← Tom Bilyeu's Impact Theory
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When you manage procurement for multiple facilities, every order matters. But when it's for a hospital system, they matter even more. Grainger gets it and knows there's no time for managing multiple suppliers and no room for shipping delays. That's why Grainger offers millions of products in fast, dependable delivery so you can keep your facility stocked, safe and running smoothly. Call 1-800-GRAINGER Click grainger.com or just stop by Granger for the ones who get it done. When you manage procurement for multiple facilities, every order matters, but when it's for a hospital system, they matter even more. Grainger gets it and knows there's no time for managing multiple suppliers and no room for shipping delays. That's why Grainger offers millions of products in fast, dependable delivery so you can keep your facility stocked, safe and running smoothly. Call 1-800-GRAINGER Click grainger.com or just stop by Grainger for the ones who get it done.
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If you think your money is safe in the bank, you are dangerously wrong. The Fed just did something insane Given the state of the market on December 10th of 2025, the Fed cut by 25 basis points, bringing the Fed's fund rate down to 3.5 from 3.75%. This wasn't a unanimous decision, though several Fed officials dissented, which is rare, and it tells you that this is a deeply divided committee making a move under pressure, not because they've reached consensus and the decision that they came to is going to have a dramatic impact on your ability to save. And the cut wasn't a symbolic move to pacify Trump or the markets. This was a third third rate cut this year, and it came with forward guidance that explicitly points towards more rate cuts to come. The dot plot, which is a chart that shows where each Fed policymaker thinks interest rates are headed to over time, shows that the median dot has quietly flipped from hold to ease and the markets have already priced in a continuation of the easing path. This is the same Federal Reserve that spent the last two years telling you inflation was the biggest threat to economic stability. It's the same Fed that told you rates would stay higher for longer. The same Fed whose explicit mandate is price stability and maximum employment. So why are they cutting now when that will only fuel the everything bubble we're already in the middle of. And what can you do to protect yourself? Despite the lunacy of this rate cut, it was entirely predictable for reasons we're going to discuss. And the underlying reasons for the move make the path forward increasingly clear. The stark reality is that this Cut has nothing to do with inflation, obviously. It will inflate asset prices like crazy. And the Fed knows that this cut is about the survival of the US Economy as a whole. Or should I say that it will help it die more slowly so we have time to pray for a miracle. But if you're watching Buffett right now, he's fleeing to Japan because American policy is making him nervous. Now, unfortunately, due to decades of deficit spending and terrible economic policy, the Fed is trapped in something called fiscal dominance. To go into that in detail in a minute. But for now, just know that it's the world's greatest example of being damned if you do and damned if you don't. Fiscal dominance is what happens when the government has accumulated so much debt that monetary policy, via the Fed, stops being about managing the economy and starts being about keeping the system from collapsing due to the interest payments. If you don't understand the timing of the move yet, brace yourself, because beginning in 2026, the United States is staring down a massive wall of government debt that has to be refinanced. It's trillions of dollars issued back when interest rates were near zero, and now it has to be rolled over at dramatically higher rates. The refinancing is not optional. Even at historically low interest rates, and. And these still are very low, our interest payments on the national debt is already the second largest single item on the budget. It's bigger than national defense and Medicaid. I almost don't want to say that out loud too often, because people are going to become numb to that fact, and that fact should hit like a sledgehammer. Deficits have consequences, and debt does not magically disappear. It just stacks and eventually has to be paid off or rolled over. That's what we're going through right now, and we certainly can't afford to pay it off. So that only leaves rolling it over and praying for a growth miracle. And if rates stay high, the government will have to refinance at dramatically higher rates, which will break the economy. If interest costs explode, deficits spiral. And if deficits spiral, the only way out is money printing. So while the Fed will never come out and actually say what they're doing, they're not going to say we're going back to printing. That's functionally what this move signals. Even though the Fed is technically shrinking its balance sheet to cool the economy, more liquidity is being injected into the financial systems through other channels