The Credibility Trap: Debt, Deficits, and the Pivot Toward State Control
Oct. 14, 2026
Host: Hon. Sam Rohrer
Guest: David McAlvany
Note: This transcript is taken from a Stand in the Gap Today program aired on 10/14/26 To listen to the podcast, click HERE.
Disclaimer: While reasonable efforts have been made to provide an accurate transcription, the following is a representation of a mechanical transcription and as such, may not be a word for word transcript. Please listen to the audio version for any questions concerning the following dialogue.
Sam Rohrer:
Hello and welcome to this Thursday edition of Stand and the Gap Today, and it’s also our monthly conversation on economics, finance, and biblical stewardship. Returning expert guest is David McAlvany. He is the CEO of the McAlvany Financial Group, and they have a website which I’ll give again, but it’s at mcelvany.com. Now, you think, “Well, I’m not too interested in finance or economics.” Stay with us because you will be, and we all are. Now, today, I’ve selected four primary issues and narratives, public narratives that are continually surfacing and are in headline news, but they drive contradictory economic and financial statements. There are things that are said, there are things that are seen, and what’s happening is that these narratives in these four areas, which I’ll identify, are coming from and through what I would say is a controlled media, the media that most are listening to, and officials from within the current Trump administration.
Now, every administration relates its own data, and I’m not picking on the Trump administration, I’m using them as an example because that is what’s driving statistics. So that’s why we’re going to go there and look at it, because for millions of everyday Americans, the official narratives often clash head on what I’m going to call lived reality, what’s actually happening. Now, the first is this, that inflation is finally conquered and safely under control. That’s a statement that’s out there, and you’ll hear more about it. Even as families struggle with structural cost of living pressures. Second, that global and US debt can continue to expand indefinitely without consequence in ignoring what the bond market is quietly, I’m going to say quietly streaming. Third, that glowing employment and growth numbers tell a story of unmitigated prosperity while at the same time main street businesses are experiencing a quiet perhaps recession.
And fourthly, that massive artificial bubbles and particularly AI bubbles are setting the stage for further unprecedented government interventions from taking equity stakes in those companies involved to invoking emergency war powers, which has been done, all presented as enormous stability and unprecedented wealth rather than a march towards state directed economic control. We’ll build all of these things out. Now, the title I’ve chosen to guide our conversation today on these critical areas is this, the credibility trap, debt, deficits, and the pivot toward state control. And with that, David McAlvany, thanks for being back with me today. A lot to cover and you are the guy we want to talk with.
David McAlvany:
Well, thanks so much for having me back. This is a highlight whenever we can do this. I love these conversations. All
Sam Rohrer:
Right, David, let’s get onto a little bit more information before I pose the question. When you were with me here on August 13th and our program then, our title was this, Deflating the Myths of Inflation. And that program was very well received and helpful to many, many people. Then on our September 17th program, we pursued a theme, the Fed’s Inflation Dilemma and What’s Next for America as we discussed, for example, is there a genuine solution to inflation when the many respective presidents and congressional leaders who have pursued, I’m going to say, and we talked about it, pursue bribery and corruption and debt and spending without any restraint regarding the taxpayer’s wealth. It just continues and it has been for a long time. Yet into that, and here’s the point, the president, current president right now just stated a couple of weeks ago, has been widely reported, but he said this quote, “We have inflation totally under control and we’ve done a great job.” Those were the words.
So here’s the question. When the president makes statements like what I just quoted, and then administration officials like Treasury Secretary Scott Bessent confirms those clearly untrue statements, I’m going to say, although I’m going to let you say that, from an economic analysis perspective, how do you respond to this? Is inflation measurably totally under control? And I’m going to say this, is inflation even partially under control?
David McAlvany:
I mean, my first response is no, of course it’s not. I mean, there’s lots of ways to look at inflation, but we’ve got money supply growth, which is continuing to increase. We’ve got bank reserves, which are unhinged. The inputs that impact inflation, AI growth and its impact in the economy, what that does to basic commodities that go into the build out of AI. We’ve got supply chains which are disturbed by what has happened in the energy sector. Fuel, of course, is a part of what goes into inflation. And as we move from a world which centered on the US and the US dollar and the US treasury market to a more multipolar world, there are economic frictions which we’re going to have to absorb and they translate to higher costs. So I can think of at least six areas where you’ve got inflationary inputs that are not ending.
