The Fragmentation of the Transatlantic Order and the Rise of Wrecking-Ball Politics

The international security architecture is currently navigating a period of profound systemic degradation, identified by the 2026 Munich Security Report as being "Under Destruction". This era is characterized by the emergence of "wrecking-ball politics," a paradigm shift where traditional alliances and multilateral norms are being systematically dismantled in favor of raw transactionalism and unilateral dominance. As the global order enters this volatile interregnum, the structural decoupling between the United States and Europe is no longer a theoretical risk but an active process of economic and security divergence. The United States, burdened by a gross national debt approaching $39 trillion and an inflationary environment where core prices remain stubbornly above 2.5%, faces a domestic fiscal crisis that is increasingly limiting its capacity to act as a global stabilizer. Simultaneously, the rapid ascent of Agentic AI and autonomous robotics is exerting unprecedented economic pressure, manifesting in a national security crisis that necessitates the reskilling of 65% of the American workforce within a three-year window. In response to this American retreat and the escalating instability of the transatlantic bond, Europe is mobilizing through the "ReArm Europe" and "Europe Readiness 2030" plans, seeking a path toward strategic autonomy that may permanently alter the global balance of power.  

“The traditional U.S. stock market for the next 10 years could be a mixed bag of uncertainty with Europe decoupling and given the growing massive U.S. national debt now $39 trillion and inflation still hovering around 2.5% or more.  And U.S. Real Estate prices appear to be sluggish as well nationwide. So, innovative digital assets and vintage collectibles of increasing value will remain a lucrative investment market long-term with significant ROI. Moreover, the widespread, rapid business implementation of autonomous machines, Agentic AI and humanoid robots is adding significant economic pressures impacting prospects of human job employment opportunities in America. Based on research data, it is now estimated 65% of the U.S. workforce must be reskilled within the next 3-years which is a critical national security issue now.” - Author, James Dean (February 18, 2026) 

The Munich Manifesto: 'Under Destruction' and the End of the Rules-Based Order

The 2026 Munich Security Report provides a stark assessment of the current geopolitical climate, suggesting that the foundations of the post-World War II liberal order are being intentionally undermined. The concept of "Under Destruction" refers to a deliberate shift away from the "rulebook" of global governance—once set and legitimized by the United States as the global hegemon—toward a strategy of raw dominance. This transition marks the end of an era where international institutions and the most-favored-nation principle underpinned global stability.

The Rise of Wrecking-Ball Politics

Wrecking-ball politics defines a style of governance where established norms are viewed as burdens rather than assets. Under this paradigm, the United States has increasingly adopted an "America First" posture that treats international obligations as transactional leverage. This was notably demonstrated in January 2026, when the U.S. administration announced its withdrawal from various international organizations it characterized as "wasteful, ineffective, or harmful". This "farewell to global governance" reflects a desire to reclaim the Americas as Washington’s backyard and restore U.S. pre-eminence through unilateral displays of force, as seen in recent military interventions and the weaponization of capital.

The "wrecking-ball" metaphor is particularly apt when examining the administration's use of tariffs. Rather than serving as tools for fair trade, tariffs are now deployed for explicitly transactional purposes, serving as bargaining leverage for non-trade objectives. A primary example is the threat of additional tariffs on Denmark and other European allies following U.S. efforts to secure the territory of Greenland through military or economic coercion. Such actions signal that the U.S. no longer aspires to lead through systemic stability but seeks to extract specific concessions from both allies and rivals alike.

The Geopolitical Interregnum and the Middle Power Pivot

The current state of international affairs is best described as a geopolitical interregnum—a disordered period where the old rules formally remain in place but no longer shape global affairs, while a new order has yet to emerge. In this vacuum, the U.S. is retreating from its role as architect and guarantor of the global order, just as China and Russia advance competing models. This interregnum has catalyzed a significant repositioning among "middle powers" such as Canada, India, Brazil, and the Gulf States.

These middle powers are refusing to be reduced to bystanders in a great-power competition. Instead, they are pursuing a strategy of "workarounding"—cooperating on trade and policy through agile, often cross-regional platforms that deliberately exclude superpowers. The Future of Investment and Trade Partnership (FITP), which includes nations such as Brunei, Chile, Morocco, and Switzerland, exemplifies this trend. This shift allows middle powers to bypass global volatility, strengthen their own supply chains, and establish rules around emerging technologies without being subject to the dictates of Washington or Beijing.

