.

I write each using a powerful principle Benjamin Franklin expressed in the Eighteenth Century: 

‘An investment in knowledge pays the best dividend.’

In a world addicted to hype, hot takes, headlines, various other forms of short-term thinking…

Knowledge is an asset that can only compound, and never crash. 

That’s what The Benchmark aims to deliver each week: A concise (or wordy, depending on the subject) knowledge dividend, delivered directly to your inbox. 

You can think of this essay as an example of the type of ideas you’ll get should you choose to subscribe today. 

Become a Benchmark subscriber (free)

Invest in knowledge, 

Thom

The Benchmark 

The most dangerous words in investing might hold
the answer to why the financial world seems to be collapsing and booming at the same time. 

Hey ,

Thom here — co-founder of Navexa. 

I've got different kind of email for you today.

Everything is better, and worse, than ever. 

Asset prices are at, or near, all-time highs.

But so is government debt, housing unaffordability and the cost of living. 

One moment, you’ll hear about AI coding company Cursor hitting $100 million in annual recurring revenue within 24 months…

The next, you read that the Great Depression is playing out again like clockwork 100 years hence.

One commentator argues we’re at the (disruptive) dawn of a new golden age of technology and abundance. 

While another shows credible evidence this is really a late-stage capitalism ‘melt up’...

And we’re poised to plummet off an economic cliff into a financial dark age. 

Which means one side must have it all wrong, right?

Maybe. 

But, maybe not. 

You don’t have to look far to find pretty convincing reasons to believe both sides. 

I’ll show you strong evidence for each in a moment. 

You’ll see the bad news and the good news.

But more importantly, you’ll see a third point of view:

That the bad news relates largely to the old world.

While the good news relates to the new world.

The systems we built to measure prosperity in the economy of the 20th Century are now signalling their own decay.

Meanwhile, the engines of the next economy — AI, energy, and code — are roaring to life.

PART I: The Old World Collapsing (The Doom Data)

If markets, as they say, climb a wall of worry, then they’re climbing dangerously high right now.

Feeds saturated with doom. Headlines forecasting collapse.

Annotated crash charts predicting a second tech bubble litter every platform:

The Buffet Indicator — the market’s favorite over-valuation gauge — is higher now than at any point since 2008: 

Inflation still runs hot despite tariffs, trade wars, and a weakening dollar:

There’s confronting evidence that everyday people are increasingly strugglingin an economy that’s only making it tougher:

While the U.S. — issuer of the world’s reserve currency — now looks disturbingly close to broke.:

On top of this, Big Tech stock dominance is concentrating stock market performance down to just a handful of companies — which is exactly what happened just before the 1929 crash that kicked off the Great Depression:

In many ways, there’s never been so much pessimistic fuel to power investors’ fears and anxieties. 

So it’s no surprise that, despite stocks having just made new highs, and the Federal Reserve just cut interest rates, many investors are worried about the market right now. 

All of the above charts and indicators come from expert analysis and hard data. 

And yet…

PART II: The New World’s Ascent (The Boom Data)

The S&P 500 and the NASDAQ hit new all-time highs throughout 2025.

They’ve both nearly doubled in the past half a decade:

These rallies, by the way, are happening against a backdrop of quantitative tightening, as opposed to the low/no interest rate policies that fuelled the market’s post-2008 run up.

The pessimist calls this money-printing disguised as growth.

But the optimist could just as quickly point out that this growth is down to a new breed of businesses and technology…

That the Nvidia-led artificial intelligence arms race isn’t just transforming consumer and commercial tech faster than any previous step-change…

That it’s actually driving an unprecedented surge in infrastructure spending, as the world scrambles to prepare for a compute and energy-driven future we could barely have comprehended just 24 months ago:

That the people screaming about the critically overstretched market, and the about-to-burst tech bubble, are actually just making noise, when the signals show good times ahead: 

And that, while Google searches might indicate unprecedented levels of economic hardship…

On balance, people living on Earth today are far better off than they’ve ever been:

There’s plenty of proof for both stories.

It just depends on what you want to believe.

Yes, stocks are trading at eye-wateringly high levels. 

Yes, search traffic indicating severe financial stress is spiking. 

Yes, the US national debt looks like it will only keep piling higher. 