And let’s not forget that inflation when it hits usually comes in two waves. The most recent major spike was 1974. It peaked, you had some policy responses, there was a receding of the inflation statistics into 75 and 76. And then the second wave of inflation hit very strongly in 78 to 80. And what you typically see is a push in inflation, a policy response, which tames it to some degree, but does not kill it. They don’t want to do too much because if they do too much, they’ll trigger a recession. And then all of a sudden it comes back in a second wave, then they have to take the gloves off. Then they have to take the strong medicine. And that typically is shrinking bank reserves so that there’s a curtailment of commercial bank lending. You’re tempting fate with a recession when you do that, but that’s one of the only ways you can really tame inflation.
They don’t want to do it the first go round because they risk throwing the economy in the recession. They don’t want to do it. So the most effective way of dealing with inflation hasn’t even been introduced yet. They’re tinkering with interest rates, but history would say that’s actually not the most effective strategy and it hasn’t solved the problem thus far.
Sam Rohrer:
Okay. Got about 30 seconds here. Drivers of inflation. We’re trying to control the symptoms. We talked about that before. Just reiterate again, what are the drivers of inflation that if they are not dealt with, you’ll never be able to really control the consequences of inflation?
David McAlvany:
Yeah. I mean, on the positive side, economic growth tends to drive inflation. And so as we’ve had a significant spend for data centers, that is driving inflation, but that’s not the most critical piece. I mean, what we’re talking about is money supply growth and when you have fuel costs, when you have energy costs on the rise, it ends up touching everything. It ends up touching everything because for instance, you go to the store, everything that you buy was moved. And if it was moved, it matters what the price of diesel is. So you can’t forget how important energy is as it translates to longer term inflation. They consider it a shock so they don’t worry about it. They want to “look through” and consider it temporary, except we’ve got some long-term drivers for higher energy costs.
Sam Rohrer:
Okay. And with that, ladies and gentlemen, stay with us. David McAlvany is my guest today. As we look at economic and biblical stewardship, we’ll be touching on more things as we look at the global debt spiral and the bond market implications in the next segment. Well, welcome back to Stand in the Gap Today as this is our monthly special emphasis. We do it every month, the Lord willing, and try to do that, on the theme of economics, finance and biblical stewardship. And my guest again today, returning guest on this theme is David McAlvany. He serves as the CEO of the McAlvany Financial Group at website mclvany.com. Now, as we move into our second primary issue today, having discussed inflation in the first segment, we have to confront, I want to say the elephant sitting squarely in the middle of the global financial reality, and that is debt, particularly sovereign debt, debt held by national governments themselves.
Ours is 40 trillion, so other nations have debt too, but that’s what we’re talking about. While officials try to reassure the public that debt can, well, they would say almost expand infinitely without consequence. At least that’s the only way to describe the unrestrained spending that we’ve seen out of Congress for actually a long time now. The structural mechanics of rolling over trillions of dollars in maturing obligations, bonds we’re going to talk about, things where people buy our debt in order to keep us going, have really turned our circumstance into a very high stakes tight rope walk, some would say. And I’m going to suggest it’s almost more like playing Russian roulette, but many tend to think that, well, nothing’s happened so far, so nothing will. But we know that is a lie of the devil. The friction between public relations and financial reality I think becomes glaringly obvious.
And it happened in a recent Time Magazine interview when our president, Donald Trump, was again questioned about the mounting $40 trillion national debt. And he and all of our congressmen and all are increasingly questioned about it because it’s the elephant in the room. It’s big. But in that much publicized interview of the president, he explicitly stated this, “Certain levels of inflation will also pay off that debt, our debt $40 trillion plus, will pay off that debt very rapidly.” Now, think about that answer. Does it make sense? What did he and other officials like Secretary Scott Bessent say the same or other, in my words, bizarre statements and Bessent makes a lot of statements like that. But when government officials openly point to managing inflation as a tool to draw down our liabilities, we’re forced to look past the political spin and examine and say, “What in the world is happening?