The Fiscal Abyss: $39 Trillion and the Geometry of U.S. Debt

The internal stability of the United States is increasingly compromised by a fiscal trajectory that many economists view as unsustainable. As of early 2026, the gross national debt has reached approximately $38.43 trillion, an increase of $2.25 trillion over the previous year. Projections indicates that the U.S. will reach the $39 trillion milestone by approximately April 5, 2026, assuming the average daily growth rate of the past three years continues.

The Mechanics of Debt Accumulation

The sheer velocity of U.S. debt accumulation is unprecedented in the post-war era. On average, the national debt is expanding by $8.03 billion per day, which translates to $334.48 million per hour, or roughly $92,912 every single second. For the average American household, this amounts to a debt burden of approximately $285,127. This rapid expansion is driven in part by the "One Big Beautiful Bill Act," which extended individual tax cuts and increased funding for border security and the military, adding an estimated $4.7 trillion to deficits through 2035.

The Interest Trap and Budgetary Crowding Out

A critical factor in the current fiscal crisis is the rising cost of servicing this debt. As of late 2025, the average interest rate on total marketable national debt rose to 3.362%, compared to just 1.552% five years earlier. This increase in interest rates has a compounding effect on the deficit. In fiscal year 2026, it is estimated that maintaining the debt will cost $426 billion, representing 17% of total federal spending.

Net interest costs as a share of total outlays are forecast to rise from 13.85% in FY2026 to 14.52% by FY2028. Within a decade, net interest is projected to exceed $2.1 trillion annually, amounting to 19% of federal spending. This "interest trap" creates a scenario where the U.S. government is increasingly vulnerable to further rate hikes, as every increase in borrowing costs forces either deeper deficits or the crowding out of essential services, including national defense and infrastructure.

Inflationary Inertia: Why 2.5% is the New Floor

The U.S. economy continues to struggle with persistent inflationary pressures that complicate the Federal Reserve's monetary policy objectives. While headline inflation eased to 2.4% in January 2026, core inflation—which excludes volatile food and energy prices—remained at 2.5%, the lowest since 2021 but still above the central bank's 2% target.

The Drivers of Sticky Inflation

Several factors contribute to the "stickiness" of current inflation levels. Services inflation remains high and persistent, even as goods prices have stabilized. However, there are emerging indications that core goods prices may firm up as companies implement price adjustments related to new tariffs. For example, in early 2026, prices for laundry equipment jumped 2.6% in a single month, while computers and home furnishings saw rises of 3.1% and 1% respectively. Economists believe these increases reflect the end of pre-tariff priced inventories, as higher-cost goods manufactured under new trade policies reach consumers.

The CBO argues that the combination of aggressive tax cuts and expansive tariff agendas creates conflicting pressures on the economy. While tax cuts may stimulate short-term growth, they also put upward pressure on inflation and interest rates. Simultaneously, tariffs—though projected to reduce deficits by $3 trillion over a decade—increase the cost of imported components, thereby raising the overall price level for everyday needs.

The Fed's Restricted Maneuverability

Persistent core inflation at or above 2.5% limits the Federal Reserve’s ability to lower interest rates to stimulate growth. Fed officials have indicated that they require actual evidence of inflation declining toward 2% before endorsing significant rate reductions, particularly as strong job growth and a steady labor market continue to support spending. This "wait-and-see" approach keeps borrowing costs high for consumers and the federal government alike, further straining the fiscal position of the United States.

The Great Decoupling: Europe’s Search for Strategic Autonomy

The transatlantic relationship is undergoing a structural transformation as Europe seeks to lessen its asymmetrical dependency on the United States. For decades, the U.S. served as both the market of last resort and the primary security guarantor for the continent. However, the rise of "America First" policies and the perceived fatigue in Washington regarding European security have compelled Brussels to chart an autonomous path. 

Strategic Autonomy and Industrial Sovereignty

Europe's pursuit of strategic autonomy is rooted in the realization that U.S. domestic priorities may no longer align with European security interests. The European Union is now focused on strengthening the European Defense Technological and Industrial Base (EDTIB) to ensure it can protect the continent without heavy reliance on U.S. military hardware. This shift is formalised in the European Defense Industrial Strategy (EDIS), which sets clear targets for 2030 and 2035.

A central tension in this decoupling is the "Buy European" preference. By 2030, the EU aims for at least 50% of member states' defense procurement to be sourced from European companies, rising to 60% by 2035. For U.S. defense contractors, this represents a potential loss of market share in one of their most lucrative regions. Conversely, for Europe, it is an essential step in building the "strong European backbone" necessary for a balanced transatlantic relationship—or an autonomous one should the bond fully fracture.

