Last week, I found myself doing the most boring kind of research an investor can do: comparing grocery receipts, gathered from friends, across four cities. A basic basket — some fruit, dairy, a few staples, nothing fancy. The bill ran close to US$90 in San Francisco; US$32 in Singapore; about US$25 in Johor Bahru, just across the Malaysian border, and US$21 in New Delhi. Singapore is one of the most expensive cities on earth; but San Francisco was still ~40% pricier than that, and more than four times pricier than Johor and Delhi.
Those grocery receipts are a better macro indicator than most of what crosses my desk. Because if you strip away exchange rates and just ask what a US dollar, a Singapore dollar, a Ringgit or a Rupee can actually buy, the picture of the US economy that emerges is very different from the one in the headline GDP numbers. And once you sit with that picture for a while, a few other things I’ve been tracking — household debt, the shape of Treasury issuance, and the politics at the Federal Reserve — start to line up into a story that should worry anyone holding US assets on autopilot.
The GDP number is flattering itself
US GDP is measured in nominal dollars, and consumption is about 70% of that number. But nominal dollars in an economy where a basic grocery run costs three to four times what it costs across large parts of Asia are not the same thing as real purchasing power. See the US output through the purchasing-power-parity lens, which economists use to compare living standards across countries, and a meaningful chunk of America’s GDP lead evaporates. It isn’t that Americans are producing that much more; it’s just that everything they buy is priced that much higher.
This matters because Washington keeps pointing to a 3% year-on-year inflation print as evidence that the inflation problem is basically solved. It isn’t. 3% this year sits on top of a price level that has already doubled or tripled relative to large parts of the world over the last few decades. A “controlled” 3% on an already-inflated base is not the same as price stability — it’s a slower march up a mountain you’ve already climbed most of. When your starting altitude is this high, the next few percentage points matter a lot more than the official narrative suggests.
The debt picture looks better than it is
The standard rebuttal to any US-fragility argument is the debt chart: household debt as a share of GDP has fallen from roughly 98% at the 2008 peak to around 70% today (or from about 86% to 62% on the narrower Federal Reserve measure). In real, inflation-adjusted dollars, total household debt is still just below its 2009 high. On the surface, that looks like a system that deleveraged responsibly.
Look under the surface and the story changes. The composition of that debt has shifted away from mortgages — which are secured, long-dated, and mostly held by higher-income, higher-asset households — into student loans and auto loans, which are unsecured or attached to rapidly depreciating collateral, and which are concentrated in the bottom two-thirds of the income distribution. That’s not a healthier balance sheet; it’s the same debt burden redistributed onto households with the least capacity to absorb a shock.
And the shock is already showing up in the delinquency data. Student loan forbearance ended, and serious delinquencies jumped from under 1% to over 16% in a single year, with roughly one in ten dollars of student debt now 90-plus days past due. Credit card serious-delinquency flow is running near 7%, on balances carrying interest rates north of 22%. Auto loans have roughly doubled in dollar terms, stretched out to six- and seven-year terms on assets that lose value the moment they leave the factory, with negative equity now common. Put it together and the flow of debt going seriously delinquent across the household sector has nearly doubled year-on-year. That is not a slow-burn statistic — that is a system starting to crack at the load-bearing joints.
Why the next move is almost certainly more easing
Here is where the fiscal and monetary threads meet. The US Treasury has been quietly running its own version of quantitative easing by issuing an unusually large share of new debt — well over 80% — as bills with maturities under a year. That’s the fiscal equivalent of financing a house with an adjustable-rate mortgage instead of a thirty-year fixed: it looks cheap when short rates are low, and it becomes a rolling crisis the moment they aren’t. It works fine right up until it doesn’t.
Meanwhile, the buffer that used to absorb funding stress — excess bank reserves — has been drawn down. The last time reserves got this thin, in September 2019, the overnight repo market seized up and the Fed had to step in with emergency liquidity almost overnight. We are closer to a repeat of that than most portfolios are priced for.
Add the politics. Whoever ends up leading the Fed inherits an institution that is still majority hawkish, at a moment when the Treasury’s own borrowing structure and a fragile household sector are both quietly begging for lower rates and more liquidity. Any new chair with an inflation-hawk reputation has every incentive to hold the line as long as politically possible — partly on principle, partly to protect their own legacy — before the pressure becomes unavoidable. But the direction of travel is not really in question. Between an over-levered household sector, a Treasury that has to keep rolling short-dated debt, and a banking system running low on reserves, the destination is the same: more balance-sheet expansion, on a scale bigger than 2020 or 2008. The only real question is how much pain arrives in the gap between now and then.
The dangerous part is the gap, not the destination
This is the part that is genuinely hard to model, and it’s the part most investors are ignoring. Everyone can see the endpoint — easier money is coming, eventually, because the alternative is a funding crisis nobody in Washington wants to own. What’s much less certain is what happens in the interval between “everyone knows QE is coming” and “QE actually arrives.” That gap is where currency stress, bond-market air pockets, and credit events tend to live. History doesn’t move in a straight line from problem to solution; it moves through a chaotic middle where things break in ways nobody predicted, before policymakers are finally forced to act. Anyone who lived through 1997, 2000, or 2008 as an investor remembers that the crisis wasn’t the eventual policy response — it was the disorderly scramble that forced the response.
And if the policy response, when it comes, is aggressive — a real “super QE" rather than a modest top-up — the inflationary consequences could be severe. An economy already running elevated inflation on top of an inflated price base, hit with a large new wave of liquidity, does not necessarily settle back into 2–3% inflation. It can just as easily accelerate toward double digits, especially with a fiscal deficit that shows no sign of shrinking.
Why this time the social risk is not purely theoretical
Here is the part that doesn’t usually make it into investment commentary, but probably should. A generation of young Americans is coming of age with weak job prospects in traditionally high paying sectors, high living costs, record levels of unsecured consumer debt, and a wall of delinquencies already forming under their feet. Layer double-digit inflation on top of that combination, and you are not just looking at a market risk. You are looking at a social one.
Civil unrest as a tail risk for the US used to be the kind of thing you’d mention only half-seriously, a footnote in a scenario-planning deck. I don’t think it’s purely theoretical anymore. It doesn’t need to become the base case to matter — even a modest, non-trivial probability of serious social instability is the kind of risk that reprices currencies, sovereign spreads, and equity risk premia long before it shows up on the evening news. Markets are usually terrible at pricing tail risks like this until the tail starts wagging the dog.
What this means for how I’m positioning
None of this is a call to panic or to abandon US assets wholesale — the United States remains the deepest, most liquid capital market in the world, and that doesn’t change overnight. But it is a case for taking seriously a scenario the consensus is currently pricing at close to zero: a period of genuine monetary, fiscal, and social stress in the US, sitting between now and the eventual “everything gets easier” resolution. That argues for holding real assets and inflation hedges; for not over-extending duration into US paper on the assumption that rates only fall from here in an orderly way; and for treating US-dollar cash as a tool rather than a safe haven by default.
The lesson from every cycle I’ve watched — 1997, 2000, 2008 — is the same: the eventual policy response is rarely the dangerous part. The dangerous part is the disorderly stretch of road that forces policymakers into that response in the first place. We may be entering that stretch of road now, and it’s worth positioning for the possibility that it gets bumpier before it gets smoother.