We are talking a lot about regime shifts at the Institute. Juan C. Rocha, a research scientist at Stockholm University, describes a regime shift as “large, abrupt, persistent changes in the function and structure of systems.’’ Complex systems tend to fluctuate around some equilibrium. Shocks can push them over a threshold into a new regime. These tipping points can have cascading effects. Periods of transition can be chaotic, creating uninsurable risks for investors, as Andersen Institute CEO Fabio Natalucci wrote on The Arc blog and in a column on Dow Jones MarketWatch.
Here are three areas where regime shifts have surfaced in the Institute’s work:
Economic Fragmentation: The long-standing, market-based rules of trade and comparative advantage are changing as the U.S. puts national interests above its strategic relations with Western democracies. One framework for understanding this type of regime change is geoeconomics, the study of how hegemons use economic and financial power for strategic ends. Matteo Maggiori, a Stanford Graduate School of Business professor, spoke on the Global Rewire podcast about how globalization appears to be fraying. “Traditional Western alliances have been broken to a level that is not going to be put together very quickly,’’ he said. (The Institute is a financial supporter of Maggiori’s research program.)
State Capitalism: Luigi Zingales, a University of Chicago Booth School of Business professor who is an expert on capitalism, had a conversation with us about the administration’s hands-on approach to the economy and investments in private companies such as Intel Corp. and Lithium Americas Corp. Shares of both companies have soared. But Zingales called out the erosion of norms that are “deeply engrained’’ and necessary for a capitalist system to function. A government stakeholder raises unresolved questions for competitors and shareholders in the company itself. It risks introducing political signals into corporate decision making that could obfuscate market signals. The first rule of a healthy capitalist economy is to “create trust,” Zingales said.
The U.S. Payment System: With the passage of the GENIUS Act, the U.S. payment system is also set to undergo a regime change as the establishment of a regulatory framework is likely to accelerate the adoption of stablecoins. The U.S. payment system is slow, expensive, inefficient, and ripe for change. The Institute published a white paper on stablecoins, where we cite both possible risks and benefits. Transaction costs could fall for both consumers and retailers. At the same time, there are financial risks. Stablecoins could be runnable in an event of large redemptions across the entire market. Unlike banks, there is no lender of last resort to backstop stablecoins. There are many other areas of the economy that seem near tipping points, such as the challenge to Fed independence or risks of stress in the U.S. Treasury market if confidence in the sustainability of fiscal deficits deteriorates. That will also have implications for the central bank’s control over its balance sheet.
Below you will find our work since the last newsletter.
Whitepapers
Stablecoins: A Revolutionary Payment Technology with Financial Risks
October 2, 2025 — This white paper analyzes the transformative potential of stablecoins in global payments systems. It details how these digital assets could improve efficiency but also expose vulnerabilities in financial stability, monetary control, and regulatory oversight.
Global Rewire Podcast
Global Rewire #12: Beyond the Great Wall with Logan Wright
October 7, 2025 — This Global Rewire episode features economist Logan Wright discussing China’s shifting role in the global economy. The conversation highlights financial reforms, real estate challenges, and the geopolitical consequences of China’s economic model.
Global Rewire #11: Geoeconomics: The New Frontier with Matteo Maggiori
September 30, 2025 — In this episode, Matteo Maggiori joins to discuss the emerging field of geoeconomics, where financial and trade tools become instruments of geopolitical strategy. The discussion unpacks how nations are competing for economic influence beyond traditional diplomacy.
Global Rewire #10: Demographics & Data Centers with Brooke Lierman
September 24, 2025 — Maryland Comptroller Brooke Lierman joins to discuss how demographic changes and the rapid growth of data centers intersect with state economic policy. The episode connects technology infrastructure with public investment, workforce trends, and sustainability issues.
Global Rewire #9: The State of Capitalism with Luigi Zingales
September 16, 2025 — Luigi Zingales reflects on the evolution and current state of capitalism, discussing its successes, failures, and future direction. The interview probes questions about market incentives, corporate responsibility, and social equity in modern economies.
Global Rewire #8: Political Cycles & Policy with Nellie Liang
September 9, 2025 — In this conversation with Nellie Liang, the discussion focuses on how political cycles influence monetary and fiscal policy decisions. The episode explores the trade-offs policymakers face during election years and the long-term implications of short-term political thinking for financial stability.
Global Rewire #7: Defending Federal Reserve Independence
September 2, 2025 — This Global Rewire episode explores why defending Federal Reserve independence remains crucial in an era of political skepticism. The discussion touches on historical challenges to the Fed’s autonomy and how institutional design can safeguard credibility.
