Drift Signal

In a world where GPUs 🖥️ are emerging as the new oil 🛢️ , stablecoins are becoming the new petrodollars. This latest edition of Currency of Power is foundational to our broader thesis and connects the dots between GPU scarcity, stablecoin adoption, and Treasury demand to reveal how digital infrastructure is becoming the new basis for dollar dominance, just as oil once did. High-end GPUs and AI infrastructure are scarce, capital-intensive, and critical to technological growth. Just as oil once drove global dollar flows, commoditised compute priced in USD stablecoins is emerging as the key driver of structural demand for dollars. The combination of scarce compute, tokenised settlement, and Treasury-backed stablecoins creates a cycle where the AI economy actively funds American government spending—potentially preventing fiscal Armageddon in the US. This is the anchor of our entire thesis: we’re witnessing the birth of a new global monetary architecture. The numbers are staggering. Stablecoin issuers hold $200 billion in Treasury bills. CoreWeave raised $14 billion using Nvidia GPUs as collateral. Don Wilson argues demand for high-end GPUs could soon rival spending on crude oil. The Silicon Data H100 Index now tracks GPU rental costs like oil futures once tracked crude. The geopolitical scramble reveals the stakes: the US deploys Nvidia data centers in Saudi Arabia and the UAE while China bans these chips entirely. Both understand that whoever controls compute infrastructure controls the next monetary system. In this framework: Nvidia is Aramco, OpenAI is Exxon, GPUs are barrels. But unlike oil tying dollars to one commodity, compute and tokenisation embed dollars into nearly every digital transaction worldwide. This cryptodollar recycling may exceed what petrodollars ever achieved. We consider this one of our most important pieces yet—it maps the blueprint of how compute, tokenisation, and dollar settlement are converging to create what may be the most powerful monetary system ever constructed. Link in comments to read how barrels are becoming bytes—and why this matters for the future of money. 👇

📊👶 Universal childcare is becoming real in both New York City and New Mexico. In New York City, Mayor-elect Zohran Mamdani won on a plan for free care from six weeks to five years old. Meanwhile, thousands of miles away, the state of New Mexico launched state-funded childcare for all residents. Both these steps signal a shift in how the US thinks about work, families, and the economy. Laetitia Vitaud breaks it down in her latest Laetitia@Work newsletter. Families in New York City spend about $26,000 a year on childcare, while the workers who provide it earn roughly $32,000. The system leaves both sides struggling. By coincidence, Peter Zeihan recently highlighted New Mexico’s plan, funded by $600 million annually from the state’s oil fund. He notes a key truth: when women must choose between work and children, society loses twice—births fall and the workforce shrinks. Accessible childcare removes that false choice! There is precedent. During World War II, the Lanham Act funded childcare so women could work in war industries. Economist Claudia Goldin once called it the closest the US has come to universal childcare. Sweden offers a modern guide: parents pay no more than three percent of income, the state covers about ninety percent, and 83% of mothers work. The world needs to act now. Japan and South Korea’s fertility rates have fallen to 1.25 and 0.72. Labour gaps and slow growth followed. Weak support for working parents contributed to demographic decline. The economic case is strong, too. Investing in childcare could raise GDP in the Asia-Pacific by 12% by bringing more women into work. High-quality early education improves long-term schooling, earnings, and health. Low-income families gain stability, narrowing lifelong gaps. As Laetitia points out, France shows a mixed model: free care from age three, but limited support for younger children. Across countries, old networks that once helped families care for children have faded. Long commutes, high housing costs, and dual-earner households make informal care harder. Formal support has to replace those networks. Childcare should be seen as basic infrastructure—like water or power. Once established, it becomes part of everyday life rather than a political flashpoint. Yes, costs are high. NYC’s plan would run about $6 billion a year, funded through higher taxes. But doing nothing costs more: lost output, wider inequality, and lower tax revenue. Families often already pay more out of pocket for care, health, and schooling than Swedish taxpayers pay for universal services. Success depends on good design, stable funding, and fair wages for childcare workers. And here's the core argument once again: modern economies need both women in the workforce and children to secure their future. Universal childcare is the one solution that supports both. -- Read Laetitia’s full analysis at Laetitia@Work: https://lnkd.in/eXCfD7Pn

