The economy looks wobbly, but your screen keeps flashing new highs—what gives?

Corporate taxes are slipping—corporate income taxes now make up only about 8% of federal revenue and roughly 1.7% of GDP. Tax Foundation | Tax Policy Center

Unemployment is ticking up from cycle lows near 3.5% to the mid‑4s in late 2025. Trading Economics

Recession chatter is back…yet tech stocks and gold won’t stay down.

That disconnect isn’t random noise.

The U.S. just quietly crossed an annualized ~$1.1 trillion interest bill on its national debt—more than it budgets for defense. RAND

The FY2025 budget request for the Department of Defense was about $850 billion. Brownstein

That’s not just a scary headline.

It’s the entry fee to a new regime macro folks call “fiscal dominance.”

In that regime, the government struggles to tolerate a classic deflationary bust.

Deflation makes the debt heavier in real terms—and eventually harder to service.

So when growth sags, the policy playbook tends to shift:

And when the world smells more money printing, a lot of capital rushes into things that can’t be printed.

Today, we’ll unpack what fiscal dominance really means—and how it quietly stacks the odds for tech, gold, and other scarce assets.

Here’s the line in the sand.

In Fiscal Year 2025, the U.S. interest tab has pushed above $1.1 trillion on an annualized basis, overtaking a defense budget request of about $850 billion. RAND | Brownstein

On a trailing‑12‑month basis through October 2025, net interest paid was about $981 billion, and the Congressional Budget Office projects $952 billion in net interest for FY2025, ramping toward $1.78 trillion by 2035. JEC / Treasury | Peterson Foundation

Interest used to be a rounding error.

Now it’s a headliner, set to swallow close to one‑fifth of every tax dollar in FY2025 (roughly $952 billion of interest on about $5.2 trillion of projected federal revenue). Peterson Foundation | Wharton Budget Model

Meanwhile:

When almost one‑fifth of government revenue goes just to interest, the usual “just hike rates to fight inflation” trick stops being free.

Why?

Because higher rates don’t just cool the economy—they explode the interest bill.

The weighted‑average interest rate on U.S. marketable debt has already more than doubled, from about 1.55% five years ago to roughly 3.36% as of December 2025, on a much larger principal base. JEC Debt Dashboard

Push rates much higher from here and next year’s interest tab lurches into numbers that start to crowd out everything else: social programs, investments, even parts of the military.

RAND notes that interest payments are now larger than spending on national defense, and bigger than combined federal outlays on education, law enforcement, and scientific research. RAND

That’s how the conversation drifts toward solvency questions, not just “soft landing” debates.

So the Fed is boxed in.

They can talk tough on inflation, but there’s a line they can’t cross without blowing up the Treasury market.

And in practice, that pivot has already started:

All of this helps keep the government’s $38.4 trillion (and growing) debt pile funded—now increasing by about $8.03 billion per day, with total gross debt up $2.25 trillion in the past year. JEC

In plain English: monetary policy starts serving the needs of the Treasury.

That’s fiscal dominance.

Markets see this.

Once investors believe the Fed cannot let a full‑on deflationary bust happen, the game changes:

So capital often rotates into anything with scarcity or pricing power.

You’re already seeing it:

What about Bitcoin?

On paper, it lines up neatly as an “anti‑printing” asset.

And a key institutional barrier just fell:

So while the macro backdrop screams “hard money,” the largest, slowest pools of capital are still ramping up their exposure—gravitat­ing first to gold and giant, cash‑rich businesses, and only gradually to Bitcoin as the regulatory and custody rails mature.

So what do you do with this?

You don’t need a 40‑page macro report.

You need a simple lens:

A lot of investors and allocators tilt their attention toward:

You don’t have to go “all in.”

But many investors prefer their portfolio story to rhyme with the policy story.

There’s a smart camp that still worries about deflation.

Their argument:

Put together, that looks like falling prices—not inflation.

They’re right about the pressures.

Debt can be a growth killer.

But here’s the key distinction:

Every time the system has wobbled in the past 15 years, the response has rhymed:

Different labels.

Same core move:

Turn on the liquidity taps. Protect the debt. Stabilize the system.

In 2025, we saw the same pattern: the Fed ended QT and effectively prioritized sovereign funding and financial stability even with unemployment rising and inflation still above target. NRUCFC | Fed MPR, June 2025

Given a choice between:

History suggests policymakers usually lean toward saving the debt.

Which means that even if you get deflation scares along the way, the medium‑term response keeps pushing back toward:

That’s the fiscal‑dominance playbook in action.

If the Fed had to print another $1 trillion to stabilize the system, where would your next dollar likely go—and why?

Hit reply with your letter and one sentence on your reasoning.

A few responses may be featured (anonymously) in a future issue.