Nothing Stops This Train
Walter White on Deficits
Breaking Bad character Walter White starts into meth production just to make ends meet. But as he progresses, growing power overcomes his self-control. Eventually, when his criminal colleagues suggest they stop and lay low, he responds with “The meth keeps flowing no matter what. We aren’t ramping down. We’re just getting started. Nothing stops this train. Nothing.”
Author Lyn Alden uses this analogy in her newsletter (1) and many subsequent YouTube interviews as a parallel to governments indefinitely running high fiscal deficits. While her example focusses on the US, a version of the same thing is occurring in most western countries including Canada. She examines the cause, the low probability of change, and investment implications for this fiscal dominance.
Some Causes
· Unbalanced social security, fewer workers supporting increased number of retirees
· Healthcare spending, its inefficiency and demographic challenges
· Spending on war and military is continuing and now growing
· Accumulated debt interest is growing with each year’s deficit and increasing rates
Low Probability of Reduction
· Polarization between political parties, except agreement on continued deficits (kicking the can down the road), has continually increased since the 90’s
· Any government austerity (cost saving) programs will probably harm the stock market, in turn harming government income taxed from investors
Investment Implications
Alden’s long-term investment timeframe is five-to-ten-years. To develop a plan for this duration, she goes looking for historical datasets. For developed countries she finds the nearest example in the 1940s, a long time ago with many different variables. For emerging markets, there are examples in more recent decades on how they deal with large fiscal deficits. Netting in the similarities and differences from the datasets, she proposes the general trends we may apply to the current fiscal dominance period:
· Governments often try to restrict the flow of capital, subtly or overtly
· Stock prices are not as likely to be as weak as you might think, since the currency they’re measured in is also weak
· Inflation is likely to be an issue, either persistent or in waves
Those general trends steer her to a tentative 5-year outlook:
· US stocks: Overall they’re already expensive, but case by case reasonably priced individual stocks could offer opportunity
· International stocks: Relative to US stocks, an outperformance may be expected, and at least some exposure to allow for the possibility
· Government bonds: Not a positive outlook in terms of maintaining their purchasing power
· Gold: Remains interesting and is under-owned by most metrics. Strong base case.
· Bitcoin: Has been highly correlated with global liquidity, which should continue. Very strong case with consideration for high volatility.
These trends are clearly important in her Newsletter Portfolio, circulated with her newsletter every 6 weeks to over 100,000 subscribers. I’m one of them. In a recent interview (2), she confirmed her thesis, timeline, and strategy for fiscal deficits.
Be Prepared. Ensure your investment plan considers what Walter White (governments) continue to do with his meth (their fiscal deficits).
1. September 2024 Newsletter: Why Nothing Stops This Fiscal Train, Lyn Alden
2. Nothing Stops This Deficit Train, Lyn Alden on WTFinance, July 10, 2025, YouTube