But…

Money is flooding into AI and AI infrastructure stocks.  

Corporate earnings, unlike with the 2000 tech bubble, are in some cases keeping up with the rising valuations of today’s mega tech stocks.

Some even make the case that the stock market is pretty much trading at a ‘fair value’ trend, and is nowhere near as frothy as it was pre-2000. 

And, despite spiralling debt and rampant inflation, the world is trending towards eliminating extreme poverty. 

But here’s the truth hiding in plain sight: 

Everybody is correct.

The market is overextended — valuations are stretching, debt is ballooning, and the Buffett Indicator is screaming déjà vu.

And yet, at the same time, it’s booming like never before. 

AI spending is exploding even under tightening liquidity.

Microsoft, Amazon, and Google are investing record amounts of capital to expand data center capacity — not just because they can, but because they have to.

The indicators everyone trusts are still measuring the old financial world.

But a new one has started trading underneath it.

That’s why every signal seems contradictory — GDP says slowdown, while Nvidia posts 200% revenue growth; bond markets price a recession while Nasdaq hits new highs.

When you look for a single truth in all this contradiction, confusion is guaranteed. 

But when you accept that the financial world is, in fact, now two worlds…

You start to see the pattern.

One world runs on credit, policy, and paper — the machinery of the 20th century.

The other runs on compute, code, and collateralized energy — the machinery of the 21st.

PART III: The Crossroads Where The Old & New Financial Worlds Meet

Once famously derided by Warren Buffett as ‘rat poison squared’, and dismissed by respectable investors the world over as a fraud, a ponzi, and various other damning things…

Bitcoin is now in the midst of mass institutional investor, corporate, and government adoption. 

Governments are holding and/or acquiring more, Bitcoin:

About 140 publicly-traded companies now hold Bitcoin on their balance sheets, or have become outright ‘Bitcoin treasury’ companies, like Michael Saylor’s Strategy:

The same trend is now showing up in Ethereum and Solana, two competing networks. 

Treasury companies are now going public with their plans to buy and hold vast quantities of digital assets:

By August last year, Bitcoin accounted for almost 2% of total global money. 

While BlackRock’s IBIT quietly became the fastest ETF in history to cross $80 billion in assets under management: 

And there’s a growing chorus of voices, both on and far from Wall Street, signalling that we’re now living in a new paradigm — one in which fiat currencies reach the end of their useful life, and the world returns to sound money (except this time secured by energy-backed digital networks, instead of precious metals).

While the old financial world looks and feels as though it’s collapsing into obsolescence. 

The new one is travelling in the opposite direction. 

So if we’re living through the Great Depression AND the Roaring ‘20s at the same time… how do you navigate what’s coming?

Yes, we are in many ways in a New Great Depression. 

The debt. The currency debasement. The clearly spiking financial emergency search queries. 

Property is more out of reach for people than it has ever been. 

The Buffett Indicator and other metrics are screaming that something bad is imminent. 

And yet, you can’t deny these are boom times, too. 

What if this is just year three of 12 for the current bull market in stocks?

What about when you look at the trendline of the NASDAQ’s performance instead of just getting hung up on the parallels with the Dot Com bubble?

Or the colossal AI earnings and infrastructure investment playing out right now…

The fact that extreme poverty is rarer today than it has ever been…

Or the fact that Bitcoin has gone from Wall Street punching bag to Wall Street favourite in just 16 years. 

You can find plenty of evidence for both narratives. 

Because these are two concurrent truths. 

One is the reality of credit, policy, and paper — the crumbling foundations of the old world.

The other is the theoretically infinite promise of compute, code, and collateralized energy — the systems of the new.

The tension between them is where the opportunity, volatility, risk and reward will flow from for the foreseeable future. 

If you’ve read this far…

And you’ve found these ideas resonating…

Then you’re probably going to like my free weekly email about money, markets, and the stories we tell ourselves about both.

Before I share the details, let me quickly explain where this project came from.

In July 2020, I wrote an essay with a friend who’s a blockchain engineer:

The piece explored the idea that fiat currency, and the governments that continuously debase them, tend to lose on a long enough timeline. 

We considered Bitcoin’s place in that equation.