faster than quantitative tightening is removing it because of low interest rates. So, on paper, while quantitative tightening still exists in practice, liquidity conditions are already easing. Here's how quantitative tightening is supposed to work. The Fed owns trillions of dollars in Treasuries and mortgage backed securities from years of quantitative easing. As those bonds mature, though, the Fed should allow them to roll off its balance sheet instead of reinvesting the proceeds. That gradually removes a large price insensitive buyer from the market and over time reduces liquidity in the financial system. Tighter liquidity conditions tend to push borrowing costs higher, pressure asset valuations and slow demand. And over time, that cooling of financial conditions is intended to help bring inflation down. That's the theory anyway. But that's not what's happening in reality. Instead, at the exact moment in history when under normal conditions, rates would be going higher, they're coming down. So this cut is not a healthy system making a rational decision to cool down. This is an overheated ENG engine being revved even harder. The RPMs are being driven deep into the red and the engine is starting to smoke. By cutting the rates, the Fed might be able to avoid even more CPI inflation. But they're going to spike asset prices, which is just another kind of inflation. And that inflation kills the only refuge from the exponential 3 to 25% CPI inflation we've experienced over the last five years alone. Asset prices going up would be awesome, except for the fact that they have now completely detached from business fundamentals by a lot, making it clear bubbles are forming everywhere and expanding rapidly. And to make matters worse, 90% of Americans live paycheck to paycheck and or are trying to get ahead simply by saving money. So when you have CPI inflation of 3% and asset inflation of even more, you've got a dual problem and nowhere to escape to. First, inflation punishes savers by quietly stealing your purchasing power over time. So cash is a long term disaster. And second, in an inflationary environment, owning productive assets is not optional, it's an absolute requirement. And the higher prices put intuitive assets like homes completely out of reach. And for the people who already are invested, the inflation of asset prices feels like you're getting rich. And so they're very excited. But odds are prices are going to correct. And those corrections tend to be violent and destroy massive amounts of wealth because so many people are doing it on debt. So driving inflation beyond what business fundamentals warrant is extremely risky. It's better than CPI inflation in the short term, but long term it can be just as bad, if not worse, depending on the size and speed of the correction. So while the much reported CPI inflation rate might be down on paper. Lowering rates and returning to quantitative easing AKA QE will just send asset prices racing even higher. Housing equities, gold, Bitcoin, etc. Everything that protects people from currency debasement and the inevitable correction could create years of stagnation, AKA a recession or if it's violent enough, a full blown depression. And as a fun reminder, this is not a self correcting problem without a balanced budget or a debt reset which is horrifying and inflationary pressure never goes away, it just compounds but the political madness of lowering rates because we refuse to balance the budget is still what's actually happening and what's likely to continue happening until disaster strikes with sufficient force to make everyone accept austerity. And odds are voting isn't going to save us. The rate cuts and reckless spending does not appear to be a partisan issue. Both sides are hyper guilty and will keep spending until they simply can't do it anymore because the interest payments on the debt balloon to the point that it gobbles up all taxable revenue. None of this is a conspiracy. This is just debt math colliding with the lunatic behavior of people all of us who continue to vote for more free stuff, which is what caused the problem in the first place, and politicians who promise whatever they need to promise to get elected and reelected. And it all happens just slowly enough that not enough people take the time to figure out what's really going on. And the problem is structural and it's caused by math and human behavior. The cut was unavoidable given the realities of politics and the raw math of the debt obligations we've already racked up. Because when you're servicing tens of trillions of dollars, small changes turn into hundreds of billions of dollars in additional expense. Interest cost compounds. Every percentage point matters, Every basis point matters. Make no mistake, the only smart move right now is to balance the federal budget. But no one is going to do that because if they did, they won't get reelected. And as much as I hate the the cut, it was the only politically survivable move. By cutting, the current crop of politicians can kick the can down the road by choosing to fuel the everything bubble rather than immediately crush the economy under impossible interest payments or honestly defaulting