Where does the moral component come into this? Where does the structural weight of such policies show themself?” The ultimate diagnostic tool, I think, to measure sovereign fiscal health has always been the bond market. We’ve talked about that. David is going to explain more about that right now. Where countries right now and others are not wanting to buy our bonds, our debt, unless we pay them more money. Okay. David, we’ve talked a little bit about before, but it’s come up again. It continues. When we hear statements suggesting that inflation is a viable tool to, I’m going to say magically erase national debt and accomplish that as the president said very rapidly. How’s that possible? In other words, what is the president suggesting? And is there a connection here to what we’ve shared in previous programs that there is no acceptable level of inflation and inflation’s interaction then with the biblical mandate for honest weights and measures, something that you brought out in the last program, which was so very good.
I’d like you to kind of put those things together again.
David McAlvany:
Well, first of all, you can tell the president’s talking out of both sides of his mouth. If inflation’s completely under control and it’s no issue, but he’s also saying, “Look, we accept that there’s a certain level of inflation that’s very helpful here and it’ll pay it off very rapidly.” What he’s basically said is the quiet part out loud. This is not an inconvenience. This is actually a policy choice and the only way of dealing with too much debt is either a jubilee, some form of a default or as he’s suggesting, you pay it off with cheaper dollars. So the nominal debt of 40 trillion gets paid off more fast or faster with cheaper dollars. He’s right. It makes sense. Now the problem is there’s a trade off and it’s that the middle class and consumers in the context of dealing with greater inflation have to pay higher prices for everything.
So just in the last 10 years, you’re looking at what cost $100 in 2016 now costs $139. And by 2029, assuming a modest three, 3.5% inflation, which is below the current CPI level, $150. Move out farther in the curve to 2033, $175 to buy the same $100 worth of goods. By 2037, 10 years from now, it’s going to be $200 to buy what cost $100 10 years ago. So you look at this 20-year timeframe and it’s a doubling in prices. So can you pay off debt with cheaper currency units? Absolutely. The trade off is that consumers get pushed to the wall. So maybe that’s the acceptable cost is that you and I just have to suck it up and pay more. But he’s right. This is actually a policy choice. It just means that the inflation cycles is not over. In fact, we’ve got the BLS which massaged for September the way they count inflation and by changing the weightings of what goes into the inflation basket, it got an improvement of 20 to 30 basis points.
That still didn’t change the fact that CPI for the month of September, 3.7% higher, that’s year over year. And PPI, which is the producer price index, we got this week as well, year over year 6.3%. So is inflation dead? Absolutely not. Is it a tool? Absolutely. And we just have to be very cognizant of what that means. The real consequences in the bond market where bond investors say, okay, if inflation’s going to be a fixture, if it’s going to be a feature of the market going forward, we’re going to have to be compensated more. So interest rates have to go higher in order for us to continue to fund deficits. Investors are self-interested. If they’re not adequately compensated, they’re not going to provide money. They’re not going to provide capital. And so what the bond market does here is really, really important. The real impact is if interest rates go higher, so does the interest component on the national debt.
We closed out the fiscal year at the end of September, September 30th, and I’m looking right now at the treasury’s website, fiscaldata.treasury.gov, and the interest expense for 2026 was $1.36 trillion.
That’s the most we’ve ever paid in interest. If you look at it as a percentage of revenue, this is tax revenue coming in, it’s 28.33% of all of tax revenue is going to the interest expense. So as interest rates go higher, you’re talking about a solvency issue for the US government. It’s going to either force them to do some radical things in terms of cutting spending. I think that’s very low probability in terms of the political implications. Nobody wants to cut spending because somebody’s going to be angry about it. So what do you do? Yes, you run inflation because you don’t want to make your constituents angry. They don’t really have many other alternatives, but at this point, as interest rates creep higher, so does the interest expense. I would guess that 2027, we’re talking about 1.5 trillion in interest expense. If you have a recession…
Sam Rohrer:
And – I’m sorry, David, go ahead. I thought you were done. Go ahead.