Digital Sovereignty and the Cloud and AI Development Act

Decoupling is not restricted to defense; it extends to the digital infrastructure that underpins the modern economy. The European Commission’s Cloud and AI Development Act (CADA) aims to at least triple the EU’s data center capacity within the next five to seven years. This initiative is designed to foster the growth of European cloud providers and ensure that highly secure cloud capacity is available for critical public and private sector needs. By 2030, the EU targets 75% adoption of cloud-edge technologies by European businesses and the deployment of 10,000 highly secure, climate-neutral edge nodes. This digital industrial policy aims to protect European data from extraterritorial legal claims and reduce reliance on U.S.-based hyperscalers.

The $8 Trillion Leverage: European Capital as a Weapon of Resistance

The most volatile element of the U.S.-Europe decoupling is the massive concentration of European capital in U.S. assets. European investors currently hold approximately $8 trillion in American bonds and equities. This represents nearly 40% of all U.S. public debt in foreign hands, making Europe the United States' largest global creditor.

Capital Weaponization and the 'Sell America' Trade

The potential "weaponization of capital" has emerged as Europe’s most potent leverage against U.S. trade coercion. In early 2026, concerns were raised by Deutsche Bank analysts that European institutions might begin a structural sell-off of U.S. assets in response to aggressive tariff policies and geopolitical tensions. While the bank's management later distanced itself from these reports under political pressure, the underlying reality remains that European investors have already begun reducing dollar exposure.

A "sell America" trading strategy, initiated by Danish pension funds and followed by other institutional investors, reflects a broader skepticism about whether dollar-denominated assets can continue to serve as a safe haven. Any significant divestment from U.S. Treasuries would cause yields to spike and equity prices to tumble, directly impacting U.S. borrowing costs and fiscal stability. This interdependence means that if the U.S. disrupts the geo-economic stability of the Western alliance, it risks triggering a funding crisis in its own debt markets.

Real Estate in Retrograde: The 2026 Housing Reset

The U.S. real estate market, historically a cornerstone of household wealth, is entering a period of significant stagnation and localized correction. Analysts describe 2026 as a "reset year," where the post-pandemic housing boom has finally been checked by high borrowing costs and expanding inventory.

Price Declines and Market Imbalance

National home price growth is projected to stall at 0% or rise only modestly by 1.9% to 2.2% in 2026. However, when adjusted for inflation exceeding 3%, real (inflation-adjusted) home prices will likely decline for the second consecutive year. This dynamic improves affordability slightly for buyers but erodes the wealth of existing homeowners.

Regional variations are stark. While major urban centers like New York and Chicago show modest gains, Sunbelt markets that experienced a construction boom during the pandemic are seeing significant price drops. In Florida, seven of the eight largest cities are projected to see declines, with Cape Coral and Fort Lauderdale expected to drop by over 10%. This "overbuilding" in the South and West, combined with a glut of new homes, is a primary driver of these regional price corrections.

Mortgage Rates and Inventory Recovery

Mortgage rates are expected to remain elevated, averaging around 6.3% throughout 2026. While this is a slight dip from 2025, it remains significantly higher than the rates seen during the 2020-2022 period, continuing to keep many potential buyers on the sidelines. Simultaneously, for-sale inventory is recovering, up nearly 9% year-over-year. This combination of high rates and increasing supply is finally shifting the market toward a more balanced state, where neither buyers nor sellers hold a clear advantage.

The Digital Frontier: Tokenization and the Migration to Alternative Assets

As traditional equity and real estate markets face uncertainty, a significant migration of capital is occurring toward innovative digital assets and collectibles. The year 2026 is seen as an "inflection point" for the digital economy, as blockchain technology moves from experimental phases to enterprise-grade financial infrastructure.

Asset Tokenization and the DeFi-TradFi Convergence

Tokenization—the process of putting physical and financial assets on-chain—is accelerating, impacting capital markets and liquidity. Large financial institutions are increasingly adopting the view that tokenization can expand the world of investable assets beyond listed stocks and bonds. By 2026, entire asset classes are expected to be tradable on-chain, reshaping capital flows and global finance. This convergence of Traditional Finance (TradFi) and Decentralized Finance (DeFi) is providing high-net-worth investors with new ways to diversify their portfolios and hedge against volatility in conventional markets.

The Growth of Digital and Vintage Collectibles

Digital collectibles, including art and gaming items authenticated via NFTs, are projected to grow at a CAGR of 15% during the 2022-2028 period. North America leads this market growth, driven by a strong culture of collecting and high purchasing power. Specialized NFT marketplaces have become the dominant sales channel, providing verification of ownership and authenticity that increases investor confidence.