At the time, BTC wasn’t even worth $10,000 USD, and a long way from its relative mainstream popularity today.

While we didn’t make any predictions on price (in hindsight, I wish we had), you can see in the chart what the original crypto asset has done since we published. 

But perhaps the more important chart is this one:

Our 2020 piece wasn’t so much about Bitcoin as about the undeniable impact that inflation and money printing has on people’s economic power. 

More specifically, it was an exercise in perspective; on what we can learn about the financial and economic world when we zoom out and consider big trends and concepts. 

This piece became the genesis of a project I experimented with in 2024.

I wrote 37 essays for a project I called The Benchmark. 

The Benchmark is, simply, a financial newsletter I would want to read. 

We made it available to our business’s email list.

About 2,000 people began to read my essays each week. 

I covered ideas like:

• Whether the US stock market’s movements simply come down to periods of expansion and contraction that last about 16 to 18 years... and there have only been two secular bull markets since the 1920s — one in the 1950s and 1960s, and another in the 1980s and 1990s.

• The imminent $700 quintillion gold discovery could destroy the precious metal’s scarcity and render it common. 

• How an 1873 railway industry crisis holds clues to the potential risks of the current mania/anxiety around artificial intelligence stocks.
  

• Why what makes perfect financial sense to me might seem insane to you. 

I received many positive messages about the stories and insights I shared in The Benchmark. 

From private investors in Australia to chief investment officers in Texas, former hedge fund managers in Washington, D.C., and crypto traders in the UAE. 

Now, with the financial world appearing many times more exciting and fraught than it did way back in 2020…

I’m publishing The Benchmark again. 

And this essay is my invitation to you to become a subscriber. 

Here’s what you can expect when you do.

I write each using a powerful principle Benjamin Franklin expressed in the Eighteenth Century: 

‘An investment in knowledge pays the best dividend.’

In a world addicted to hype, hot takes, headlines, various other forms of short-term thinking…

Knowledge is an asset that can only compound, and never crash. 

That’s what The Benchmark aims to deliver each week: A concise (or wordy, depending on the subject) knowledge dividend, delivered directly to your inbox. 

You can think of this essay as an example of the type of ideas you’ll get should you choose to subscribe today. 

Become a Benchmark subscriber (free)

Invest in knowledge, 

Thom

The Benchmark 

Dear Reader,

Just two weeks of 2024 remain.

A year in which the S&P 500 has climbed almost 30% — about triple its annual return:

A year in which central banks began slashing interest rates having battled the highest inflation of the past 25 years:

A year in which a resurgent Donald Trump led the Republican Party back to power in the U.S.:

A year in which NVIDIA surpassed Apple to become the most valuable company on the planet:

In which Bitcoin hit a six-figure valuation for the first time:

And in which Michael Saylor's MicroStrategy both became the first 'Bitcoin treasury' company, and the first such company to enter the NASDAQ 100.

You could say that the theme of this year for investors has been up and/or to the right.

How much further this bull market runs, as always, we must wait to see.

For The Benchmark, however, it doesn't matter whether prices are rising or falling.

There's stories and insights everywhere.

After writing nearly 40 of these emails this year, as I take a pause before writing at least that many next year, here's five of the most-read Benchmark stories from 2024.

​The 0.00000001% investing mindset: This is the investing email I promised I'd never write, and the one worth breaking that promise for. It's about the obvious things all around us that we ignore.

​The other Great Depression: Most people think the Great Depression started with Wall Street's notorious 1929 crash. As you'll see though, people are all too easily tricked by their short memories.

​Unskilled 24-year-olds running Wall Street: Never before have so many unskilled twenty-four-year-olds made so much money in so little time as the characters you'll read about in this one.

​The stock market vs. the 'real' world:  Behold the stark reality of working for money, versus putting money to work in the markets — and a stack of other confronting charts about the markets and economy.

​Why this elite ex-trader ditched Wall St for fast food: The ultimate arbitrage trade? Taking your earnings from seven years trading for 'the hedge fund king' and investing it into a Mexican takeaway empire on the other side of the planet.

These are some of the stories subscribers enjoyed most this year.

As for next year? Here's what 20 of Wall Street's top firms would have us believe.

That's it for The Benchmark in 2024.

