Edition 019: The Debasement
The last edition ended with the institution that prices risk refusing to price generative AI. This edition is about a system that never had to refuse, because it was never built to see the cost at all.
Data and money are the two resources the modern American economy runs on. Both are being taken from the people who produce them and concentrated in the hands of the people who already hold power. This edition is about the money.
There is a word for what is happening to the dollar that does not appear in most political discussions, because most political discussions are organized around the vocabulary of the people who manage the system. You know those terms well: deficits, debt ceilings, and fiscal responsibility. A word you may not know as well is debasement.
Debasement is different from inflation, though the two travel together. Inflation is the general rise in prices over time.[1] A dollar buys less than it did a decade ago. Debasement is something more structural. It is the erosion of a currency’s purchasing power through the systematic expansion of the money supply and the accumulation of debt that cannot be retired through ordinary means.[2] In other words, when the government keeps creating more money and runs up debts it can never realistically pay back, each dollar already in your pocket buys less than it used to. Part of how this happens is that the government pays for its spending less through taxes and more through new borrowing. Eventually the interest on that borrowing grows so large that the government has to borrow again just to make the interest payments.
The United States has been doing this for a while, and faster recently. The US Dollar Index fell 9.4 percent in 2025, the biggest single-year decline since 1973.[3] Interest payments on the national debt now consume nearly forty percent of all federal tax revenue.[4] Each year’s larger interest forces larger borrowing, which creates even larger interest the next year, until the debt grows on its own momentum.
This is similar to what happens to a credit card balance when the cardholder can only pay the minimum. The interest gets added to the balance, and the balance grows by itself, faster every year. But here, the balance is the national debt. It has grown large enough that it now expands regardless of whether the government spends another dollar, and it will not shrink without a deliberate and painful choice that neither party has been willing to make. So the debt keeps growing, and the point where it can no longer be carried keeps getting closer.
There is a story about how this ends without anyone having to make hard choices. The story is that AI will produce enough growth to outrun the debt. Elon Musk has made the claim directly, calling AI and robotics “pretty much the only thing” that can solve the debt crisis and predicting the turn within three years.[5] Ray Dalio, who has appeared in the footnotes in prior editions, has described the debt “death spiral.”[6] He has also pointed to AI as a possible lifeline, a productivity surge large enough to outpace the debt, though he doubts it will be enough.[7]
The Yale Budget Lab has modeled the optimistic case. At 2.5 percent annual productivity growth from AI, the median expectation of surveyed economists is that the debt path flattens and begins to decline.[8] But that rate has been reached only twice in the postwar record, and the Budget Lab calls its own figures “illustrative” rather than an “authoritative forecast.” The report also flags a problem it has not yet modeled. If AI raises output by replacing workers, the income that used to go to wages goes to the owners of the machines instead. Wages are taxed at higher rates than that kind of income. So, the economy can grow, but the government’s tax revenue will not grow with it, which is the part that would actually pay down the debt. Martha Gimbel, who runs the Budget Lab, told Fortune that AI is unlikely to be a “free, infinite money tree.”[9] The growth, if it comes, helps, but does not retire the debt, and it depends on a number the record rarely produces.
The cost of all of this lands on the people who hold their money as dollars rather than assets, in wages, in savings accounts, in fixed incomes, in the checking account where a paycheck arrives and rent is paid. What they notice is that the same dollars buy less than they used to. The value does not disappear. It moves to the people who hold assets. When the money supply expands, the price of a house rises while the house itself is unchanged. The person who already owned the house is now wealthier in dollars for having done nothing, while the person still saving to buy it watches the down payment grow further away. The owner’s house holds its real worth because it is a real thing, and the house’s dollar price rises as the dollar falls. The renter’s savings are only dollars, so they fall with the dollar.
The people who hold assets in America are not randomly distributed. The top one percent of Americans own approximately fifty percent of all stocks.[10] The bottom fifty percent own almost none.[11] This matters because the same force that erodes the dollar lifts stocks and real estate, so the people who own assets are carried up while the people who hold dollars are left behind.
