How Crises Actually Work
There's a war going on. But this is not about this war alone.
Every few years the world produces a new crisis. 2008. 2011. COVID. Ukraine. Now the Middle East and a closed shipping lane. The headlines rotate. The machine underneath stays the same.
It runs on its own. Nobody built it on purpose. It doesn't have an owner or a control room. Once you see it, you can't really stop seeing it, and that's the only reason I'm writing this.
The machine takes a shock as input (a war, a pandemic, a closed shipping lane, a bad harvest), runs it through 4 steps, and spits out the same thing every time: money moves from the bottom of society to the top. Not all at once. Slowly. By a route nobody has to defend in public.
I'm going to walk through the 4 steps. It'll take maybe 10 minutes. Then in the next post I'll tell you what to do about it, depending on which side of the machine you're standing on. The third post is about Germany specifically, because Germany has a couple of tax tricks that deserve their own post.
The machine first.
Step 1: something real runs short
Every crisis starts with a real-world thing running short. Less oil getting through a shipping lane. Less wheat leaving a port. Fewer people working because of a lockdown. Fewer computer chips. Less of something the rest of the economy is built on top of.
I want you to keep this in your head: the shortage is real first. Money comes after.
The rest of the machine only makes sense if you remember that. The crisis isn't a money problem. It's a stuff problem. Money is just how the system reacts to it.
Step 2: prices jump
Less stuff, same number of people who want it, higher price. That's how a market figures out who gets the thing that ran short.
Left alone, this is harsh but at least it's honest. The people who can't afford the new price stop buying. The shortage gets shared out by who can pay. You can stand outside a petrol station and see exactly who got priced out, because they're the ones not pulling in.
Almost no government lets it run that way. Step 3 is why.
Step 3: the government hides the bill
A government can't sit through people suffering in public. Suffering in public makes people angry. Anger costs elections. So the government steps in.
Subsidies. Price caps. Tax breaks on the thing that got expensive. "Energy bonus" payments. "Cost of living packages." Names change country to country. The mechanic is the same, and it's the most important sentence in this whole post:
The government pays the difference between the old price and the new price, so you don't see the full bill.
The bill doesn't go away. It moves. Out of the column you can see (your gas bill, your shopping receipt) and into a column you can't (government debt, future taxes, services that quietly get worse).
Where does the money come from? Almost never from current taxes. Current taxes are politically frozen. It comes from borrowing. Sometimes a lot of borrowing. The state takes on the debt so you don't have to.
It feels like rescue. It's a delay, paid for in debt, and the delay is the entire product.
Step 4: the borrowed money lands somewhere
Now the trick. Slow down here, because this is the only step that matters.
When the state pays the difference between the old price and the new price, somebody on the other side of that payment is collecting it. That's how payments work. Money doesn't evaporate when a government writes a cheque. Somebody banks it.
Who?
Not you. You were the one who was supposed to pay, and the state just paid in your place. So somebody else is on the receiving end.
The people who own the thing that ran short. The oil or gas company (and its shareholders). The landlord. The shipping firm. The big food producer. The pension fund whose biggest holding is the oil company. The hedge fund whose biggest investor is that pension fund.
They get paid the full crisis price. All of it. Whether you hand it to them at the pump, or whether your government wires it to them out of borrowed money, or whether you eventually pay it back through 10 years of weaker schools and worse hospitals, the total they receive doesn't change. The route is your problem. The total is what they care about, and the total stays the same.
Down at the bottom, up at the top. Same loop, every time, in the same direction.
It's not a plan. It's not a conspiracy. It's what falls out of any system where:
- the state doesn't own much of the essentials anymore
- ordinary households don't own much of the essentials anymore
- the people who do own them have no reason to share the upside
(Which, if you look around, is the system you're standing in.)
"But what if we just made more of it at home?"
Every time energy gets expensive, somebody on TV pulls out the same answer. Drill more. Build more LNG terminals. Build more reactors. Build more wind. Build more solar. The argument lands easily because it sounds like control. If we make the stuff ourselves, surely we're protected from a war on the other side of the world.
It doesn't work, and the cleanest proof is the United States.
The US makes more oil than any other country in the world. By a wide margin. More than Saudi Arabia. More than Russia. Has been that way for years. By the "make it at home" theory, Americans should have the cheapest fuel on the planet.
They aren't. When the global oil price spikes, Americans pay more at the pump, more for heating, more for trucking, more for groceries. The full hit lands on them, every time, just like everyone else.
Why? Because the oil that comes out of the ground in Texas isn't owned by Texans. It's owned by a small group of very rich people and the funds that invest on their behalf. When the world price rises, those owners do the only sensible business thing. They sell their oil at the world price, to whoever pays it, regardless of which country the buyer happens to live in. The American driver pays the world price. The American owner banks the world price. The fact that the well sits in Texas is a geography detail, and geography doesn't pay anyone's bills.
The lesson, in one sentence:
Where a thing comes from doesn't matter. Who owns it does.
If you don't own it, it doesn't help you that it comes out of your country's ground. The owners will sell it to whoever pays the most. During a crisis, that's a high price, and you're going to be one of the people paying it.
"But what if we just cap the price?"
The second reflex, after "make more of it," is "cap the price." Tell the energy company it can't charge more than X, have the state pick up the rest, problem solved. It sounds responsible. Let me actually walk you through what happens to the money.
Here's a simple example with made-up numbers, so you can follow the money.
Pretend petrol normally costs €1 a litre. The oil company sells at €1, you pay €1, both sides are fine.
A crisis hits. The world price of petrol jumps to €2 a litre. The oil company now wants €2 for every litre it sells.
