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If you look at America right now, you'll see two completely different countries. The first one looks like a golden age with stock markets at record highs, low unemployment, and a growing GDP. The second one looks like the buildup of every major financial crisis in history. It's the same country during the same time.
So, which version is the real one? Well, the truth is the US economy isn't really thriving and it's also not collapsing just yet because it's being held up by six pillars with cracks running up the side of every single one of them. So, let's unpack the six supports together because by the end of this video, you'll understand the US economy better than 95% of people and be ready to protect yourself from whatever comes next.
Imagine your country had one giant company and that one company decided to spend so much money this year on one project and without that single company spending the entire country would be in a recession. It sounds absolutely ridiculous doesn't it? But that's essentially what's happening in the US right now. Just spread across four companies instead of one. Amazon, Microsoft, Alphabet and Meta. These four names alone are allocating somewhere between 660 and $725 billion on capital expenditure in 2026. If you've never heard that term before, it basically means a company spending big on long-term things that they need to build or buy so that that company keeps growing. To put that into perspective, that's up roughly 77% from what they spent last year. It's more than the entire defense budgets of the UK, France, and Germany combined. And around 75% of all that money is going into one thing, AI infrastructure. I mean, Microsoft alone committed $190 billion to capex this year. Google matched them and Amazon went even higher around $200 billion. Zuck might be feeling a bit burnt out after the whole metaverse disaster because Meta are only in the 125 to $145 billion range. But in all seriousness, it's the biggest infrastructure buildout in American history and it's happening right now while you watch this video.
On one hand, it's quite exciting that this AI revolution is happening right in front of our eyes. But it's not all sunshine and rainbows, and there's a very clear dark side to it. According to David Saxs, Trump's AI advisor, he recently said around 75% of all US GDP growth in Q1 of 2026 came from this AI capex alone. So if you strip the spending of these four companies out of the GDP number, the rest of the US economy is basically flat. Now think about what this actually means. The headline GDP number the politicians wave around and use to say the economy is doing great only looks great because of one industry and more specifically four companies. Without them, the US would technically be in a recession.
There's a two-fold problem here because all this spending is based on the assumption that AI will eventually generate enough enterprise revenue to justify all of the spending. But as it stands, that revenue is nowhere close to the spending. But if AI companies do manage to close that spending to profit gap, the knock-on effect could be a complete disaster. Because the very companies AI is supposed to disrupt, like enterprise software firms and SAS companies, are already seeing their valuations collapse. And Morgan Stanley estimate that 20 to 30% of private credit loans are sitting on the balance sheets of these exact same companies. So, if AI does what its biggest bankers say it will do, it kills the companies the financial system has lent trillions of dollars to, that's a snake eating its own tail. And the only thing keeping things going is the belief that all of this spending will eventually pay off. But if and when this spending goes down, the GDP number cracks instantly. But businesses can only buy so many GPUs and AI related things. Eventually, real people need to walk into shops, swipe cards, and buy things. Otherwise, the economy stalls.
So, who's actually doing the spending right now outside of these AI companies? Because when you look at the data, it's quite shocking. Think of the entire US economy as one giant restaurant. There are 340 million potential customers. The menu is the same for everybody and the doors are open to all. Now, who do you think is actually paying the bill? If you said, "Well, it's probably a nice even spread," you'd be completely wrong. Because according to data from the Federal Reserve and Moody's, the top 10% of US households are now responsible for nearly 50% of all consumer spending, which is the highest share since they started tracking this number in 1989. Think about that for a second. Half of all spending throughout the US in shops, on holidays, cars and furniture is being done by just one in 10 people. And the bottom 50% of households, which is around 170 million Americans, account for just a fraction of what the top 10% are spending each month.
So, how do we end up in a situation like this? Well, the answer is some economists call the wealth effect. Here's how it works. When you watch your stock portfolio go up or your house becomes worth more than it was last year, naturally you feel richer. And because you feel richer, you spend more. Even though you haven't actually sold anything or pocketed any extra income, this feeling alone is enough to loosen your wallet and blow off some steam. For the top 10%, the wealth effect has been nothing short of a miracle because their stock portfolios are at an all-time high. Their houses have doubled in value over a decade and their combined net worth has gone up something like $40 trillion since 2020. So they spend like the money is real because in their minds it is. Consumer spending as a whole makes up around 70% of the total US GDP. So if the top 10% felt poor for even one quarter of the year, US consumer spending and the economy with it would just collapse. We're at a stage now where the rich aren't just contributing to the economy, they are the economy.
And this is a problem because when you think about it, the wealth effect works both ways. When the market goes up, people spend. And when the market drops, people naturally stop. The same psychological trick that drives consumption in the good times kills it just as quickly in the bad times. And bad times could be on the horizon. because right now the S&P 500 is trading at a forward price to earnings ratio of around 21, which is well above its 5 and 10 year average. If that doesn't make sense to you, let's put it like this. The market is priced for absolute perfection at the exact moment when nothing in the world looks perfect. A 20% correction in the stock market, which historically happens every four to five years, would wipe out trillions of dollars in paper wealth almost overnight, which would cause the top 10% to stop buying Teslas, cancel the kitchen remodels, and forget about the trip to Disneyland. As a side point, Disneyland recognized this shift in spending a long time ago. That's why they've started marketing their parks to Disney adults and not families like back in my day, because the average family just can't afford to go anymore. It's a very fragile situation because the wealth of the top 10% is now overwhelmingly concentrated in the stocks driving support one. So if the AI revolution doesn't go as planned, well, it doesn't take a genius to work out what happens next. Both support pillars collapse at the same time.
But even if that doesn't happen, there's another problem quietly building underneath the economy. This is Jack. He's 32 years old. lives outside Columbus, Ohio, and works in logistics. He's married, has two kids, and takes home around $5,200 a month. Now, 5 years ago, that paycheck stretched just far enough to get by. But today, it really doesn't because his grocery bill, health insurance, car payments, mortgage, and more things than you could imagine have all gone up. So, what does he do? Well, the same thing 90% of Americans in his position are doing, which is putting the rest on a credit card.
This is the third support propping up the US economy, and it might be the most invisible one, because hardly anyone is talking about it. Credit card balances in the US just hit a record high, just shy of $1.3 trillion. Buy now, pay later has become a hundred billion industry, and subprime auto loans are through the roof. And this debt isn't just for fancy vacations and cars. It's for groceries, fuel, insurance, and rent. Basically, all the essentials. This third support is basically a giant pile of borrowed money holding up the bottom 90% of the consumer side of the economy. And that pile might be starting to crumble. Miss credit card payments recently hit a 13-year high. Subprime auto repossessions are spiking. And over 40% of buy now pay later users are missing payments. Q1 PCE inflation just jumped back to 3.5% year-over-year, mostly thanks to the oil shock from the Iran war. And real wages after you adjust for inflation are falling again. What I'm trying to get at here is you can't outrun rising prices with a credit card forever. There is a credit limit and an interest rate and eventually you'll have to choose between paying the minimum payment and putting petrol in your tank. And this shows in the data. Q1 consumer spending growth in the US slowed to just 1.6% down from 1.9 which is the first sign of consumers slowing down in years. The Americans who have been holding the consumer economy together with duct tape and credit limits are visibly starting to run out of room.
So we've got businesses spending big on AI, the rich spending because of their investment gains, and everyone else spending on credit. But all of that combined isn't enough to keep the economy growing the way the GDP numbers suggest. Most people think the economy is driven by consumers buying stuff, which is true to a certain extent, but a huge amount of economic spending is actually the government itself. Every year, the federal government spends about $2 trillion more than it takes in. And that $2 trillion dollars flows into the economy through defense contracts, highway projects, social security checks, and much, much more. If you strip the deficit out of the US economy, the country basically shrinks overnight. Imagine you have a family member who's been telling you for years how successful they are, how much they earn, how nice their house is, and then one day you find out they've actually been borrowing every month for the past 15 years just to maintain that lifestyle. Well, that's basically the United States.
And the cost of this pillar propping up the economy is actually pretty scary. The interest on the national debt is now over $1 trillion a year. Which means the government is spending roughly $88 billion a month just to service its debt of $39 trillion, which is still growing by $7 billion a day. And the cherry on top is that in February this year, the Supreme Court struck down Trump's IEA tariffs in a 6 to3 ruling. Those tariffs were the single biggest revenue raising tool the administration had been using and they got replaced with section 122 tariffs which are capped at 15% and expire after 150 days. If none of that made sense, because honestly it is pretty complicated. What you need to know is that the tariff regime is now bringing in much less than expected while costing each American household roughly $1,700 a year. It's the largest tax increase as a share of GDP since 1993. And it isn't even fully working as a revenue tool. The result is a government that can't really raise taxes much more without crushing growth, can't easily cut spending without a political disaster, and is paying $3 billion a day just to stand still on its existing debt. This is the exact same trap the UK fell into and has been stuck in for 17 years. The US has a bigger runway, deeper bond market, and should we say, a more dynamic economy, but the maths is the same.
So this raises a question. How can a government with $39 trillion in debt and trillion dollar deficits keep borrowing more and more year after year and not face a currency collapse? Believe it or not, the US actually has a superpower which might be the single most important thing keeping the system standing. The US dollar is the global reserve currency which means almost all international trade like oil, copper, wheat, microchips and so much more is priced and settled in dollars. It's essentially the universal language of global finance and this created an almost infinite demand for dollars and by extension US treasury bonds which is what allows the US to borrow at a scale that would have bankrupted any other country on earth. Economists call this the exorbitant privilege. And to be honest, I agree. It's almost like some kind of magic trick. When you think about it, the US prints the world's reserve currency. The world has no choice but to use it. And so, the US gets to play by its own rules.
But this pillar is starting to crack. And it's happening faster than most Americans realize because the US has spent the last 20 years weaponizing the dollar against any country it disagrees with. I'm talking Russia, Iran, Venezuela, North Korea, and even Chinese tech firms. Every time the US freezes a country's reserves or kicks them out of the Swift payment system, every other country in the world takes note and then starts looking for a way out. The BRICS nations, Brazil, Russia, India, China, South Africa, plus new members from the Middle East and Africa are actively building alternative payment systems. I mean, China and Saudi are settling some oil trades in yuan. India is buying Russian oil in rupees. And Iran, which is currently at war with the US, has been working with China on dollar-free trade for years. And then there's gold. Central banks bought a record amount of gold in 2022, 2023, and 2024, which has continued into 2026 as fears about US debt, dollar dominance, and geopolitical instability shows no sign of easing. Gold is up over 80% in the last 2 years. And it's not retail traders like you and me pushing the price. It's sovereign nations methodically diversifying away from a currency they no longer trust. The dollar's dominance hasn't ended. But the trust that took 80 years to build is slowly being chipped away. And once it's gone, it doesn't come back quickly, if at all.
By every rational measure, markets should be panicking right now, and investors should be running for the exits. But they're not. In fact, the S&P just hit another record high. And the reason for that has nothing to do with the economy itself and everything to do with politics. There's a phrase that gets thrown around a lot on Wall Street called the Fed put. It basically refers to the idea that if the markets sell off badly enough, the Federal Reserve will step in, cut rates, print money, and do whatever it takes to stop the bleeding. Investors have priced this assumption in for decades, so they buy the dip because they assume the cavalry will always show up. What we have now is the same thing, but extended into the entire political system. So, let's call it the political safety net. Essentially, every panic is being met by an emergency package, an executive order, or a truth social post that reverses whatever scared the market in the first place. Investors don't believe in real risk anymore because every time they've been wrong over the past 15 years, the government has been there with their safety net. This is the psychological glue holding the whole thing together. Even if the other five supports are stretched paper thin, people don't sell because they assume the government will always show up. And so far, they've been right.
But this support might also be starting to crumble because the political safety net works well for a financial crisis. But what it can't do is fix a supply shock. For years now, these six supports have slowly been getting strained. But nothing in the world has been big enough to actually test all six of them at the same time. That was until February the 28th this year when the missile started flying between the US and Iran.
>> A short time ago, the United States military began major combat operations in Iran.
>> Crisis in the Middle East. Iran strikes back after the US and Israel begin major combat operations against the regime in Thran.
Oil shot up 45%. Inflation came roaring back and every single one of these pillars started getting hit at the exact same time. The US economy hasn't collapsed yet because so far the supports have held. But the longer they hold under this kind of pressure, the bigger the eventual reckoning will be when one of them gives way. Britain is 17 years into its own version of this story. And America, in many ways, is just getting started. The US still has the world's reserve currency, the deepest capital markets on Earth, and some of the most advanced companies in history, which buys you time, but it doesn't buy you forever. If you want to see why the UK is a warning to the rest of the world, then I'm going to leave that video right up there. But don't click on it just yet. Make sure to subscribe if you want to stay ahead of everyone else. Okay, I'll see you over.