The stock market’s gains over the last several years are partly the same phenomenon. The S&P 500 rose roughly 16 percent in 2025.[13] But gold, which holds its value as the dollar loses purchasing power, rose roughly 65 percent.[14] Measured in gold rather than dollars, U.S. equities lost roughly a third of their value.[15] Ray Dalio has argued that the dollar’s decline hid how U.S. stocks really performed, and that the gains are smaller than the headline numbers suggest.[16] Some of the rise is real, companies that grew and earned. But a large part of what looks like a gain is the dollar falling, not the company growing. An asset that merely keeps pace with the falling dollar is still doing the one thing a dollar cannot do, which is hold its value.
So the number on the screen rises, and it is easy to read that rise as the market growing richer. But much of it is the dollar growing weaker. The two are hard to tell apart on a chart, and the person who owns assets has little reason to tell them apart, because either way the wealth is there for them in assets. For the person who holds dollars, though, a paycheck covers less than it used to.
***
The dollar is debased, the people who hold assets stay whole, and everyone else absorbs the loss. Underneath that outcome is a judgment the system is making without ever saying so. It measures a person by what they hold and what they produce, and the person who holds dollars and works for wages comes up short.
This is the same story this book has been tracking. Human data is taken from the people who generate it and pooled where the power already sits, and money does the same thing. The result is a system that nominally serves everyone and structurally serves only those who already hold power. The system externalizes its costs onto the people who were never its concern. It has made a choice about who absorbs the loss, and underneath it is a choice about whose loss counts.
I want to be careful about how this sounds. I am not given to radical conclusions, and I did not come to this one looking for it. But there is something radical in a system that lets the dollar fall, lifts the people who hold assets while the loss settles on everyone else, and calls the fall growth, deciding as it does that their loss does not count. I am not a radical. What I am describing is.
***
[1]See “What Is Inflation, and How Does the Federal Reserve Evaluate Changes in the Rate of Inflation?” Board of Governors of the Federal Reserve System, https://www.federalreserve.gov/faqs/economy_14419.htm. Accessed 9 June 2026.
[2]See Halton, Clay. “Currency Debasement: Definition and Historical Examples.” Investopedia, https://www.investopedia.com/terms/d/debasement.asp. Accessed 9 June 2026.
[3] “U.S. Dollar Index (DXY) Annual Performance.” Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/. Accessed 17 May 2026 (The 2025 decline was the largest single-year drop since 1973, when the Bretton Woods system collapsed).
[4] “The Current Federal Deficit and Debt.” Peter G. Peterson Foundation, May 2026, https://www.pgpf.org/national-debt-clock. Accessed 17 May 2026. See also Congressional Budget Office. The Budget and Economic Outlook: 2026 to 2036, https://www.cbo.gov/publication/budget-economic-outlook. The author accessed this CBO data prior to its removal from the site. Since the beginning of the second Trump administration in January 2025, federal agencies have removed or modified more than 8,000 government web pages and approximately 3,000 datasets, including material from the Centers for Disease Control, the Census Bureau, the National Institutes of Health, the Environmental Protection Agency, the Department of Justice, the Department of Agriculture, and the National Oceanic and Atmospheric Administration. The Office of Legal Counsel ruled in April 2026 that the Presidential Records Act is unconstitutional. The pattern is documented by the National Security Archive’s Climate Change Transparency Project, the Center on Budget and Policy Priorities, KFF, and academic library guides at Tulane University, the University of Minnesota, and American University, among others. See “2025 United States Government Online Resource Removals.” Wikipedia, https://en.wikipedia.org/wiki/2025_United_States_government_online_resource_removals. Accessed 17 May 2026. See also Santarsiero, Rachel. “A Disappearing Data Chronology.” National Security Archive, 30 Mar. 2026, https://nsarchive.gwu.edu/special-exhibit/climate-change-transparency-project/2026-03-30/disappearing-data-chronology. Accessed 17 May 2026.
[5] Chong Ming, Lee. "Elon Musk Says AI Will End America's Debt Crisis Within 3 Years." Business Insider, 1 Dec. 2025, www.businessinsider.com/elon-musk-ai-us-debt-crisis-robotics-deflation-2025-11. Accessed 9 June 2026.