🚨 We’ve just rebranded—and broadened to a global focus! 🌐 What began as "Euro Stable Watch", tracking Europe’s stablecoin ecosystem, has grown into Currency of Power, reflecting the global scale and stakes of the emerging monetary order. -- The future of money is now being decided in code rather than in central bank boardrooms. USD stablecoins, China’s digital yuan, and tokenised deposits are redrawing financial influence worldwide. To capture the transformation of global finance, Marieke Flament and I converted the former "Euro Stable Watch" into Currency of Power. 🇺🇸 Our early work made one fact clear: It's still a dollar's world 💵 Stablecoins process more than $15.6 trillion each year and over 95 percent of that volume sits in the dollar system. Tether.io alone holds over $135 billion in US Treasuries. These flows reinforce dollar dominance and finance US deficits, since each new unit of USD liquidity draws more demand for Treasury bills. This dynamic now shapes the global monetary structure. 🇪🇺 Europe faces a different challenge. Euro stablecoins account for barely 1 percent of the market. MiCA provides a regulatory framework but slows adoption and limits revenue opportunities. The EU still lacks a unified safe asset that could anchor reserves. The digital euro moves slowly and offers limited clarity on integrating public and private money. A stronger path relies on a wholesale CBDC, tokenised deposits from banks, and a competitive euro stablecoin for broad adoption. Retail and commerce networks could provide the reach needed to scale. This layered approach fits the New Money Stack outlined in our earlier analyses. 🇨🇳 Meanwhile, China builds a yuan zone through trade links, the CIPS payment system, and Hong Kong’s regulated digital asset experiments. Just like the US (and Europe, to a certain extent), Beijing wants to create a clear monetary sphere anchored in technology that moves value with minimal friction. All these shifts create systemic risks. Stablecoin issuers hold assets that take time to liquidate while redemptions happen at the speed of code. A crisis could ripple into traditional finance within hours. Central banks are stockpiling gold, and bitcoin is gaining support as a hedge against debasement. Trust now depends on resilient digital infrastructure rather than institutional weight alone. Currency of Power will track these changes with weekly editions, documenting the emerging global monetary order as it unfolds. For those ready to follow the forces shaping the next era of money: ✅ Subscribe now to Currency of Power for full access to weekly analysis, research, and insights from the frontlines of this transformation. ✅ Stay ahead of the global monetary shift and gain insights that decision-makers rely on to navigate the new architecture of money. -- Read the announcement: Link to the latest edition of Currency of Power in comment 👇

