Enter Multiflation
The Investing Rules Have Changed
Events do not just happen, but arrive by appointment.
— Epictetus
Trump may be one of those figures in history who appears from time to time to mark the end of an era and to force it to give up its old pretences. It doesn't necessarily mean that he knows this, or that he is considering any great alternative. It could just be an accident.
Once or twice a century, the world undergoes a transformation of historic importance. Everything changes—but the transformation is so profound that its full magnitude and meaning only become clear in hindsight. The last such transformation—the collapse of the Bretton Woods I monetary system—ushered in the Bretton Woods II pure fiat monetary system in 1971.
We are now living through the early stages of the next great transformation. The architecture of the global economy—the systems, assumptions, and models that defined the past five decades—is undergoing its most violent upheaval in more than half a century.
For over three decades, the global economy surfed the perfect wave of the “Great Moderation”. The perfect “Goldilocks” environment—ever-lower interest rates, economic growth without inflation, faith in technocratic central banking, and relative geopolitical stability—formed the foundation upon which modern finance was built.
A generation of financial norms was constructed upon this delicate “Goldilocks” scaffolding: the hyperfinancialization and hyperreality of first-world economies as Wall Street detached from Main Street, the dominance of passive and quantitative investing, “asset allocation” and 60/40 portfolios, securitization, carry trades, private equity and credit, cryptocurrencies, and housing markets turned casinos-cum-collateral engines.
Nearly every financial “innovation”—and indeed the performance of every asset class and investment strategy—evolved within the climate-controlled greenhouse of that world. Armed with abundant liquidity by central bankers who stood ready to intervene at the first sign of instability, we constructed a hyperreal Financial Matrix—a simulation that took on a life of its own, untethered from the real-world economy it once aimed to represent. A single imperative prevailed: optimize within the system.
Until COVID.
The global policy response to the pandemic was not just aggressive—it was epochal. The world’s largest economies rewrote their monetary, fiscal—and sometimes legal—constitutions on the fly. At the time, we concluded in our 2021 Sorcerer’s Apprentice whitepaper that these actions would not merely trigger a wave of inflation but would catalyze a systemic rupture—marking the end of the Goldilocks era and setting in motion a wholesale restructuring of society—transforming money, markets, and power.
As of this past week—the 92nd anniversary of FDR’s executive order confiscating gold, itself a catalyst for Bretton Woods I and Money’s Metamorphosis—we can now say, with certainty: the next transformation isn’t coming. It’s here.
Wall Street Trading Desks Stunned By Once-a-Century Tariff Shock
—Bloomberg, April 2, 2025
The End Of Bretton Woods
In our Sorcerer's Apprentice series, we’ve dissected the mechanisms by which the monetary disorder unleashed by Bretton Woods II and decades of central bank intervention have hopelessly corrupted the global economy's operating system. Trump is both the golem raised by—and potentially the perfect scapegoat for—the failures of the post-Bretton Woods II system and the global policy establishment.
The preceding quote captures the essence of the Trump administration’s mindset, and is further underscored by Treasury Secretary Scott Bessent’s declaration during an interview with
that a global economic reordering is both inevitable and imminent:In the next few years, we are going to have some kind of grand economic reordering. Something equivalent to a new Bretton Woods. There’s a very good chance that happens in the next 4 years and I’d like to be a part of it.
Trump and Bessent are explicitly rejecting the hyperreality of the Financial Matrix—the hyperfinancialization that has so divorced Wall Street from Main Street—as well as the post-War status quo on practically every other subject of economic and social import.
“So I think that this is the beginning of a process. We're going to re-industrialize…we have gone to a highly financialized economy. We have stopped making things”
It’s evident that much of the world either doesn't yet fully understand—or doesn't want to understand—how profound this ideological and economic revolution truly is, nor how deeply it will affect them: we are on the cusp of a wholesale reordering of the global monetary and economic system.
As we wrote in the Metamorphosis of Money:
“A New Bretton Woods Moment”
Today’s monetary system would be utterly unrecognizable to people living 100 years ago. Government-issued currency—now mostly replaced by digital bits—has been considered money for the adult lifetimes of nearly everyone alive today. This false sense of permanence makes it easy to forget that our monetary order has only existed for a little over a generation—a mere blink of an eye in the context of millenia of monetary history. There are many compelling reasons to believe that a new monetary system is on the horizon…
The digitization of fiat money has enabled the distortion of economic reality to such a hallucinatory degree that the world now resembles a real-life version of Snow Crash. Since the 2008 crisis, central banks have so blurred the line between real and fake money that they inadvertently catalyzed the creation of a new, parallel monetary system—a virtual set of digital currencies resembling those previously found only in video games or Snow Crash’s fictional Metaverse.