Global Rewire #6: Immigration & Innovation with Rebecca Diamond
August 19, 2025 — Economist Rebecca Diamond joins to discuss the links between immigration policy and innovation in the U.S. economy. The episode highlights how diverse labor markets contribute to technological progress, entrepreneurship, and productivity gains.
Global Rewire #5: The Politics of Financial Stability with Raghuram Rajan
August 12, 2025 — Raghuram Rajan discusses the intersection of politics and financial stability, emphasizing how populism and short-term incentives can distort regulation. The conversation offers insight into building resilient systems amid political pressures.
The Arc Blog
The Risk to Fed Independence Is a Divided Congress
September 29, 2025 — Political polarization in Congress has become one of the greatest risks to Federal Reserve independence. (Featured on Dow Jones MarketWatch.)
The Lurking Risk of a Buildup in Financial Leverage
September 25, 2025 — Growing leverage in financial markets creates hidden dangers. Low interest rates and risk complacency have fueled excessive borrowing, potentially setting the stage for instability during future downturns. (Featured on Dow Jones MarketWatch.)
Federal Reserve Independence, Federal Finance, and the Uneasy Relationship
September 11, 2025 — Preserving central bank independence remains vital for economic stability. This analysis delves into the tension between central bank independence and government finance, examines the historical roots of the relationship, and how fiscal pressures can threaten central bank autonomy.
Financial Fragmentation is Creating New Risks in Your Portfolio
September 8, 2025 — Increasing financial fragmentation across global markets introduces new risks for investors – divergent regulations and capital controls are leading to inefficiencies, higher volatility, and weaker diversification benefits. (Featured on Dow Jones MarketWatch.)
The Tariff Map: Who Can Pass Along Price Increases and Who Can’t
September 3, 2025 — 2025’s tariff rate policy changes have lifted tariff revenue by $196 billion year-to-date. Producers and retailers look to have only passed on about 10% of the new taxes to consumers so far, though the picture varies by industry.
Calls for Rate Cuts Grow as Fed Grapples with Inflation Risks & Weaker Job Market
August 19, 2025 — The article reports growing calls for rate cuts as the Federal Reserve navigates inflation risks alongside signs of labor market weakness. It evaluates the balancing act between stabilizing prices and supporting economic growth amid uncertain data.
AI Will Reallocate Labor to Jobs That Require New Skills
August 7, 2025 — While routine digital tasks are being automated, workers are shifting toward non-routine and creative roles. To manage disruption and maximize productivity gains, businesses and policymakers must invest in retraining, upskilling, and AI-complementary skills.
New Stablecoin Law Leaves One Big Question Unanswered
August 4, 2025 — While stablecoins promise faster, cheaper payments and financial inclusion, their rapid growth raises concerns about run risks, market contagion, and whether issuers should gain access to the Fed’s safety nets.
We Must Defend Fed Independence but Enhance Transparency and Accountability
July 31, 2025 — We can protect Federal Reserve independence, while enhancing transparency and accountability mechanisms. Various reforms could be implemented to improve communication, oversight, and public trust without undermining central bank autonomy.
Tariff Debates are as Old as America
October 10, 2025 — Disagreements over protectionism versus free trade have shaped U.S. policy since the nation’s founding. In this article, historical episodes of tariff policy changes are connected to current global trade tensions and their policy implications.
Game of Power: From Dilemma to Deadlock and Its Policy and
Investment Implications
July 22, 2025 — Game theory shows that U.S. politics has shifted from a cooperative “Prisoners’ Dilemma” to a “Deadlock” game that rewards defection and partisanship. This change fuels policy reversals, greater uncertainty, and higher risks for the economy and investors.
Why Enterprises are Holding Back on AI
July 15, 2025 — Despite major advances in AI, only about 9% of U.S. firms have integrated it meaningfully due to high costs, limited skills, and organizational hurdles. Many businesses are still unsure of the return on investment, but adoption is expected to rise as technology matures and companies look for new ways to boost productivity.
Tokenization Is The Latest Crypto Fad But Is It a Derivative, a Security, or a Wager?
July 15, 2025 — Financial tokenization allows real-world assets to be traded digitally, but evolving regulations blur the line between legitimate securities, derivatives, and gambling instruments. As oversight lags innovation, state and federal regulators may clash over how to control this fast-growing market.
June 16, 2025 — Trump’s tariff policies are straining U.S. small and medium-sized enterprises, raising import costs, uncertainty, and credit needs amid tightening lending standards. Regional banks, however, have a key opportunity to strengthen relationships with SMEs by providing critical financing and risk management support.
