The extreme volatility in metals markets (in recent days, the price of silver has fallen by nearly 30%) reflects a deep structural problem in Western societies. In recent years, investors have increasingly allocated capital to gold and silver as hedges against the inflation of government-issued currencies – commonly referred to as the “debasement trade.” Behind this investment strategy lies the demographic reality of aging populations. Over the past 50 years, governments have steadily redirected spending toward healthcare and pensions for a growing elderly population, crowding out long-term investment and pushing down economic growth. This has led to record levels of government debt and a greater reliance on inflation as the means of reducing the burden of debt over time. This precarious economy of rising prices, particularly in basic needs such as housing and groceries, has produced a fragile political system defined by the rise of populism.
Because all of this is rooted in demographics, it is likely to persist. Recent policy shifts in the United States and Europe signal an attempt to confront this reality by cutting healthcare and pension commitments, but such measures do not address the underlying problem and are likely to intensify political unrest.
The deeper issue is that governments lack a strategy capable of offsetting the reality of aging populations. One possible exception is China. With a limited tax base to finance its own demographic decline, Beijing has been forced into a more radical response: restructuring its economy toward innovation, including in healthcare itself.
At the start of 2026, just as the United States’ confrontation with other countries threatens global stability, its withdrawal from other regions is also fueling conflict, particularly in the Middle East. The region’s dynamics have shifted fundamentally in the past few years: as the United States retreats, the most powerful country in the region, Iran, has been weakened by its war with Israel following the Hamas attack of October 7, 2023. The result is an open contest for control of the region among five countries: Israel, Turkey, Saudi Arabia, the United Arab Emirates, and Qatar. In April 2025, Israel bombed designated sites for three Turkish military bases in Syria, while Saudi Arabia and the United Arab Emirates - until recently longstanding allies - have engaged in proxy conflicts in Yemen, Sudan, Libya, and Somaliland. Looking ahead, it is Saudi Arabia that appears most at risk of triggering a destabilizing scenario, as its future is increasingly threatened by shifting dynamics in the global oil market on which it so heavily depends, driven by rising US production and the prospect of Venezuela, and possibly Iran, regaining access to global oil markets.
As the Western world awaits United States President Trump’s speech in Davos amid an escalating conflict between the US and Europe over the status of Greenland, the prime minister of Canada has returned from China after announcing a “new world order” in which Canada will deepen its relationship with Beijing. This Canadian vision is part of a broader shift across the West: in 2025, Spain joined Hungary in welcoming Chinese producers of batteries and electric vehicles to the European continent, and in the coming weeks the leaders of both the United Kingdom and Germany will visit China in what will likely crystallize into a shared narrative.
As China is increasingly seen as a more reliable partner than the United States by many nations, it is also overtaking the US in technological innovation. In the latest update of the Australian Strategic Policy Institute’s (ASPI) tracker of 74 “critical technologies,” the US leads in just 8, while China leads in 66. Notably, China has recently surpassed the US in the global share of downloads for open-source artificial intelligence models, which are released for free and can run on local cloud providers rather than US- or China-based ones. China’s growing lead in AI is underpinned by its massive advantage in electricity generation: by 2030, its surplus power is projected to be three times larger than the entire world’s electricity demand for data centers. This is also giving rise to entire industries that remain largely unknown in the Western world, such as the “low-altitude economy” (Chinese food-delivery firm Meituan has completed more than 600,000 orders via drones in China).
In 2026, this global shift could shock US financial markets, much as the launch of an AI model by the Chinese firm DeepSeek triggered a panic in January 2025.