David McAlvany:
If you have a recession, now your revenue drops, but guess what? The interest expense doesn’t. So we’re already at 28%. Could you move towards 35, 40% of tax revenue going to feeding the meter on interest? I mean, this is where the global bond market says we’re not adequately compensated. Rates are going even higher. So this is something that tends to snowball on itself. It’s bad now if the bond market judges that they’re inadequately compensated and rates have to go even higher, now you’re talking about a debt doom loop. And I think we’re facing that now.
Sam Rohrer:
Okay. Now let me just throw it in the last remaining time here. We’re talking about people listening now understand what you’re saying in terms of our debt here. Those are the numbers you’re giving, but there’s a global aspect about this because the debt globally is all over. So have we reached the point where I’m going to say slights of hand and market manipulation tricks have pretty much run their course? What do you think?
David McAlvany:
I think that’s very fair. I mean, because you’re talking about $365 trillion in global debt, not all of that, sovereign paper, but the top, if you look at the members of the OECD, these are the largest mature economies in the world. A dozen of them at least, might be actually 13, 14, but a dozen at least have debt to GDP figures north of 100% and are dealing with the same kind of dynamics that we have in terms of the interest expense creeping higher as the global bond market is pricing in not only higher inflation, but a credibility issue. And this is really what becomes the heart of the matter. When people lose confidence, when there’s a lack of trust with global treasuries, the US treasury being one, and global central bankers, the Federal Reserve being just one, that’s when you begin to have a destabilization of the financial market, which has radical complications and implications for the stock market and for all assets.
So I mean, this is one of the best setups I’ve seen in 54 years and justifications for having a healthy allocation to precious metals in your portfolio because you’re talking about a credibility crisis with the treasuries around the world and the central banks around the world.
Sam Rohrer:
Ladies and gentlemen, our theme today, and David’s talking about credibility, our theme is the credibility trap, debt, deficits, and we’ll end up talking about a pivot towards state control. What does the government do when they cannot control anything anymore? Well, just wait, we’ll talk about some of that. Stay with us. We’ll be back in just a moment. Well, as we move now into our third primary issue today, that of interpreting the official economic data released by government entities and statements repeatedly being made by our president in the ongoing campaign stops that actually in those settings are presenting economic condition as glowing, golden, making people rich, while at the same time rebuking people who are unwilling to accept the small price of high priced energy when so much good is being done. That’s basically what I just said there is the essence of statements that are being issued out of the White House.
But it takes us to this aspect of there is one side of the narrative, but then in reality, there’s another side and that is what’s happening in reality on the ground. And that is producing and has produced a very persistent disconnect where people say, “Wait a minute, I hear what’s being said, but that is not what I am seeing. That’s not what other evidence and statistics are indicating.” And that brings us to this aspect right here because week after week, government agencies and market analysts churn out reports on unemployment, personal consumption, employment, unemployment rates, housing starts, mortgage rates, a whole host of things, manufacturing, all of that kind of thing. Each side interpreting, I’m going to say interpreting the tea leaves to justify a narrative of unmitigated prosperity. And then when you say, now wait a minute, what’s happening? Yet consumer sentiment surveys are flashing caution that while Main Street operations navigate, I’m going to say a quiet recession as some would say, and I’m going to ask my guest whether he thinks that is the case, but I would say under the weight of sustained borrowing costs, all of this debt that we’ve been talking about, it’s there, it’s an anchor, always is.
But when official reporting tells one story and then the ledger on the ground tells an entirely different one, then someone is misreading the room or perhaps the data is being massaged to mask underlying structural fatigue. Now we know, David, that numbers can be interpreted so broadly. It’s not like what’s happening now is the first time. It’s happened a lot. Manipulation of numbers. Yes, you can phrase things in a lot of ways, but that’s why I want to cut through this, what is, I’m going to say, really wildly divergent views regarding our economic condition. There were economic indicators released this last week. You cited a couple of them. Go a little further into that if you don’t mind. And where do you see the most glaring disconnect, if in fact that’s how you analyze it, between official government reporting and I’m going to say the real world pressures that are facing small business in particular and working families?
David McAlvany:
Well, with statistics, it always comes down to which ones are putting a highlight on. So if you want to look at corporate numbers, they’re solid. But if you want to look at consumer numbers, they’re not solid at all. So you could almost say this is the tale of two economies. Corporate sector is doing great in part because they’re beneficiaries of a massive spend, the largest expansion. I mean, you’d have to go back to the 1950s when we were building out the highway system or when we were electrifying from 1905 to 1925, the entire country bringing electricity to every home. I mean, the kind of infrastructure build that we have today is without precedent. It is absolutely massive. And so never larger actually as a percentage of GDP. 73% of GDP growth right now is coming from this AI spend. So if you’re in corporate America and the money’s sloshing around and you’re providing products that go into or peripheral to this AI CapEx boom, your numbers are great.
Meanwhile, and that’s where when you look at the Federal Reserve System’s beige book, there’s decent activity. There’s not a lot of growth outside of manufacturing. So services are a little bit weak, but manufacturing has been quite strong. And then you check in with the consumer, US consumer confidence is at its lowest since April 2014. That is below the COVID lows. So the consumer is saying, we’re not happy. Why is the consumer not happy? Well, because they’re running out of money before they’re running out of month. This is where inflation is the defining factor for the consumer and corporations are looking and saying, “Yeah, but the money’s flowing. There’s so much money that’s being raised in the debt markets to build out this AI boom, this data center boom.” So it really is a tale of two economies. Corporate numbers look good as long as this AI narrative holds.
And I think that’s already beginning to show significant cracks. We’ve had a couple of significant leaders in that space who are under intense pressure even this week, thinking of core weave in particular. Their bond yields in the last 30 days have gone from 8% to 15, 16%, doubling in the cost of borrowing, which that in itself should get everyone’s attention. There are cracks in the AI narrative and that I think is going to damage the GDP growth that we see coming into 2027, which we’ve benefited from in 2026. So again, it’s the tale of two economies. Consumers are under pressure, largely in recession already. Corporate America is not because there’s so much money sloshing around because of the AI CapEx boom.
Sam Rohrer:
Okay. And David, that’s great, that tale of two economies and what is in the corporate and then what is in the world with the consumer. And that is part of what I’m trying to pull out, ladies and gentlemen, is the fact that there is that difference that exists and yet we continue to hear all is good and golden. And on the other hand, the consumer confidence index is at its lowest level, as you heard David say. So the two cannot be true. David, let’s just go into a little bit more onto the consumer side. Anything that you can share about the recent data and for instance, talk about housing. I mean, the mortgage rate I think is up over 7% now. I heard just the other day that housing starts perhaps the lowest for not sure when, but a long time, but how are some of those things, consumer borrowing, credit card debt, where are those factors to compare contrast to the corporate to the consumer?
David McAlvany:
Yeah. The two things that stand out to me for the consumer, one, when you’re looking at the real estate market, 7.5% is the current 30 year fixed rate mortgage, and that’s going to be a significant drag in terms of activity within the real estate sector. The second thing is looking at auto loans. The loans are getting larger, they’re extending to 84 months. Now 25.5% of all auto loans extend to 84 months. I used to think this was a big deal when we got to 70 months in terms of financing. Now it’s 84 months so that people can, they stretch it out over a longer period of time so that their monthly payment is lower. And even with stretching it to 84 months, you’re still talking about record monthly payments on auto loans. The increase is also there in terms of auto loan delinquencies, nothing super disturbing at this point.
But again, I think what happens next, for instance, in real estate, you can’t sustain current pricing nationwide averages with a seven and a half percent mortgage rate. Something has to give and it’s either rates come down or housing prices come down. But the fact that both are still relatively high means that unaffordability is a defining issue. And you’re looking at a younger generation who can’t touch the housing market. They’re perpetual renters. They can’t get into a house because they don’t have enough cash flow for monthly mortgage payments. So anything above 7% I think begins to take the oxygen out of the room for the real estate market and you’re sort of tempting fate with significant downside pressure and pricing.
Sam Rohrer:
All right. So let me come back and ask a stewardship question here, David. All right. Here’s a trend. We’re seeing it, and I’m not going to back and recite all that we’ve stated, people are listening. What should a God-fearing person right now seeing this movement, this direction, how should they steward or navigate their decisions at this point where this direction that we’re talking about seems to be pretty much set?
David McAlvany:
Yeah. I think you’ve got to lower the total risk that you have. If you look at your finances, make sure that you’re lowering your risk considerably. So what does that mean exactly? If you’ve got retirement accounts or stock accounts, start raising cash. And I would do that immediately. I wouldn’t say between now and the end of the year. I think again, the AI narrative is getting ready to shift dramatically. And as that does, you’re talking about 40% of the S&P 500 today is tied to the AI narrative. We’ve never had that kind of concentration. Well, the one instance where we had that kind of concentration was back during the railroad boom in the 1870s and 80s. Outside of that, this is the largest concentration in one sector. And that means if that sector rolls the entire stock market rolls over and goes lower. So reduce your risk, raise some cash, make sure that you’ve got at least 25, 30% of your liquid capital actually liquid in the form of T-bills or money market funds or what have you.
I would definitely be adding to precious metals at these prices because again, when higher rates are a feature within the marketplace, people say, “Well, they’ll move lower again quickly.” No, no, no. In 200 years of interest rate history in the US, the shortest trend, it doesn’t matter if the trend is up or down in terms of interest rates, the shortest trend is 22 years. We’re five, six years into this trend. We’ve got another 10 to 15 years for interest rates to normalize and they’re normalizing to higher levels. That will be very detrimental to almost every asset class except for the precious
Sam Rohrer:
Metals. Okay. And then we’ll touch on that again. Ladies and gentlemen, stay with us. I’m hoping you’re finding this to be practical and interesting. It is relevant without a doubt. And when we come back, we want to talk about this AI bubble a little bit more and what that may mean and what the response may mean from the government. Well, as we enter into our final segment, again, I just want to say this program here today is our monthly emphasis on economics, finance and biblical stewardship. And my guest on all of these, on these emphasis that we’ve been doing now for quite some time is David McAlvany. He’s the CEO of the McAlvany Financial Group. And they have a website at McElvany.com. And if you go to that site and you go mcelvany.com/standinthegap, they have something there that can pertain to you as listeners if you’re interested.
And I would recommend that you do that. Now, as we look across the horizon today, and again, we’re talking economics and finance and those things which impact us all, we do it because within scripture, the emphasis on finance and how we handle finance and what we trust God to do and the principles relative to spending and the debt, all of the things that we’re talking about today all have their basic principles found in the word of God. So that’s why we’re doing this because it’s not only practical, but it comes right off of God’s word. And what we’re doing as a nation now, I’m going to suggest that is absolutely in the danger zone from God’s perspective as you read Deuteronomy chapter 28 and other places where when nation turns its back on God, it will be reflected in where they spend their money and how much they spend.
And they go from being a lending nation to a debtor nation. That’s a mark of judgment of God. It’s worthy that we speak to these things because we don’t ever get where we are accidentally. It’s a series of choices. And we know that as believers, there are consequences to our choices. Now on this last aspect here, David, let me just kind of cut through what I was going to lay out to give you more time here. But we talked about the AI bubble and the potential. And you talked about how significant a share it’s been of the S&P, standard and poor, and it’s very, very significant. In fact, from my perspective, I think that the president’s focus on every time he gets up, he wants to cite all of these new levels that have been achieved by the Dow and the market’s up higher and higher.
That proves that we are doing well. And I, being a numbers guy as well, and like you would say, wait a minute, that’s not the whole story because part of that is this AI bubble. Now, the report I just saw, you can comment on it. If you take the AI bubble out, and I’m not calling it SI, as the president was, that’s not super intelligence. I think the only super intelligence, ladies and gentlemen, is the word of God and that’s super knowledge. But nonetheless, the AI bubble and its impact on the market, if it were taken out, the market actually would be down 5.4% today. That’s dramatic. So David, what is the truth? Again, build it out about AI and data center expansion that presidents held out as was literally referred to as the savior of the world more or less, and the ROI rate of return not being realized.
