The information concerning the challenges faced by certain U.S. companies operating in the Private Credit segment confirms what I have long maintained regarding the ongoing crisis in the Shadow Banking System. The suspension of redemptions in Private Credit funds managed by Blue Owl Capital and BlackRock appears to echo the stress episodes that surfaced in the Bear Stearns funds prior to 2008. The contagion immediately spilled over to the shares of the leading Private Equity firms (Blackstone, KKR, Apollo, and Carlyle Group), whose stocks have now been under intense downward pressure for many months, with declines from the highs reached two years ago ranging between 30% and 40% or more.
Negative news has begun to exit the narrow circle of sector specialists and is now prominently featured in major financial media outlets. The entire Private Markets sector is valued at approximately $9 trillion (40% of U.S. GDP), while the Private Equity segment alone, according to the latest Bain & Co. report, holds roughly $3 trillion in assets that are effectively unsellable under current market conditions. It is therefore highly probable that the U.S. banking sector, already heavily exposed to speculative lending to the Shadow Banking System, will start reporting serious credit impairments in the coming months. Share prices of major U.S. banks active in Investment Banking have begun to decline noticeably despite results that “beat estimates.”
Compounding these developments is the further deterioration of credit in the Commercial Real Estate sector, where delinquencies have reached a new record above 12% at the end of 2025. It is worth recalling that bank lending to this sector totals $4.5 trillion (20% of GDP), yet no insolvencies have so far appeared on the balance sheets of exposed institutions. At this point, a sharp worsening of the credit environment and a generalized contraction in lending to the economy and consumer credit—which has long shown a surge in delinquencies—appear inevitable.
Thus, while the narrative continues that “earnings beat expectations,” Capital One Financial (COF US), the largest consumer lending company in the United States, has lost more than 20% since the beginning of January. Consensus commentary remains focused primarily on AI-related Capex and the potential positive implications of higher productivity, yet the entire edifice of speculative credit that financed the “bubble” in Private Markets is revealing vulnerabilities that are increasingly difficult to conceal. It is now clear that a Shadow Banking System crisis will have serious repercussions across the entire financial sector and will transmit contagion to the real economy through a contraction in credit.
Recent U.S. GDP data, whatever credibility they may currently command, nevertheless confirm one key point: as soon as fiscal support is withdrawn, GDP weakens immediately. The U.S. administration has attributed this slowdown to a temporary administrative “shutdown” caused by debt-ceiling negotiations. However, in periods of high inflation, GDP growth is significantly distorted upward. Indeed, multiple inflation metrics exist: CPI, PCE, and the CPI used to calculate GDP; yet the CPI employed for real GDP excludes imported inflation, since GDP is by definition “gross DOMESTIC product.” Consequently, real GDP calculations reflect only price increases for goods and services produced domestically.
Although correct in principle, this methodology tends to generate a positive bias in the calculation process, resulting in an overstatement of real output in an economy that imports nearly everything. Consider a simple example: if an Apple phone is imported from China and its price rises from $500 to $600, that increase is not captured in the domestic inflation measure used for GDP; yet when the consumer spends an extra $100 on the purchase, it boosts reported real consumption. The price increase will register in the PCE or headline CPI but not in the CPI used for GDP. The same logic applies in Europe: if Germany imports U.S. gas at double the price previously paid to Russia, the increase is not recorded in the inflation metric applied to GDP (since the gas is not produced domestically), yet the higher gas bill still raises consumer spending. After all, utility bills form part of consumer spending—even when households are forced to spend more.
This explains why most consumers do not perceive the economic growth recently touted by China and the United States, and to some extent by Europe and the UK. The phenomenon is commonly referred to as “Ghost GDP”: it is visible in the statistics but provides no tangible benefit. This is the primary reason consumer confidence remains at record lows everywhere, even as the economy appears to expand and unemployment stays near cyclical troughs. Since 2022 we have been dazzled by “Ghost GDP,” while the real economy has been in recession for four years. Equity-market algorithms celebrate, yet the majority of households struggle to make ends meet, forcing the U.S. government to deploy endless fiscal stimulus to avert an outright recession. Confirmation of this analysis comes from rising consumer-credit delinquencies and the mounting difficulties in the Shadow Banking System, as underscored by recent remarks from JPMorgan CEO Jamie Dimon, who “warned of an impending market collapse and likened the current situation to the pre-2008 crash era” (The Economic Times, February 25, 2026).
