Richter argues that the U.S. economy is running hot with 8.5% nominal GDP growth in Q2 2025 and 6.4% GDP inflation, driven by roughly a trillion dollars in AI corporate spending, couple-trillion-dollar government deficits, and full employment with rising wages. He contends that this hot economy is the best way to manage the $40 trillion federal debt through higher nominal growth and sustained 3 to 5 percent inflation rather than the Fed’s stated 2 percent target, allowing tax revenues to rise in parallel with GDP and making interest expense easier to cover. Richter sees no recession on the horizon until AI spending starts declining and AI stock valuations collapse significantly, at which point corporate confidence will evaporate and trigger layoffs similar to the dot-com bust, though he expects the impact to be geographically concentrated in tech hubs rather than nationwide.
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AI spending boom sustaining growth: Richter identifies AI corporate investment of roughly a trillion dollars, drawn globally and spent in the U.S., as one of three pillars propping up the economy alongside government deficits of a couple trillion dollars a year and strong consumer spending from full employment and rising wages. He warns that when AI spending starts declining and AI stock prices suffer a major sell-off of 80 to 90 percent, corporate confidence will collapse and trigger a recession, similar to the dot-com bust which took one year from March 2000 to produce a downturn.
Inflating away the debt burden: Richter explains that 8.5 percent nominal GDP growth in Q2 2025 outpaced the roughly 8 percent growth in federal debt, and because tax revenues rise in parallel with nominal GDP without any tax rate increases, the government can more easily cover interest expense and reduce the debt-to-GDP ratio. He believes the White House has adopted a strategy of running the economy hot with 3 to 5 percent inflation instead of the Fed’s 2 percent target, which he calls an adequate solution to the otherwise unmanageable $40 trillion federal debt.
Bond market turning attractive again: Richter says he is unwinding his T-bill and chill strategy and starting to buy longer-term Treasuries and TIPS, noting that bonds are now moderately appealing after being toxic for 20 years when yields were too low. He points out that anyone who bought a 30-year bond in summer 2020 is down about 50 percent in market trading today, but with yields back to pre-QE levels and spreads still historically narrow, bonds are finally a valid investment option again.
No K-shaped economy myth: Richter disputes the K-shaped economy narrative, arguing that the median married couple household income is $128,000 and both the upper and lower segments are rising, just at different rates, rather than one going up and one going down. He notes that credit card spending hit $7 trillion in 2025 with only about $500 billion in interest-bearing debt, prime credit card delinquency rates are a minuscule 0.8 percent at historic lows, and overall delinquency at 2.8 percent is well below the 6.5 percent peak during the financial crisis and only slightly above pre-pandemic levels.
Housing affordability the real crisis: Richter identifies the affordability crisis as concentrated in housing, where home prices exploded over a two-year span and now trigger high homeowners insurance, property taxes, maintenance, and HOA fees, but notes that 65 percent of households own their homes and love watching their values rise on Zillow every day. He argues the solution is to let home prices stay flat or trend downward while wages rise for a decade or two, but acknowledges that governments, homeowners, and the majority do not want homes to become more affordable because it would shrink tax revenues and personal wealth.