Even now the IMF is calling for a “New Bretton Woods Moment”—another reshaping of the international monetary system—suggesting that central planners recognize the instability of the current system and are devising strategic solutions. Central Bank Digital Currencies (CBDCs) appear to be their weapon of choice—a Franken-Fiat creation for the digital age that would only amplify the worst aspects of the current hyperreal system and create altogether new problems in the process.
The illusory permanence of today’s financial order is crumbling, and we stand on the cusp of a monetary revolution. The future is unwritten, but battle lines are already being drawn between centralized fiat CBDCs, decentralized Bitcoin, and gold in what promises to be the defining monetary conflict of the 21st century—one that will ultimately determine the fate of the hyperreal Financial Matrix and, by extension, our own.
The End Of Globalization
Globalization—and by extension the Financial Matrix—was fundamentally predicated on geopolitical stability, enabling “just in time” supply chains stretched globally to maximize efficiency and profit. This arrangement created a bifurcated global economy: developing nations manufactured tangible goods while the US printed its reserve currency, engineered complex financial instruments, and the developed world generated “wealth” primarily by trading assets like houses, stocks, and cryptocurrencies amongst themselves.
COVID shattered this illusion when advanced economies couldn't source basic necessities such as N95 masks and antibiotics; the Israeli pager incident and various recent incidents of Chinese backdoors related to AI and robotics further highlighted the risks of a “just in time” globalized supply chain. These events delivered a powerful one-two punch to the core assumptions underpinning globalization and forced a wholesale reevaluation of global economic interdependence in a world where geopolitical stability can no longer be taken for granted.
Even the institutions and leaders tasked with preserving the old regime have begun to admit that it is ending:
“The world has changed, globalization is over and we are now in a new era.”
—Keir Starmer, April 6, 2025
Enter Multiflation
We are living through the birth pangs of Multiflation—a fundamental transformation in our global economic reality. This new regime— characterized by economic whiplash and dislocations—emerges from painful but necessary tectonic realignments as the artificial stability underpinning the Financial Matrix can no longer be maintained.
As we venture deeper into the Multiflation labyrinth, deviations from what we have come to expect as a "normal" economic environment will become both more frequent in number and more violent in magnitude.
Throwing Over The Chessboard: Multiflation = Dislocations
Under Trump's economic revolution, such dislocations are not just accepted but are actively catalyzed by the administration as part of the deliberate dismantling of the post-Bretton Woods system. Trump’s attempt to remedy the ills of the Financial Matrix and globalization—whether ultimately successful or not—is already creating a ripple effect of disorder and dislocations across various sectors and markets, and will continue to defy Great Moderation-era economic thinking and models. (Simultaneously unfolding alongside these changes—and significantly compounding their effects—is the “AI Revolution,” poised to become the most transformative technological advancement since the internet.)
Businesses and households alike are even now being forced into the role of reactive traders, constantly making bets on policy changes and short-term fluctuations in asset markets, input and output costs, interest rates, foreign exchange, and supply-demand dynamics.
What lies ahead is not simply a regime change but rather a fundamental reprogramming of the global economic order. Multiflation represents both the chaotic unwinding of decades of monetary-induced hyperreality and the painful birth of a new reality—one where economic forces no longer behave according to the models and assumptions that guided us for fifty years.
Those who cling to the outdated maps that successfully steered them through Goldilocks and the Great Moderation will find themselves increasingly disoriented in this emerging landscape. The adept navigators of Multiflation will be those who recognize that the old maps no longer apply—and embrace the difficult work of mapping the uncharted territory before us.
We stand at a historic crossroads where fortunes will be made not on optimizing within a stable system, but rather on cultivating resilience and adaptability. True resilience—not the illusory kind that was seemingly validated during an unprecedented period of economic stability—must become the cornerstone of economic and investment strategy.
The Great Moderation is dead.
Enter Multiflation.
Addendum:
The White House’s own admission—that the the exorbitant privilege of the dollar’s reserve status is no longer viewed as an unambiguous asset by the U.S. government—confirms that the unraveling of Bretton Woods is policy. The dollar’s reserve status is increasingly framed as a structural liability—a cost center shouldered by U.S. taxpayers and workers to subsidize a global system that, paradoxically, undermines their own economic foundation and families:
We will continue unraveling the historical roots of this transformation in the Sorcerer's Apprentice series, while our forthcoming Multiflation series will apply this analytical framework to decode the chaotic present.
America 'fought' hard to maintain the dollars status as 'the' reserve currency.........the fact that they abused the advantage they thus gained is no surprise, but the article suggests it's the fact of the dollar being the world reserve currency that damaged America; I suggest that's nonsense; it is the abuse of that very special privilege that has brought America and world to this new crisis.