Exactly as in 2007 and early 2008, equity markets remain fixated on alternative narratives, ignoring credit problems in the Shadow Banking System and the risk of contagion to the broader economy. It is essential that the average investor stay focused on the consensus story without dangerous distractions that could jeopardize the resilience of U.S. equity indices. In reality, even for listed companies, “not all that glitters is gold.” Absent the support of share buybacks—which consume on average about 50% of cash flow— the earnings-per-share (EPS) figures promoted by Wall Street would look markedly different from the narrative being sold. The U.S. administration is debating how to curb this perverse mechanism that continues to channel realized profits toward the stock market rather than the real economy, yet any attempt to halt it collides with the risk of a market collapse.
Wall Street finance is therefore devouring the real economy, while the public budget must step in to replace the capital diverted to buybacks that keep equities rising. The capitalist system has entered an unsustainable phase and, to survive, must defend to the death the monopolistic positions it has created. This “monopoly trap,” in which value created by the economy remains concentrated in the hands of a few, is already generating significant social tensions across the Western world, and populist pressures are set only to intensify. To counter them, current governments (the U.S. first and foremost) are resorting to welfare-oriented public spending, thereby feeding yet another trap: public debt.
For now the perverse mechanism holds, but it is evident to all that it will culminate in a crisis. The performance of gold tells us that systemic risk has reached extreme levels. The start of 2026 highlighted a fierce contest in the precious-metals markets between China and the United States. After a spectacular surge in the first weeks of the year, gold and silver were subjected to massive intervention by parties intent on halting the rally.
The U.S. government is now forced to intervene across multiple fronts to prevent the ignition of a financial crisis: it supports the Treasury market to cap rate increases, props up equities whenever they weaken, recently intervened in the dollar-yen cross, and has most likely also acted in the gold and silver markets.
The sharp January rally in precious metals, besides fueling a flight from the dollar, was on the verge of triggering a potential crisis at the Comex. Long positions in gold and silver had exceeded available physical inventories at the exchange, meaning that any wave of physical delivery requests would have left the Comex unable to deliver. The intervention produced a steep drop in a matter of hours and triggered margin calls.
Yet within days, Chinese authorities ordered domestic mining companies to cease selling forward silver futures contracts, effectively installing a backstop to the decline. China declared silver a strategic metal and noted that current inventories had reached their lowest level since 2021. These statements halted the crisis and sparked a swift recovery in precious metals, trapping the U.S. institutions that had intervened to push prices lower in both gold and silver.
It has thus become clear that certain U.S. institutions are short futures on precious metals now largely controlled by China. Physical gold is scarce in London and New York but abundantly stored in the vaults of the Shanghai Gold Exchange. The current market structure is therefore difficult to alter with one-off interventions, which merely expose the interveners to painful short-covering rallies.
All of this underscores the “war” China is waging against dollar supremacy and the international monetary system, fully aware that the economic and commercial confrontation with the United States goes far beyond a simple trade dispute and forms part of Washington’s strategy of containment and economic isolation of Beijing. Unfortunately, the United States has limited capacity to reverse an irreversible trend. China’s economic weakness is evident even if official data show 4% growth, while the U.S. crisis is no less severe despite official figures—coincidentally—also reporting 4% growth in three of the last four quarters.
Following the January storm, gold is destined to reach $6,000 in short order, nullifying the American attempt to arrest a trend that signals an ever-more-evident systemic risk and an increasingly pronounced dollar risk. To prevent a collapse of the reserve currency, Japan has embarked on a reflationary strategy based on public spending and interest rates that are not rising as previously signaled by the BOJ. This policy has once again weighed on the yen, whose weakness tends to import inflation and feed a negative feedback loop on JGBs. At present the dollar appears to benefit from Japan’s decision to delay rate hikes, yet the decline in JGBs is set to resume after the BOJ’s January intervention. Japanese institutions, heavily loaded with government bonds purchased at 0.5% yields, now face 3% JGB rates and are compelled to average up and increase domestic asset holdings; this shift will begin to drain flows previously directed into carry trades on U.S. Treasuries.
In conclusion, we are operating in a clear environment of stress, and the global financial system is surrounded by dozens of potential Black Swans that could materialize at any moment. The complacency currently supporting long positions in risk assets rests solely on the hope that policymakers will always be able to intervene to prevent a crisis (a broken system is based only on the faith of the next bailout). Over the past four years this approach has proved successful, yet history teaches us that fundamentals ultimately prevail over interventions, and that hope is not an investment strategy.