Jeb Butler

January 2026

The coming decades will see persistently higher inflation than we have seen since the 1990s.  As a result, investors should move away from growth stocks and toward value investments, companies that control real-world assets, or companies with sustainable pricing power.

• Inflation

We are entering a sustained period of higher inflation.  In the US from the 1990s through the COVID-19 pandemic, we generally saw declining or low interest rates with inflation in the range 1-3%.  That will change in the coming decades.  We will see persistently higher inflation, persistently higher interest rates, or both, for the following reasons.

• Expansion of the money supply. 

Throughout the last 20 years, and especially in response to the COVID pandemic, the US has demonstrated a bias toward accommodative monetary policy.  We have generally kept rates low, engaged in quantitative easing, bailed out large companies that foundered, and expanded the Fed’s balance sheet if an economic downturn appeared likely.  Although the US has occasionally tightened its fiscal policy during the last 20 years, the trend toward rapid expansion of the money supply during crises, and reluctance to fully reverse it afterward, is clear.

The accommodative era may have started with the Fed’s intervention to save Long Term Capital Management in 1997.  It intensified in 2007-08, when the Federal Reserved provided $4 trillion of quantitative easing.  Then in 2020-22, the federal government provided $16 trillion worth of accommodative monetary policy including direct transfers, treasury borrowing, balance-sheet expansion, and credit guarantees.  One-quarter to one-third of the current M2 money supply was created after January of 2020.

• Short-term political focus. 

Federal political leaders are increasingly focused on electability and short-term economic goals, likely because candidates who propose tax hikes or short-term austerity in favor of long-term prosperity are generally unable to win elections.   Political incentives prioritize the avoidance of short-term pain over long-term financial discipline.

US presidents and legislators seeking re-election respond to their incentives to deliver short-term financial benefits to voters.  In recent years the US has seen accelerated deficit spending, banking bailouts, checks mailed directly to citizens, and increasing unfunded liabilities.  Our sitting president has overtly pressured the Fed (which was long imagined to be politically independent) to lower interest rates.  I cannot see how our democracy in its current form can return us to fiscal responsibility.

• Size of the national debt.

The national debt has exploded in size.

year	nat’l debt
1990	$3.2 trillion
2000	$5.7 trillion
2010	$13.6 trillion
2020	$27 trillion
2025	$37.5 trillion

In fiscal year 2025, the US spent 14% of its budget (and 19% of its revenue) paying interest on the debt.  That percentage will increase, and likely rapidly.  Much of today’s debt was borrowed at low rates like 1-2% in 2020-21 and has had to be, or must soon be, refinanced at much higher rates like 4-5% in 2025-26.

The US lacks the political will to meaningfully pay down the debt by either reducing entitlements or increasing taxation.  The only politically palatable way to address the debt is through inflation – by keeping the rate of inflation higher than the interest rate on the debt.

The US is therefore incentivized to increase the rate of inflation.  Many commentators argue that the Fed is now tactitly tolerating inflation higher than the historic rate of 2%.

• Diminishing attractiveness of US debt. 

For many decades, the US could sell its debt at very low yields because of demand from China and other foreign investors.  Selling debt at low yields was disinflationary because it reduced income to debtholders and strengthened the dollar.  While the overall market for Treasury debt remains strong, the US must now offer higher yields to clear large volumes of its debt, both because the supply of US debt is higher and because the creditworthiness of the US is no longer beyond question.  The diminished attractiveness of US debt has lessened the disinflationary forces created by strong demand for low-yield Treasury debt.

• Diminishing global dominance of the dollar. 

For many decades, the dollar’s dominance as a reserve asset and as a medium of exchange (particularly as to oil) was overwhelming and not seriously challenged.  Although the dollar remains strong in both capacities, it now has challengers.  The price of gold has doubled in the past two years as foreign governments (an investors attempting to front-run them) have began buying gold as a reserve asset.  The BRICS countries have begun settling oil transactions in yuan and other alternatives to the petrodollar.

As global demand for dollars is reduced, the dollar loses strength.  A weakened dollar causes inflation because imported goods cost more and global commodity prices rise.

It has been argued – persuasively, in my view – that one of the reasons the US attacked Venezuela and captured Maduro is because he was facilitating the use of alternatives to the petrodollar.  In my own opinion, leadership can be described as having four phases, and the dollar is in the third.

1. First, others follow the leader voluntarily.  This was the Bretton Woods agreement of 1944.
2. Second, the leader is able to persuade others to follow.  An example was the US’s tacit agreement with Saudi Arabia in the 1970s to provide military protection in return for Saudia Arabia’s use of petrodollars.
3. Third, the leader can still coerce others to follow.  That is why the US attacked Venezuela.
4. Fourth, the leader loses control.

• Multipolar world. 

From the 1990s and into the 21^st century, the US was the world’s sole superpower.  The reduction in global conflict during these unipolar decades facilitated international commerce and globalization, which lowered the costs of production and reduced the price of goods.  For example, China sent inexpensive consumer electronics to the US and Russia supplied fossil fuels to Germany.

As the US’s military dominance diminishes, conflict becomes more common.  One such conflict is Russia’s attempted annexation of Ukraine – which led to an express warning from the US that it was longer willing to shoulder a disproportionate share of NATO’s defense costs. 

As pax Americana wanes, reshoring becomes more attractive, new tariffs emerge, and de-globalization begins.  For example, tariffs and other political factors have caused a greater percentage of consumer electronics sold in the US to be produced in countries other than China.  Germany now receives little or no natural gas from Russia.  The disruption of those trade relationships increased costs.

• Food, water, and climate. 

