Chris Whalen on Why America’s Fiscal Reality Is About to Hit Hard

A featured conversation on Capital & Power, plus a spotlight on his book, Inflated.

Welcome to Capital & Power, where we sit down with the people shaping markets, policy, and the systems in between. In this episode, we’re joined by one of the sharpest minds in American finance: Chris Whalen. As Chairman of Whalen Global Advisors and a veteran of Bear Stearns, the Federal Reserve Bank of New York, and Kroll Bond Rating Agency, Whalen’s resume is as heavyweight as his opinions.

This conversation ranges widely—from the future of the dollar to the Fed’s real job description to why New York City may be sleepwalking toward economic decay. At the center is Whalen’s must-read book, Inflated: How Money and Debt Built the American Dream, now out in a newly updated second edition. (And yes, for the audiobook crowd—he says the audio version is just weeks away.)

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America’s Spending Addiction

Whalen starts with a sobering premise: America is a country that’s addicted to aspiration, unwilling to reckon with what things actually cost. “We don't like paying for things,” he says, tracing this resistance back to the founding of the republic. Enabled by the dollar’s global reserve status, the U.S. has funded decades of deficits without feeling much pain—until now.

“We may in fact have to replace Congress as the entity that decides what to spend,” Whalen quips. His radical fix? Freeze discretionary spending for four years. Give the executive branch a line-item veto. And most importantly, force Washington to prioritize. “Americans are not used to that kind of discipline,” he concedes—but argues the alternative is political and fiscal chaos.

The Fed Isn’t Who You Think It Is

Whalen also delivers a reality check on the Federal Reserve. Forget what your Econ 101 class told you—this isn’t your grandfather’s Fed. “The Fed is no longer an independent monetary agency that’s concerned with employment and inflation,” he explains. “They’re concerned about keeping the Treasury market open.”

Whalen argues the Fed now serves primarily as the “banker to a heavily indebted country,” using tools like interest on reserves to stabilize fragile markets. But the side effects are piling up: from inflated asset prices to a housing market warped by pandemic-era policies. “The banking system expanded by almost 40% between 2020 and 2022,” he notes. “Net interest income has been flat.”

New York: A Canary in the Urban Coal Mine

On the subject of New York City, Whalen is blunt: the economic model is broken. “Who’s going to support these institutions going forward?” he asks, referring to the city’s cultural and transportation infrastructure. He argues that inflation has made life in the city unaffordable for working- and middle-class residents. Even basic services—like subways—were once considered luxuries, he points out. Now they’re decaying under the weight of budget bloat and political fantasy.

And he doesn’t mince words when it comes to the city’s political class: “Mamdani will not be the first socialist mayor of New York City, even if we forget Joe de Blasio,” he quips, warning that rent freezes and progressive housing policies will only accelerate decay.

Crypto Isn’t the Revolution—Gold Is

If you're looking for Whalen to cheer crypto, don’t hold your breath. “To me, the troubling thing about crypto is that it's clearly not an asset. There's nothing here,” he says. Bitcoin and other digital assets, in his view, are symptoms of a broken financial system—not solutions.

Instead, Whalen urges investors to look to gold. “I wanna see [readers] with at least 10% of their portfolios in gold,” he says, citing historical periods like the Civil War, when paper currency collapsed relative to hard assets. He points to institutional gold buyers—like fund managers building vaults in the Bahamas—as canaries in the monetary coal mine.

The Dollar Is Dimming—Slowly but Surely

As for the dollar? Whalen sees a slow but certain erosion. “The first hint that we've really gotten past a tipping point is when the dollar starts to weaken,” he warns. With the U.S. increasingly reliant on debt to fund government functions, trust in the dollar as a long-term store of value is faltering—even if it remains dominant in global trade.

“The dollar has always had a bit of an arbitrage with gold,” he explains, but that balance is shifting. “Foreign buyers are already walking away. The next step is capital flight.”

A Must-Read for a Turning Point

If you’re wondering where all this is heading, Whalen’s second edition of Inflated offers a blueprint—and a warning. From monetary misfires to political dysfunction, he explains how the U.S. arrived at this precarious moment, and what it will take to correct course.

Bottom line: whether you manage capital or monitor power, this episode offers the kind of no-spin insight that rarely makes headlines. As Whalen himself puts it: “All of the good stuff is hid behind complexity.” Fortunately, he’s here to shine a light.

Tune in. Read up. And be ready.