[6] Dalio sets out the death spiral in How Countries Go Broke: The Big Cycle (2025). See also Morris, Chris. "Why Billionaire Ray Dalio Is Warning About a Potential Economic 'Death Spiral.'" Inc., 4 June 2025, https://www.inc.com/chris-morris/billionaire-ray-dalio-raising-alarm-potential-economic-death-spiral/91198330. Accessed 9 June 2026.
[7] For the lifeline framing, see Fortune’s account of his conversation with Ross Douthat: “Ray Dalio: the 'heart attack' of America's debt crisis is just the beginning of a 'great turbulence' that will reshape the country.” Fortune, 8 May 2026, https://fortune.com/2026/05/08/ray-dalio-america-national-debt-reshape-economy-heart-attack/. Accessed 10 June 2026. For Dalio’s own doubt that AI’s productivity gains could grow the country out of the crisis, see “The US is in the highly dangerous ‘fifth stage.’” Global Times, 8 September 2025, https://www.globaltimes.cn/page/202509/1342951.shtml. Accessed 10 June 2026.
[8] "What Might AI Adoption Mean for the Fiscal and Economic Outlook?" The Budget Lab at Yale, 6 May 2026, budgetlab.yale.edu/research/what-might-ai-adoption-mean-fiscal-and-economic-outlook. Accessed 9 June 2026.
[9] “AI Could Solve America's $39 Trillion Debt Crisis—but Only if Washington Abandons Displaced Workers, Yale Budget Lab Warns.” Fortune, 6 May 2026, fortune.com/2026/05/06/39-trillion-national-debt-fix-ai-productivity-yale-budget-lab/. Accessed 9 June 2026.
[10] Board of Governors of the Federal Reserve System. “Share of Corporate Equities and Mutual Fund Shares Held by the Top 1% (99th to 100th Wealth Percentiles).” FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/WFRBST01122. Accessed 11 June 2026.
[11] “Distribution of Household Wealth in the U.S. since 1989.” Board of Governors of the Federal Reserve System, Q4 2025, https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/. Accessed 17 May 2026. See also Wolff, Edward N. Household Wealth Trends in the United States. National Bureau of Economic Research, 2024, https://www.nber.org/. Accessed 17 May 2026.
[12] Metcalf, Tom, and Devon Pendleton. “SpaceX IPO Makes Elon Musk World's First Trillionaire.” Bloomberg, 12 June 2026, https://www.bloomberg.com/features/2026-spacex-ipo-elon-musk-trillionaire/. Accessed 15 June 2026.
[13]See “2025 S&P 500 Return,” DQYDJ, https://dqydj.com/2025-sp-500-return/. Accessed 10 June 2026.
[14]See “Record Gold Price Ends 2025 Up 65%,” BullionVault, 31 Dec. 2025, https://www.bullionvault.com/gold-news/gold-price-news/gold-silver-2025-record-price-123120251. Accessed 10 June 2026.
[15]See note above; see also “The 'Debasement Trade' Is the Talk of Wall Street. What Is It and Is It Too Late to Get In?" CNBC, 9 Oct. 2025, https://www.cnbc.com/2025/10/09/the-debasement-trade-is-the-talk-of-wall-street-what-is-it-and-is-it-too-late-to-get-in.html. Accessed 17 May 2026.
[16]See “Gold, currency moves and global rebalancing shaped markets in 2025: Ray Dalio.” Economic Times, https://economictimes.indiatimes.com/markets/us-stocks/news/gold-currency-moves-and-global-rebalancing-shaped-markets-in-2025-ray-dalio/articleshow/126386534.cms. Accessed 10 June 2026; See also “The 'Debasement Trade' Is the Talk of Wall Street. What Is It and Is It Too Late to Get In?" CNBC, 9 Oct. 2025, https://www.cnbc.com/2025/10/09/the-debasement-trade-is-the-talk-of-wall-street-what-is-it-and-is-it-too-late-to-get-in.html. Accessed 17 May 2026.