Increasing populations, combined with climate change and geopolitical instability, may lead to shortages of food and water in some places and cost increases in others.  Climate change affects growing seasons, rainfall patterns, extreme weather events, and the suitability of land for the crops historically grown there.  The World Resources Institute estimates that one-fourth of the works crops face water risks.  Shortages or price increases may be exacerbated by the suppression of global trade occasioned by increased geopolitical conflict.

• Counterarguments

Although I believe we will see persistently higher inflation in the decades to come, there are counterarguments.

• Technology and artificial intelligence. 

Advances in technology are often disinflationary because they make work more efficient. For example, the cotton gin made cotton production more efficient and the internet made communication more efficient.

Today’s big technological advance is AI.  It is possible that AI is overhyped and possible that AI-related securities are overpriced, but AI nonetheless promises to complete a wide range of tasks faster and more cheaply than humans.  That will tend to lower prices.

• Velocity of money. 

Monetary creation alone doesn’t cause inflation – unless the newly-created money is spent, prices remain largely unaffected.  For example, if the Fed expanded its balance sheet and put more cash in the vaults of large commercial banks by buying treasuries, but the banks did not loan or spend the money, the effect on inflation would be smaller than expected.  Contrastingly, if the federal government sends money directly to households (as in the pandemic), the effect on inflation is larger because households do spend the money.

Going forward, the velocity of money could be lower than expected for three reasons.  First, it is possible that future QE involves increasing liquidity at large commercial banks and that those banks don’t spend or loan the money to the extent anticipated.  Second, the Boomer generation controls 50-52% of US household wealth, and as the Boomers age, their spending may diminish.  Third (and relatedly), if the gap between rich and poor in the US continues to rise, such that the wealthiest people control an increasing percentage of national wealth, the velocity of money may decrease if the wealthy save their money instead of spending it.

If velocity is suppressed, increases in the money supply may not greatly affect inflation.

• Weak alternatives to US dollar.

Although the fiscal irresponsibility and arguably erratic conduct of the US in recent decades may have made the dollar less attractive internationally, there is no obvious, immediate alternative.  The yuan is emerging as a competitor, but China remains an authoritarian dictatorship with its own problems and economic data that is widely seen as untrustworthy.  Foreign countries have begun buying gold, but while gold may serve as a store of value, it is more difficult to use as a medium of exchange.  Bitcoin may be a part of this conversation, but its tremendous volatility and potential vulnerability to hacks from future, higher-powered computers mean that it is presently unable to compete with the dollar as an international store of value or medium of exchange.

In other words, the dollar is less appealing than it used to be, but nothing else is perfect either – so the dollar is the world’s cleanest dirty shirt.

• Investment

An investment portfolio for the next 5-15 years should anticipate sustained higher inflation. 

• Monetary inflation.  Gold and Bitcoin can hedge against currency debasement and overexpansion of the money supply.  Gold is historic hard money of which the supply can only increase gradually, and foreign governments have already begun buying it.  Bitcoin is a riskier and more volatile hedge, but its supply is algorithmically capped at 21 million coins.

specifically:  nothing new, hold IAU and BTC

• Avoid long-duration growth stocks.  In equities, a prudent investor should move away from the growth stocks that have come to dominate the S&P 500.  Long-duration growth stocks tend to underperform in an inflationary environment for two reasons.  First, they depend for their value on future cash flows, as inflation increases the discount rate, the present value of those future cash flows is reduced.  Second, inflation tends to lead to higher borrowing rates, which makes the capital that growth stocks need to reach profitability more expensive.

specifically: sell MGK, reconsider ETFs that disproportionately own growth stocks

• Prioritize real assets and cash flow with pricing power.  In an inflationary environment, investments tied to real assets tend to hold their value, particularly where replacement costs rise faster than general inflation.  Companies with cash flow and pricing power can pass the costs of inflation on to their consumers.  

specifically:  EMLP (N. American midstream energy ETF – pipelines, storage, processing)

• Go long energy.  Global energy needs are set to rise in the coming decades as China, India, and other populous countries develop and as their people buy cars and turn on air conditioners.  Renewable energy sources are unlikely to fulfill these needs at acceptable cost or scale in the next 15 years, leading to long-term demand for oil and gas and long-term pressure to develop nuclear energy facilities, even in countries where nuclear energy is now politically unpalatable.

specifically:  IXC (global energy ETF), NLR (nuclear industry ETF), URNM (uranium miners)

• Go long mining.  Relatedly, global demand for metals such as copper, aluminum, and rare earth metals is accelerating.  Demand for these metals is driven by electrification in developing countries, the need to modernize the power grid in the US, and demand created by green technologies like electric cars and wind turbines.  Regrettably, prices for ETFs in most of these sectors have already risen by 50-75% since March of 2025.

specifically:  PICK (global mining ETF), COPX (global copper mining)

• Go long infrastructure.  Companies that provide infrastructure have pricing power to withstand inflation, especially where assets function as regulated or near-monopolies.  Examples of such infrastructure include pipelines, storage facilities, and processing plants.

specifically:  IGF (passive global infrastructure ETF), BIPC (actively-managed global infrastructure ETF)

• Go long on food and water.  Global demand for food is increasing as populations rise.  Because demand for food and water is inelastic, agribusinesses and water suppliers can sometimes pass rising costs on to consumers.  If food costs continue to rise, as they have in the US since 2020, owners of farmland will be well-positioned.

specifically:  MOO (agribusiness ETF), LAND (owns & leases farmland), FPI (owns & leases farmland), PHO (water services), CGW (water services)

I’m a trial lawyer, not a financial advisor. This isn’t financial advice.