🇨🇳🌐 China’s rise as a manufacturing power now shapes every part of global trade. Robin Harding’s recent FT piece is a humbling read for us Europeans: China buys little from the rest of the world and plans to buy even less. It sees no gap it cannot fill on its own. That drives its push for self-reliance in semiconductors and its vast industrial base, which already produces close to a third of the world’s manufactured goods. Adam Tooze often notes that China’s size has no precedent. It acts like a continent that trades with the globe while working to cut its dependence on it at the same time 🤷♂️ This puts strain on every trade partner, including Europe. Extra Chinese growth leads to more exports rather than more demand for foreign goods. Goldman Sachs expects this shift to weigh on European manufacturing powerhouses such as Germany. As Gavekal's Louis-Vincent Gave recently stated at an event I attended, “When China enters the room, profits walk out the door”. Many argue that Europe has few good moves left. It can try to rebuild competitiveness through reform and investment, though the gap keeps widening. Or it can turn to protection, which may keep some industry alive but adds pressure on supply chains and diplomacy. 🏭 A third path sits in plain sight. Chinese firms want to build factories in Europe. They need market access and want to be close to consumers. This may look like another step in China’s expansion, yet it also gives Europe a way to learn from China’s advanced production methods. China learned from foreign manufacturers for decades. Huawei and Xiaomi grew by studying Apple inside the Chinese market. European firms could do the same by studying leading Chinese manufacturers on European soil. Some see limits here. Knowledge transfer requires deliberate effort and clear structure. China once had strong leverage because it shaped market access rules and used joint ventures to drive learning. Europe cannot use the same methods. And any production in Europe will face geopolitical limits, since re-exports into allied markets will be hard. Still, local manufacturing would build skills, shorten supply chains, and give insight into modern production systems. There is also a broader angle. Europe and the US can build a more balanced partnership if Europe closes some of its gaps in growth and competitiveness. A healthier transatlantic economy leaves room for selective Chinese investment without giving up strategic ground. This fits the emerging lines in global politics while keeping channels open where they help. China’s model creates a world where trade with it brings little reciprocity. Europe needs tools that support its industry, its workers, and its capacity to innovate. Welcoming some Chinese factories, paired with stronger European reform and closer transatlantic alignment, may serve that goal better than a turn to barriers alone. -- More analysis in my newsletter Drift Signal.

👶 I was born in the 1970s, when overpopulation was the fear of the day, and grew up in the 1980s, when mass unemployment dominated the conversation. Today, the challenge has flipped: the world faces depopulation, a shift with implications few societies are prepared to address. UN projections suggest there is now an 80 per cent chance that global population will peak this century before declining, compared with a 30 per cent probability a decade ago. One in four people already live in countries where populations have peaked, including China, Germany, and Japan. By 2054, countries from Brazil to Vietnam are expected to join this trend. 🇨🇳 China feels the effects most acutely due to the legacy of the one-child policy and other demographic factors. Their response is a rapid investment in manufacturing, robotics, and automation. Migration cannot fill the gap, so technology must. 🇪🇺 Meanwhile, European countries such as Germany and Italy also face population declines, yet their response lacks the urgency seen in China. 🇺🇸 America presents a more nuanced case. The workforce is heavily concentrated in proximity services, which cannot be automated without major societal shifts. At the same time, anti-immigration policies could accelerate the push toward automation, though the American way of life may favour a quick return to welcoming immigrants as a more feasible path. Overall, depopulation changes the stakes for labour, pensions, and innovation. Older populations are healthier and more economically active than previous generations, and cognitive abilities remain adaptable with exercise. Cultural dynamism can persist, as demonstrated by South Korea's global cultural influence despite rapid and irreversible ageing. That said, automation priorities would shift. Rather than fearing job loss, societies may struggle to ensure enough robots perform essential physical work, preserving desk-based roles that keep older adults engaged. Immigration may become a coveted resource rather than a point of restriction, with growing regions, notably Africa, providing young workers for shrinking economies. These trends suggest that current political and economic priorities may be misaligned with a depopulating world. Investment in AI, manufacturing automation, and eldercare could prove more strategic than traditional growth initiatives. The future may look very different from today, and policymakers who anticipate this shift could shape societies that adapt successfully to smaller populations. -- Subscribe to my newsletter Drift Signal for more analysis like this.