You commented on a piece of that. And what happens if this bubble bursts? In the past, government stepped in and printed money. They say, “We can’t afford to allow a collapse.” What do you think may happen?
David McAlvany:
Well, okay, so we call it a bubble. Why would we say that? Bubbles have too much enthusiasm around a particular idea and ultimately become unsustainable. People stop doing the math and figuring out what is involved to get it done. The projects that are slotted to be done between now and 2032 will require 301 gigawatts of energy to support them. And they’re already spending money to get the projects going. They’re borrowing money to get these projects going. We’re talking about $10.3 trillion, which is in motion between now and 2032 to meet all of the production objectives by Anthropic and OpenAI. So what is 301 gigawatts of power? You’re talking about 143 Hoover dams needing to be built between now and 2032, or 602 gas fired power plants. Or if you want to go clean, great. 30,100 wind turbines or 602 million solar panels, which would cover 1.51 million acres.
The scale is absolutely enormous. Can they pull that off? Well, try getting permitted to build a nuclear power plant as an example, which would be 301 new nuclear power plants. When was the last time we built a nuclear power plant? Are we going to be able to get 301 of them up and running between now and 2032? In the permitting processes, the interconnections for electricity, they’re raising the money, they’re spending the money, but the reality of being able to deliver the data centers that provide the computation power to do all the things that they say they’re going to be able to do, this is what I would call the revenge of the old world. You can’t get the raw materials. You can’t line up the logistics for those raw materials to be delivered and billed. It’s all a pipe dream at this point. They have gotten so far ahead of themselves in terms of the enthusiasm around the bubble, nobody’s actually asking good questions anymore.
Is it realistic to bring on 10 gigawatts of power? 20, let alone the 301, which is actually a conservative number. They’re penciling out 566 gigawatts of power, but then the best numbers that we’ve seen assume that a bunch of those will have to be canceled. They can’t actually deliver. But best case scenario, 301 gigawatts of power. Sam, $10.3 trillion is a lot of money. For investors to receive a modest rate of return on that $10.3 trillion, Anthropic and OpenAI are going to have to grow their revenues by 80% every year between now and 2032. It’s not possible. It’s not possible. And this is where I think the bubble comes unwound either this year or next year. They’re lining up a lot of debt and it means that they have to have sufficient revenue to make payment on those debt obligations. Where’s the revenue coming from?
Well, you got to get all this stuff online. If it’s not online on time, you have this mismatch between the outflows of cash to make payment on your debt and the inflows of revenue generated from the renting of the GPUs and the use of these data centers. So again, we’re in bubble territory for sure. When does it burst? I don’t know, but people have stopped doing basic math to figure out if this even pencils and it doesn’t.
Sam Rohrer:
See, you’re describing, well, some would say, well, people are living in a dream world. From the pages of scripture, I would look and say, we’re living in the world of deception and self-deception because there are certain principles that you just cannot avoid. And that’s basically what you’re saying. Okay, you only have about 45 seconds here. Any final words leave with listeners here today in regard to the things we’ve talked about?
David McAlvany:
Well, again, coming back to the AI thing, this is the largest infrastructure built out in US history, even larger than the rail build out. The difference is that you’ve got products, 68% of the spend has to be respent every three to four years. 68% is what goes into the IT side. It’s not the building structures and the land development. It’s the chips that go in, which become obsolescent in a three to four year cycle. That’s very different than the railroads, which can be sitting there for 20 years, 30 years, 50 years. I mean, we’re still using the same railroads that we built a hundred years ago. So it’s a very different kind of investment and it’s something that I think people need to know. It just is not sustainable. So the implications, again, we mentioned it earlier, make your portfolios conservative, raise some cash. This is not me being a chicken little.
I think AI is going to be very transformative, but the investors today are going to be the losers tomorrow.
Sam Rohrer:
Okay, David, if we have to go because we’re just out of time. Ladies and gentlemen, thank you so much for being with us today. Go and listen to this program again and forward it to a friend and David McElvany, my guest today, McAlvany.com.
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