on some portion of their debt obligations, which would be horrible, but better they chose one more beer to cure the hangover rather than actually getting sober. Unless we balance the budget or AI ushers in an era of ahistoric growth, our economy is in palliative care waiting to die. We can make it more comfortable. We can delay things for a bit, but the debt is going to overrun everything. The rate cut just allows us to refinance the huge 2026 debts without immediate cardiac arrest. But a rate cut is stimulatory and causes inflation because money becomes so cheap to borrow. And when money is cheap to borrow, people borrow and they use it to build and gamble. The building part is great. It means more jobs and the potential for growth. But if we don't grow productivity faster than we grow the money supply, it also means more money chasing the same amount of stuff. And that makes everything more expensive. And that, my friends, is called inflation. By cutting, the Fed has clearly signaled that for political reasons, we are letting politicians sit at the crabs table and make more and more insane bets trying to win it all back with growth. It is a terrible idea in Vegas and it's a terrible idea now. Taking a short break, but there's more impact theory after. Stay tuned. And we're back. Let's pick up right where we left off. If you're wondering why the market has been so volatile lately, wonder no more. Smart money knows that when money is cheap, you push further and further out on the risk curve and you do it with more and more debt. That is how you build an everything bubble. And as history tells us, eventually the bubbles will burst, and when they do, the economy chokes and slows way down. Think of the 2000.com crash and the 2008 Great Recession. Think of it like we're living in a movie. And in the movie, we're racing towards a fiscal cliff where America bankrupts itself through debt and money printing, where bubbles are forming everywhere and where the government is simultaneously trying to save us with one hand by growing our way out of the problem and then with the other hand refusing to balance the budget, causing us to move faster and faster towards that fiscal cliff. And the question becomes, will they save us before they kill us? The whipsawing in the markets is a result because smart money knows exactly how this all plays out. You've got people betting on the market going up and people betting on the market crashing. And many of them are doing it with debt because money is so cheap. And that is one of the many things driving asset prices to the moon. Now, here's the bad news. Under fiscal dominance. For all of the political theater around the Fed's independence, the truth is that not only is the Fed not independent, the Fed isn't steering the economy anymore. It's merely reacting to it. It's not that Powell is beholden to Trump or Congress, it's that he's beholden to math. If Powell keeps rates high long enough to actually kill inflation, the interest payments on the debt will explode so fast that the treasury will be forced to issue even more debt just to pay the interest. That means more borrowing, more. More monetization, more inflation, and more instability if he cuts rates. Sure, he fuels speculation bubbles and asset inflation, but at least the government can keep refinancing for a little while longer. And that's why the choice to lower rates should have been obvious to all of us, and why the Fed will lower them even more. Credit to Powell for holding out as long as he did, to be honest. But the 2026 debt just finally forced his hand. That's why he's going back on everything that he said previously. Powell isn't caving. It's that politics always wins once the debt gets big enough. Because elections do not care about long term stability. They care about this year. They care about the midterms. And that's the trap. That's what will eventually grind everything to a halt or force us to default on our debt, unleashing potentially decades of of at best managed decline and at worst, revolution, war or outright economic collapse. It happens all the time, all around the world. I know us growing up here in America, it seems impossible, but it is absolutely not. Now, none of that should be taken as YouTube hyperbole, nor should it cause you to freak out. The world is always changing. Things go up and down. Like I said, this is universal. This is happening all the time. It will always, always be this way. Stay emotionally sober and keep your wits about you. As distressing as moments like this can be, there's always a way to weather the storm and even come out ahead. But the whole point of assessing data is that data should drive your decision making. So let's get into those decisions. Now that you know what's going on, what should you do about it? Here's how to position yourself in a debt dominated inflationary system fueled by by fiscal dominance. There's five easy pieces. One. Stop saving money. I know that sounds insane, but in a system dominated by debt and money, printing cash is not neutral. Cash is exposure to inflation. Now that does not mean that cash is bad. It means you can't just blindly save to get ahead. You need cash on hand for living expenses and then you need to put the rest just to work to protect you from inflation. 