🚨 New edition of Drift Signal! This week's edition is dedicated to fiscal policy. I remind readers that the state holds credit no business or household can match. 1️⃣ While private actors can vanish, governments endure, retaining the power to tax and roll over debt indefinitely in order to perform their countercyclical function in the economy. This fundamental difference shapes fiscal debates as Western economies confront fiscal Armageddon. 2️⃣ States need not pay down principal. They must only service interest while ensuring growth exceeds borrowing costs. When GDP grows faster than interest rates, debt burdens fall naturally. This principle guided post-war recovery when Britain and America turned wartime borrowing into foundations for sustained expansion. 3️⃣ Austerity deepens problems rather than solving them. Europe's 2010s experience proves this. Greece's debt-to-GDP ratio rose from 106% to 170% despite harsh cuts. When governments cut simultaneously, aggregate demand collapses. The IMF warned that fiscal contraction during downturns reduces growth, yet policymakers pressed on, pushing unemployment higher. 4️⃣ Wartime borrowing shows the way. After 1945, Western states replaced military outlays with welfare systems and active demand management. High growth lifted tax revenues while inflation reduced real debt values. By the 1970s, debt ratios had fallen without primary surpluses or painful adjustment. 5️⃣ The eurozone's design constrains recovery. Without fiscal union or flexible exchange rates, struggling members rely on wage cuts and austerity. Southern Europe holds unused industrial capacity that coordinated investment—particularly in defence, batteries, and semiconductors—could activate. 6️⃣ America faces unique constraints from dollar hegemony. Public debt is 122% of GDP while the Triffin dilemma forces $900 billion annual trade deficits. The administration experiments with stablecoins to generate Treasury demand, monetising debt through digital finance but weakening domestic industrial revival. 7️⃣ Both regions hold untapped potential. Europe has idle factories and unemployed labour. America has financial and technological advantages but struggles to reindustrialise. Allied, strategic investment could mobilise these resources without triggering damaging inflation. 💡 The lesson: say no to austerity, yes to strategic investment. A little inflation may help in the meantime, but it obviously comes at a cost. Growth, not cuts, is the path to sustainable debt reduction. -- Subscribe to Drift Signal for this week’s full analysis of Western fiscal strategy, and stay ahead on technology, business, and political economy. 💶 Link in comment 👇

🇨🇳 China’s long rise on the back of high savings and low consumption now moves into a new phase as Beijing pushes households to spend more. This shift matters because a model that held global rates down and kept China’s own asset prices stuck in long cycles now starts to change shape. The Financial Times piece by Rory Green below sets out the heart of the turn. China’s working age share peaked in 2010 at 73 per cent, when the savings rate touched 50 per cent of GDP. That share has dropped to 60 per cent and the savings rate sits near 43 per cent. The UN expects another ten-point fall in the next decade. Retirees draw on savings and spend more, so a turn in the national balance looks baked in. Beijing knows this and now lifts child benefits, minimum wages and pensions. It wants household consumption to take a larger role in growth. Policy shifts in the coming Five-Year Plan will push hukou reform (facilitating internal migration), welfare gains and higher labour income. This has been a long time coming. China held consumption down for decades to feed investment and exports. Households took low rates on deposits, faced tight wage growth and saved more due to thin safety nets. That mix kept consumption at roughly 40 per cent of GDP and created large excess savings that flowed into global markets. It also drove overcapacity at home, which fed weak prices and forced firms to seek scale rather than profit. The turn in policy now runs alongside a drive to channel capital into advanced industry. The state puts around 7 to 8 per cent of GDP into sectors like EVs, solar and smart kit. It pulled back from property and big consumer tech and pushed talent and money into hardware and software that run modern factories. This gives China strength in core green supply chains and keeps investment high even as the old model slows. A shift to higher consumption means China will spend more abroad, run smaller surpluses and buy fewer foreign bonds. That points to higher long-end yields in developed markets. It also means more demand for services, travel and goods that China once imported at a slow pace. For China’s own asset prices, a long grind may give way to a slow turn. A fall in savings, a rise in household income and a state push to lift demand can raise the value of firms that serve the home market. When America faced its own clean-up after the global financial crisis in 2008, many wrote off its growth path. Yet easy money, a long tech cycle and slow but steady demand gains helped lift asset values for years. China will run a different path, but a rise in local demand, more income support and a shift in how households save could set the ground for firmer equity returns over time 📈. -- More analysis in my newsletter Drift Signal.