Thank you for reading my emails — it's been a pleasure and privilege to research and share these ideas with you this year.

I always appreciate the replied and feedback.

We'll be back in January with fresh stories, ideas and insights into the stock market and the broader financial world.

In the meantime, I wish you a happy, safe, and restful festive season.

Merry Christmas,

Thom
​The Benchmark​

All information contained in The Benchmark and on navexa.io is for education and informational purposes only. It is not intended as a substitute for professional financial or tax advice. The Benchmark and any contributors to The Benchmark are not financial professionals, and are not aware of your personal financial circumstances.

Reserve currency vs. 'deep reserve' currency

Dear Reader,

I believe it's alright not to like Bitcoin.

Plenty of people despise it — including Warren Buffett and his late business partner, Charlie Munger, who famously called Bitcoin 'rat poison squared'.

But, I think it unwise to ignore the Bitcoin story, or to consider what it represents.

No, this is not a 'Bitcoin maxi' email, in which I try to convince you about  the virtues of this notoriously controversial asset (or currency, or hedge, or whatever you want to call it).

Rather, I'll share some recent revelations about currency, scarcity and wealth.

To start with, let me take you to Wellington, New Zealand, last week.

Trillionaire status: Attained

I have a friend who manages a vintage and collectible coin store.

He gave me a tour when I stopped by last week.

I saw shelf after shelf, case after case, drawer after drawer of notes and coins.

Different eras, different countries, regimes, you name it.

The ancient Roman coins were the oldest.

But the most interesting to me?

The hyperinflation notes.

Here's one from Germany in 1923:

That note was legal tender for 20 million marks a century ago.

You know it's bad when you're printing notes for 20 million.

And you really know it's bad when you're printing them for a hundred trillion dollars, as per this example from Zimbabwe in 2008:

It was a note such as this that made me a trillionaire — my friend being kind enough to gift me one of these remarkable pieces.

Between 2008 to 2009, Zimbabwe’s monthly inflation reached an estimated  79.6 billion percent.

It's the most stark modern example of what can — and does — happen to fiat currency.

'Go to fiat, you're screwed...'

Sometimes, I watch podcasts.

And sometimes, a podcast strikes me as exceptionally insightful.

This episode of The Bitcoin Frontier by Unchained is one such podcast:

​

It's hedge fund manager and on-chain analyst Willy Woo's first interview in three years.

And there's one section of it, in particular, that I recommend you listen to.

Here's some excerpts:
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'If you look at money over a broad timespan... not the last 100 years, but I'm talking 1,000 to 10,000 years... really we've been following multiple empires, rising and falling, rising and falling... there's a number of empires that have all rotated being the global reserve currency. But that wasn't the money. They were all traded back for gold or silver. So really, we've had about 6,000 years of gold and silver having this trust of the world, having some value, and then we based a currency over it.'

Currency used to represent convertibility to a hard asset like gold or silver.

Woo points out that, when we disconnect money from hard assets, trouble tends to follow:
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'With the U.S. dollar since 1971, it's really just a liquidity crisis that happened... they cut that convertibility because there wasn't enough gold... now people think this is money. No it's not. It's always tiding over a liquidity crisis. You go back in history and it's always: You go to fiat, you're screwed. You blow up. And the whole world's on fiat. That's kind of a first. Can we go back to a gold standard? We can't. Because gold's no longer going to be scarce in the future.'

If you're reading this thinking, that was then and this is now, that can't happen again.

Then let me show you something.

I ran a basic calculation on US dollar inflation over the past 10 years:

The US dollar, of course, is the current global reserve currency (read about the currencies that rose to, and fell from, reserve status before the dollar assumed its current position).

The calculation shows you that what cost you $100,000 ten years ago, would now cost you more than $133,000.

In other words, your money is now worth 33%, or one third, less than it was in 2014.

With no connection to a hard asset, which derives its value from scarcity (scarcity = value in economics, of course)...

Fiat currency becomes worth less and less, the more time passes.

That's over 10 years, let alone the 1,000 or 10,000-year timespans Woo looks at.

New standards in securing value

So, why don't we just re-establish the gold standard the world abandoned in 1971, and get money back on track?

Because gold is about to get a whole lot less scarce: