Welcome To The Age Of Perennial Crisis

Authored by Daniel Lacalle,

The world is not going to see another crisis like the ones experienced in 2008 or 2011. No central bank or government is going to accept it.

You may think the prospect is good news.

However, the flip side is that this means secular stagnation and perennial crisis for wage earners and the middle class. There is a slow-motion eternal crisis that leaves the average citizen wondering why they cannot make ends meet, while governments boast about their economic stability.

A crisis is only the manifestation of a previous excess. When governments prioritise prudent investments, healthy public accounts, and attractive taxes, crises end quickly, and the recovery is stronger. However, when governments claim to be the solution and mask economic imbalances with increased spending, debt, and taxes, they merely create a significant transfer of wealth from the private sector to themselves, resulting in persistent inflation, higher taxes, weaker productive growth, and lower real wages that burden taxpayers.

Many commentators warn of an imminent 2008-style collapse or a debt crisis driven by the unsustainable fiscal situation of developed nations. It will not be like that.

A sovereign debt bubble does not burst like a real estate one. It implodes via a vicious cycle of persistent inflation, stagnation and confiscatory taxes. A sovereign debt bubble explodes in your face and in your pocket, slowly but surely.

The world has entered an era characterised by ever-rising public debt, aggressive fiscal interventions, and the permanent financial repression of savers and the middle class.

This perennial crisis is very different from an abrupt crash. It is driven by the constant erosion of the purchasing power of fiat money, productivity, and living standards, fuelled by constant public debt expansion and policy responses that ignore any deleverage or structural reform to focus on more taxes on the productive sectors.

Developed nations have exceeded all limits of indebtedness, and global central banks are avoiding sovereign debt while increasing their gold reserves.

The economic limit: More government spending and public debt lead to lower growth and the impoverishment of citizens in net real terms.

The fiscal limit: low interest rates combined with higher taxes lead to large deficits and increased interest expenses.

The inflationary limit: More government spending means more units of currency in the system and persistent inflation.

The French, British, Japanese, and US debt crises may be inevitable without serious spending cuts. As these debt crises unfold, the process of impoverishment becomes slow and painful, accompanied by a decline in the value of fiat money.

In 2025, global debt has soared to a record $337.7 trillion, an all-time high of 324% of global GDP. The public sector is overwhelmingly leading this increase. France, the UK, and Japan, through years of ultra-low rates and misguided public stimulus, have disregarded the warning signs and dangers of uncontrolled spending and public debt, resulting in massive budget deficits and debt burdens approaching or surpassing 100% of GDP.

France is the prime example of the dangers of letting governments take control of the economy. France has never implemented austerity measures; instead, government spending is excessive, and the tax wedge is harmful. Government debt surpasses 116% of GDP, with interest payments tripling from €26 billion in 2020 to €66 billion today.

If high government spending and taxes were the tools to deliver growth and sustainable accounts, France would be leading the world’s economic growth. Instead, it is in secular stagnation.

High taxes are not a tool to reduce debt but to justify it.

In Britain, long-term borrowing costs have surged to levels not seen since 1998 due to the country’s poor growth, uncontrolled spending, and rising inflation that has been exacerbated by higher taxes.

Japan, seen by some as the perfect Keynesian example of ever-rising debt with no risk, is no longer immune. With debt nearing 260% of GDP, yields on Japanese government bonds have risen to record highs and the prime minister announced that Japan’s situation was “worse than Greece”.

Yields on developed nations’ 10-year notes have reached new highs. Credit markets no longer assign “convenience yields” to government debt as they once did; instead, borrowing costs are rising fast despite interest rate cuts, showing the risk of a solvency crisis despite easy money policies.

The first ones to run away are central banks themselves. Global central banks, once the guaranteed buyers of sovereign bonds, are abandoning developed nations’ debt as a reserve asset, increasing gold purchases at a record pace. In 2025, central banks collectively bought more than 1000 metric tonnes of gold for a third consecutive year, bringing official reserves to over 36,000 tonnes globally. 95% of central banks expect to further increase gold reserves in the next 12 months, and for the first time in recent decades, their gold holdings surpass US Treasuries and euro area bonds as main reserve assets.

The sovereign debt bubble is imploding, and it will be paid with a painful and slow process of years of financial repression and destruction of the middle class. Policymakers prefer chronic crisis management instead of risking a dramatic 2008-style crisis caused by defaults and rapid deleveraging. Central banks have abandoned their inflation fight to ensure the sovereign debt bubble is “dissolved” through financial repression: cutting interest rates, flooding the markets with liquidity, and tolerating persistent inflation. However, disguising the true scale of fiscal imbalances and rewarding fiscal irresponsibility at the expense of currency stability makes governments ignore all the warning signs and soldier on with irresponsible spending.

The ongoing crisis will make wage earners poorer and create a dependent subclass incapable of saving or investing. Real interest rates will remain negative and money supply will rise faster than productive growth.

We may not see an abrupt headline crisis. It will be slow and painful, because it is already happening. Furthermore, monetary madness and government spending that destroy the value of the currency will continue to drive asset prices and gold to rise in nominal terms.

This is why market participants cheer the same policies that destroy the fabric of the economy: because they see asset prices soaring as the currency fades.

The world faces a slow-motion destruction of currency purchasing power. Inflation remains a persistent threat, eroding wages and deposit savings. Resources divert from innovation to debt service and government bureaucracy, stalling productivity growth. Thus, the middle class suffers higher taxes and persistent inflation, losing disposable incomes and social mobility.

This situation is not a result of government incompetence; rather, it is a deliberate strategy to create a dependent subclass that relies on government assistance due to the repression and elimination of financial freedom. The next time you request free services from the government, keep in mind that you will ultimately pay for them multiple times.