The government doesn't want you to feel that. So it caps the price at the pump at €1.20. You see €1.20 on the sign, you pay €1.20, you feel a little squeeze but not a disaster.
But the oil company isn't selling you petrol at €1.20. It's still selling petrol at €2. It just sells €1.20 of that to you, and the other €0.80 to the state. The state writes the oil company a cheque for €0.80 a litre, paid for with borrowed money.
Add it up. You pay €1.20. The state pays €0.80. The oil company receives €2 per litre, exactly what it wanted. Nothing was saved. The crisis price gets paid in full. It's just been split into 2 pieces, one piece you can see and one piece you can't.
The piece you can't see doesn't disappear. The state borrowed it, so it becomes future taxes, future inflation, and future cuts to the things the state used to pay for (your local hospital, your local school, your local train).
And the €0.80 a litre the state just borrowed and handed over? It lands in the bank account of the oil company's owners. Not in your pocket. Not in a public fund. In their hands.
That's the whole trick of a price cap. It doesn't stop the wealth transfer. It hides it. It moves the bill from a column you can see to a column you can't, and most people stop paying attention because the visible number didn't move much.
There's a second problem on top of that one, and it's the part the policy people really don't want to talk about. There is still less petrol in the world. The shortage is real. Somebody is going to use less. Capping the price doesn't make more petrol exist.
When you cap the price, you take away the way the market would normally sort out who uses less. So instead of the price doing the sorting, the shortage shows up in another form: empty shelves, queues, "we're out of stock," random unavailability. And in every modern case where prices got capped during a real shortage, the people who ended up using less were the same people who would've used less without the cap. The poor.
Rich people don't check petrol prices before they decide whether to drive. They pay whatever it costs, capped or uncapped, and they keep driving the same amount. The cap doesn't change their behaviour at all. It just shifts where the pain of the shortage finally lands, which is on the people who couldn't pay either way.
So you end up in the worst possible spot. The state borrows a huge amount of money. The rich keep using the same amount of energy. The poor still use less. And the borrowed money ends up at the top anyway, just through a side door.
(It's the most expensive way I can think of to achieve nothing.)
So why does every country still do it?
Because the machine makes sense at every single small decision and only looks crazy when you step way back.
A government in the middle of a price spike isn't doing economics. It's doing politics. The politics says: visible spike, visible anger, lost election. A price cap kills the visible spike. The suffering still happens. The anger still happens. Both just happen on a slower clock, spread out across years of cuts, services getting quietly worse, money slowly buying less, and the slow sale of whatever the state still owns.
By the time the bill arrives, the politicians who signed the cap are out of office. The link between cause and effect is too long and too smeared out for any voter to act on. A bad winter in 2032 because schools got defunded in 2026 doesn't feel like a connected story when you're living through it.
That's the trick. Every single government, in every single crisis, makes the small political call that makes sense in the moment. The big picture (slow, one-way drift of money out of public hands and into private ones) is invisible if you only ever look at one decision at a time.
Step back and the picture is brutal. Government wealth across the western world has been shrinking for 40 years. The UK is the steepest fall. The US, France, Italy, and most of Europe are sliding the same way. Germany has held the line longer than most, mostly because of its strict no-debt culture (the Schwarze Null), and even Germany is now under serious pressure to give that ground up.
Each crisis is one more step down. The steps don't go back up. They never have.
40 years. Every western country. Every crisis another step on the staircase. The staircase only goes one way.
What this leaves you with
Here's the line I want you to leave this post with. The next 2 posts are built on top of it:
A crisis is a check on who owns what.
The machine doesn't make the inequality. It shows it. And it makes it worse, every time it runs. The people who own things take the hit and often come out ahead. The people who don't, eat the full cost.
If you remember one thing from this post, remember that. Next time you see a headline about an energy crisis, a food crisis, a war, a pandemic, anything: stop asking "what's the government going to do?" We just walked through what the government is going to do. The government is going to run the machine.
Ask instead: which side of the check am I on?
The answer changes everything that comes next. The advice that works on one side of that line is genuinely harmful on the other side, and almost every "how to look after your money" article I've ever read pretends the line isn't there.
The next post is about that. What to actually do, split honestly by side. It also covers something I think very few people have written up properly yet: AI just opened up a kind of asset that didn't exist 5 years ago, and for a small but real group of people the math has shifted in a way it hasn't shifted in a long time.
The post after that is the German one. The wealth tax that's been frozen (not killed) since 1997. The loophole that lets the biggest German fortunes pass down with almost no tax. And the political lever that's the only thing in this whole system that's ever bent the curve back the other way.
A small personal note before I close this out, because I don't want to pretend I'm a neutral observer.
I run businesses. I build things. Like basically every entrepreneur I've ever met, my honest gut reaction to the word "tax" is a small automatic flinch. Every euro the state takes is a euro I can't reinvest into something I built, and I genuinely believe I can put that euro to work more efficiently than the government can. I'm not going to fake a conversion story where I learned to love it.
But I've spent enough time staring at the machine I just described to know it doesn't care how I feel. It runs whether I like it or not. And the only lever in the whole system that's ever actually bent it back the other way is a tax system that can reach real wealth. Not income. Not "high earners." Real, capital-owning, generational wealth. That's the only thing that's ever worked, and refusing it because I find it personally annoying is just choosing to lose more slowly.
So I've made a kind of peace with it. I still flinch. I still think most tax policy is badly designed and most tax money is badly spent. And I still think it's the only lever in the room.
Tax is the only lever the people still hold, and how it's spent is the only thing that decides who the country actually belongs to.
Which is most of what post 3 is about.
The crisis isn't the war. The crisis is what you depend on.
Look at the machine. Don't look away.