2. Own assets and accept much of your money is going to be tied up to protect you from Inflation. If the government is going to use inflation to devalue the dollar so it can pay back its interest, which I assure you it's going to, then assets are the defense, which is why they're rising so fast. That doesn't mean excessive speculation. I am not telling you to go gamble on the wildest shit ever. It doesn't mean chasing memes, and it definitely does not mean trying to time the market. If that's what you want to do, you are in the wrong channel. It means owning productive or scarce assets and dollar cost averaging into them over time. I get how boring that is, but it's actually effective. Dollar cost averaging does three critical things. It removes timing, risk. Unless you're coming back from the future, you are unlikely to get the specifics right. So bet on segments of the market or the entire market as a whole. Don't try to pick horses. It creates a money habit. And three, it keeps you investing through volatility. You'll catch the falling knife, but you won't miss the upswings. You should always assume prices will swing violently, so have cash on hand for living expenses. Drawdowns will happen. Those are just paper losses though, unless you were using margin and got liquidated. So don't panic. And your money may be locked up for years, so plan accordingly. 3. Diversify across economic forces, not just individual investments. Now this is where people think that they're diversified, only to find out in very painful fashion that they are not. Owning 10 stocks or three ETFs is not real diversification. What you want for true diversification is uncorrelated assets. Now to get there you need exposure to different economic forces, not just different ticker symbols. That means spreading exposure across productive businesses and equities spread around global markets. Real assets and commodities spread across different types that will thrive in different economic environments. Hard money like gold and Bitcoin and your own skills and earning power. Now this one is increasingly precarious in an AI fueled world. I get that. But always remember, you need a plan for today and not just the future. And right now your skills still matter a lot. Don't make the mistake of assuming that AI is going to play out exactly as everyone says. And stop developing your own talents. I assure you the future is going to surprise us in some way. Not developing your skills today would be as foolish as exiting the stock market because you think everything is currently overpriced. Each of the above asset classes responds differently to inflation, recession, liquidity expansion and liquidity contraction traction. You're not trying to Be perfectly hedged. You're simply trying to be more robustly diversified than the average bear. 4. Hold enough liquidity to remain chill in a downturn and be ready to purchase assets when they go on sale. This is a non negotiable Cash is for safety first and foremost, so make sure you always have enough on hand that you can eat and pay your bills. You also want liquidity for optionality. Liquid cash is always king in the short term, but unless the currency is actually hyper inflating because of that, you should keep enough cash to live 6 to 12 months without needing to change your lifestyle. Now ironically, the people who survive inflationary resets best are not the most aggressive. They're the ones who aren't forced to sell at the worst possible time. 5. Avoid leverage. Nothing forces a sale at the wrong time like leverage. Optimize for survival first. Cheap money makes leverage so seductive. You can make a huge return on the spread between what you pay to borrow and what you can make in the markets. But a couple of mistakes and or bad timing later and temporary volatility becomes permanent ruin. In a system under fiscal dominance, policy shifts can be abrupt and catch you totally off guard. Liquidity can vanish overnight, but margin calls happen instantaneously and it's suddenly game over and you're wildly underwater with no path back to the surface. Unless you are a truly expert level investor with deep experience managing leverage through cycles. Leverage is not the tool you're looking for. It's just pure liability and lost sleep because it's so stressful. History is brutally consistent. Wealth transfers during resets go from the over levered to the liquid and from the emotional to the discipline. So remember, you don't need to predict what happens next accurately. You just need to stop playing a game that no longer works. We are in fiscal dominance. Saving your money is not going to get you there. The Fed has no politically viable choice but to print money and that is going to drive inflation and that is going to have largely known consequences. But no one will get the timing or specifics right, so don't even try. All right, if you guys are getting value out of this, make sure that you leave us a five star review wherever you listen to your podcasts. And until next time, my friends, be legendary. Take care.
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