The Post-War Playbook Returns
All Roads Lead to Gold & Bitcoin
The last time the United States faced 120% debt-to-GDP, it took 35 years of financial repression to inflate the problem away. Today’s situation mirrors 1946—crushing debt from financing World War II and urgent rebuilding needs—but with a critical difference: the industrial base must be reconstructed from scratch while China controls 98% of the strategic materials needed to build defense systems. The timeline is a decade minimum. The cost is trillions. And the government just lost the military credibility that traditionally backed the dollar’s reserve status. Financial repression isn’t a choice—it’s math.
The only viable path is financial repression—keeping interest rates suppressed even as the Fed monetizes the industrial policy spending needed to rebuild supply chains independent of China—combined with an implicit acceptance of the BRICS nations’ shift to gold-settled trade, making gold and bitcoin’s continued outperformance the overwhelmingly probable outcome by process of elimination.
When a heavily-indebted nation loses its industrial base to a geopolitical rival and can no longer backstop its currency through military dominance, yet must still finance rebuilding that base without defaulting, all alternatives to financial repression become unavailable. What remains is currency debasement and the repricing of hard assets that cannot be printed.
The Post-War Playbook Returns
The United States has done this before. After World War II, from 1946 to 1981, the nation reduced debt-to-GDP from 119% to 32% through yield curve control and massively negative real interest rates. The government kept rates below inflation for decades, slowly inflating away the debt burden in real terms.
Today’s situation mirrors 1946—high debt and an urgent need to rebuild—but with a critical difference: the industrial base must be reconstructed from scratch. Rebuilding defense supply chains will require 10-20 years for mining capacity and 5-15 years for refining capacity—timelines dictated by U.S. permitting processes that average 7-10 years alone, plus years for construction and scaling. China built this infrastructure over four decades; the West cannot replicate it through emergency spending alone. The scale of investment needed across rare earth processing, semiconductor manufacturing, and defense production will inject trillions into the economy over the coming decade.
This spending will inevitably drive inflation higher. And when it does, policymakers will face a constraint that didn’t exist in 1981: at 120% debt-to-GDP—nearly four times the 32% Volcker inherited—raising rates to fight inflation would send interest expense spiraling into an unsustainable share of federal revenues.
The path is already locked in. The U.S. must finance massive industrial reinvestment while keeping rates suppressed, accepting higher inflation as the mechanism to reduce debt’s real burden—exactly as President Trump articulated: “You grow yourself out of debt.”
Gold Replaces Treasuries
While the United States pursues financial repression at home, a seismic shift is underway in the global monetary system. The world’s reserve asset is migrating from U.S. Treasuries to gold, driven by BRICS nations implementing multi-currency commodity pricing with net gold settlement.
Only a fool would store reserves in bonds whose value must decline in real terms just to maintain the nominal solvency of the issuing nation. As such, nations are moving away from long-term U.S. Treasuries. At current prices, U.S. official gold represents only 11% of foreign-held Treasuries, far below the 40% long-term average. A return to historical norms would imply gold prices of $15,000 an ounce.
Central banks globally are voting with their reserves. After decades of accumulating Treasuries, central banks are adding record amounts of gold while reducing dollar holdings. Gold purchases have more than doubled from ~467 metric tons annually before the Russia-Ukraine war to over 1,000 metric tons per year today. The shift is a structural rebalancing away from assets whose value must decline by design.
The Dollar’s Lost Pillar
For decades, conventional wisdom held that the U.S. dollar was ultimately backed by American military supremacy. That assumption is rapidly eroding.
In October 2025, China announced it would not allow export of rare earth materials for use by foreign militaries. The move exposed a fundamental truth: the United States cannot credibly threaten military action to maintain dollar hegemony when it depends on China for the materials needed to build weapons systems.
China controls 98% of global gallium production and 70% market share in refining for 19 out of 20 strategic minerals. Over 11,000 U.S. military components depend on gallium, with 85% involving Chinese suppliers. Rare earth magnets are crucial for F-35 warplanes, Tomahawk missiles, and advanced radar systems.
With the U.S. military made in China, we cannot use that military to enforce dollar hegemony. The Pentagon’s September 2025 draft National Defense Strategy acknowledged this reality, shifting focus from countering China to defending the homeland and Western Hemisphere. The message was clear: Washington cannot credibly threaten force to maintain the dollar system against the very nation that supplies the components for that force.
Financing the Industrial Response
The military dependence on China creates an urgent imperative: the United States must rebuild its defense industrial base from the ground up. But the timeline and cost present a problem. Establishing new rare earth mining operations takes 10-20 years from discovery to production. Building refining capacity requires 5-15 years and billions in capital investment per facility. The scale of capital needed across rare earth processing, semiconductor manufacturing, and defense production will run into the trillions of dollars over the coming decade. Treasury Secretary Bessent has called for elected officials to directly influence which sectors receive capital - industrial policy financed by the federal government.
Why Gold and Bitcoin Win
Gold’s and bitcoin’s continued outperformance isn’t speculation—it’s the logical outcome when all other policy options are foreclosed by math. The system has no other release valve.
The United States faces a trilemma with only one solution:
Can’t default on debt - Political suicide and global economic catastrophe.
Can’t cut spending enough - Would require 20%+ cuts to entitlements and defense, cratering GDP and making deficits worse. In fact, spending is likely to increase as the United States re-industrializes.
Can’t raise rates - Would trigger debt death spiral at 120% debt-to-GDP
Therefore, by process of elimination, policymakers must pursue financial repression—keeping interest rates below inflation to inflate away debt’s real value. This isn’t a policy choice among many options. It’s the only mathematically viable path remaining.
Gold and bitcoin share a critical characteristic that differentiates them from U.S. dollars and treasuries: they require real energy to be created, and thus cannot be printed or debased. Gold and bitcoin supply are fixed by nature. When the government’s survival strategy requires devaluing the currency, assets that cannot be devalued must outperform in nominal terms. This is not a forecast—it’s accounting.
The Only Way Out
The confluence of these forces—mounting debts, industrial dependence, and monetary system transition—points to a coming decade reminiscent of the 1940s or 1970s. The United States enters this period with interest expense exceeding defense spending, military systems reliant on a geopolitical rival, and central banks globally shifting reserves from U.S. Treasuries to gold. These are not temporary dislocations. They are structural realities that rule out conventional policy options.
What emerges is a world where the dollar remains a currency but loses its monopoly on commodity pricing and global reserves. BRICS nations settle trade in gold not because they prefer it philosophically, but because the mathematics of storing wealth in bonds that must depreciate by design makes any alternative rational. Industrial policy financed by printed money becomes necessity rather than choice when the alternative is strategic vulnerability.
For investors, the implications are straightforward. In a system where the government must devalue to survive, positioning in hard assets with fixed supply moves from tactical allocation to strategic imperative. Both gold and bitcoin, the only major assets that cannot be printed or debased, represent not speculation but the arithmetic of a monetary system reset already underway.
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