Deferred Assets and Economic Fragility: Is a Crack-Up Boom Inevitable?

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by

Dick Dangler
in ,

A crack-up boom, as defined by Ludwig von Mises, is an economic collapse where excessive money printing triggers hyperinflation, eroding public trust in currency. The Mises Institute describes it as a scenario where “public opinion is convinced that the increase in the quantity of money will continue and never come to an end,” leading to a “flight into real goods” (Mises Institute, 2021). As of June 14, 2025, mounting pressures—deferred assets masking financial weaknesses, sluggish employment and housing markets, Bitcoin’s surging dominance at around 63%, President Donald Trump’s push for a compliant Federal Reserve via Treasury Secretary Scott Bessent, and an unsustainable debt-to-GDP ratio—suggest a looming crisis. This article examines these factors, with a focus on deferred assets, to assess if a crack-up boom is inevitable.

Deferred Assets: A Hidden Time Bomb

Deferred assets, such as unrealized losses on securities and pension shortfalls, conceal financial vulnerabilities. The FDIC reported $620 billion in unrealized bank losses in Q3 2023, a figure tied to rising interest rates devaluing bond portfolios (FDIC, 2023). “Banks are sitting on massive losses that could destabilize the system if realized,” warned economist Nouriel Roubini in 2023 (Bloomberg, 2023). The Pension Benefit Guaranty Corporation’s 2023 report highlighted a $1.2 trillion funding gap in public pension plans, with many deferring recognition by assuming optimistic returns (PBGC, 2023). The Mises Institute cautions that such hidden liabilities can precipitate panic, as “the monetary system breaks down” when confidence collapses (Mises Institute, 2021). These deferred assets heighten the risk of a financial crisis sparking a crack-up boom.

Weak Employment and Housing Markets Add Pressure

Economic indicators reveal ongoing fragility. The U.S. Bureau of Labor Statistics reported 165,000 jobs added in May 2025, below the expected 180,000, with manufacturing and retail sectors lagging (BLS, 2025). “Persistent high interest rates are stifling job growth,” noted Federal Reserve Governor Michelle Bowman in a June 2025 statement (Federal Reserve, 2025). The Conference Board’s consumer confidence index dipped to 68.9 in May 2025, reflecting heightened job security concerns (Conference Board, 2025). The National Association of Realtors reported a 6.1% decline in existing home sales year-over-year in May 2025, with mortgage rates averaging 7.2%, further dampening demand (NAR, 2025). “Housing affordability has hit a crisis point,” said NAR Chief Economist Lawrence Yun in June 2025 (NAR, 2025). These weaknesses, compounded by deferred assets, increase susceptibility to inflationary shocks.

Bitcoin’s Dominance Signals Currency Distrust

Bitcoin’s market dominance has risen to approximately 64.3% as of June 14, 2025, up from 55% in 2024, with its price nearing $110,000, according to recent market data (99bitcoins.com, 2025; CoinMarketCap, 2025). This surge reflects growing distrust in the U.S. dollar, fueled by economic uncertainty. “Bitcoin’s rise indicates fears of fiat currency debasement,” observed CoinDesk in a 2025 analysis (CoinDesk, 2025). Trump’s establishment of a Strategic Bitcoin Reserve in March 2025, holding over $90 billion in assets, has bolstered this trend, though Cornell’s Eswar Prasad cautioned, “Linking government assets to volatile crypto risks instability” (Reuters, 2025). The Mises Institute connects such shifts to crack-up booms, noting that “people return to barter or other money” when trust erodes (Mises Institute, 2021). Deferred assets, by obscuring financial risks, may accelerate this flight to alternatives.

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Trump’s Fed Influence: Bessent’s Role

Trump’s push for a compliant Federal Reserve, potentially shaped by Treasury Secretary Scott Bessent, raises red flags. Appointed in 2024, Bessent has backed Trump’s policies, including low interest rates despite inflation pressures (Bloomberg, 2024). “Trump’s influence threatens Fed independence,” warned a 2024 Politico report (Politico, 2024). A politicized Fed could monetize deficits, worsening deferred asset risks if banks or pensions face realized losses. The Mises Institute warns, “Fiscal dominance leads to currency collapse,” citing Weimar Germany’s hyperinflation (Mises Institute, 2023). Bessent’s role could amplify these dangers, edging the economy toward a crack-up boom.

The Debt-to-GDP Chase: Fueling the Crisis

The U.S. debt-to-GDP ratio reached 122% in 2025, a level Fed Chairman Jerome Powell called “unsustainable” in a June 2025 congressional testimony (CBO, 2025). Trump’s tax cuts and tariffs may add $7.8 trillion to the debt over the decade, per the Committee for a Responsible Federal Budget (CRFB, 2025). “Rising yields could force the Fed to monetize debt,” cautioned Lyn Alden in a 2025 update (Alden, 2025). Deferred assets exacerbate this risk: realizing losses could trigger bailouts, inflating deficits further. The Mises Institute predicts hyperinflation if debt spirals, as “the economy needs larger doses” (Mises Institute, 2023). Chasing a “sustainable” ratio through monetary easing risks a crack-up boom.

Historical Precedents and Expert Insights

Germany’s 1920s hyperinflation and Venezuela’s 10 million% inflation by 2019 exemplify crack-up boom outcomes (Mises Institute, 2021; Investopedia, 2023). “Hidden liabilities fueled past crises,” said Mises Institute economist Jonathan Newman in 2023 (Mises Institute, 2023). Investopedia notes, “Aggressive spending could reignite inflation, devaluing the dollar” (Investopedia, 2023). The convergence of deferred assets, economic weakness, Bitcoin’s 63% dominance, Fed politicization, and a 122% debt-to-GDP ratio mirrors these historical triggers, signaling a serious risk.

Can it be stopped?

Deferred assets, weak employment and housing, Bitcoin’s 63% dominance, Trump’s Fed influence via Bessent, and a 122% debt-to-GDP ratio point to a potential crack-up boom. The Mises Institute’s warnings, supported by history and 2025 data, suggest inevitability without reform. Investors may turn to Bitcoin or gold (RME Gold and Silver, 2021). Policymakers must address these risks to prevent collapse.

References

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