Parallel to this, vintage collectibles and antiques are increasingly viewed as alternative investments. During periods of economic volatility, physical assets such as rare coins, fine art, and 1980s-era toys tend to appreciate, providing a hedge against inflation. High-net-worth individuals are currently advised to allocate 5% to 10% of their portfolios to this market.38 This trend is particularly strong among Millennials and Gen Z, who value the uniqueness and historical significance of these items over mass-produced goods.

Agentic AI and the Robotics Surge: A New Era of Economic Pressure

The technological landscape in 2026 is dominated by the transition from generative AI to "Agentic AI". Unlike earlier systems that required constant human prompts, Agentic AI refers to autonomous agents capable of planning, making decisions, and executing multi-step workflows across an organization. This shift is placing intense economic pressure on the workforce, as AI moves from a tool of augmentation to one of direct labor substitution.

The Great Displacement of Routine Work

Agentic AI is fundamentally altering the employment landscape by automating routine and middle-level jobs. By the end of 2026, it is estimated that 40% of enterprise applications will have such agents embedded. These systems can manage procurement end-to-end, handle customer routing, and automate financial reporting at a fraction of the cost of human employees.

The rise of human-centric automation and robotics is also transforming the manufacturing floor, where autonomous robots navigate changing environments without predefined instructions. This technological leap is expected to replace as many as two million manufacturing workers by 2026, even as it creates new roles in AI oversight and system auditing.

The Resilience of Creative and Judgment-Based Roles

While automation targets repetitive, rules-based tasks, roles requiring judgment, strategic empathy, and creativity remain resilient. The future of work with AI is increasingly about human-led, AI-enabled teams. In this model, productivity gains come from "orchestration"—humans managing the autonomous systems that amplify their output. However, this requires a fundamental shift in skill sets, as AI literacy becomes a baseline requirement rather than a specialty.

The Reskilling Crisis: A 65% National Security Emergency

The speed at which Agentic AI is being deployed has created a "reskilling crisis" in the United States. As technology disrupts millions of jobs, the mismatch between the skills of the current workforce and the demands of the AI-driven economy has reached a critical level. Analysts estimate that 65% of the U.S. workforce will require significant reskilling within the next three years to remain employable and to secure the nation’s competitive position.

The Scale of Workforce Disruption

The scope of this disruption is vast, with nearly 40% of global jobs exposed to AI-driven change. In the U.S., only 2% of workers are currently estimated to possess the skills necessary to transition immediately to new roles created by technology. This creates a "talent gap" that threatens not only economic productivity but also social mobility and national security.

The crisis is particularly acute for young people entering the labor market. Generative AI and autonomous agents are increasingly automating the tasks that traditionally served as entry-level training. This "compression" of the entry-level path means that junior staff are no longer needed for basic summarization, drafting, or analysis, making it harder for the next generation of workers to gain the domain expertise necessary for higher-level judgment roles.

Policy Interventions and the Reskilling Revolution

In response to this emergency, federal agencies are unveiling massive workforce overhaul plans. These plans include expanding Workforce Innovation and Opportunity Act (WIOA) waivers to consolidate training grants and investing in outcome-based pilot programs for rapid retraining. The goal is to create an "AI-ready workforce" through registered apprenticeships, AI education centers, and tech-enabled coaching methods like virtual reality.

Without significant reform and investment—estimated at roughly $1 billion by private entities like AT&T—the U.S. risks falling behind in the global race for technological pre-eminence. Organizations that successfully invest in reskilling see tangible returns, including 30% lower recruiting costs and 25% average wage uplifts for participants. However, for the nation as a whole, the requirement to reskill two-thirds of the workforce in a 36-month period remains a daunting and unprecedented challenge.

ReArm Europe and Readiness 2030: The Industrial Mobilization

Europe’s response to the crumbling transatlantic order is centered on the "ReArm Europe" plan and the "European Defence Readiness 2030" white paper. These initiatives represent a historic mobilization of capital and industrial capacity aimed at achieving military readiness for extreme contingencies by 2030.

The €800 Billion Defense Investment Strategy

The ReArm Europe plan is designed to enable €800 billion in additional defense expenditures. This massive investment is supported by several innovative financial mechanisms:

Security Action for Europe (SAFE): A financial instrument to raise up to €150 billion on capital markets to provide loans to member states for joint defense procurement.

National Fiscal Flexibility: Activation of the Stability and Growth Pact’s "national escape clause," allowing member states to spend up to 1.5% of their GDP annually on defense for four years without violating EU fiscal rules.

EIB Expansion: The European Investment Bank is expanding its lending to include dual-use and defense projects, facilitating private capital flow into the sector.12

Defence Industry Transformation Roadmap: This includes a €1 billion "fund of fund" to provide growth capital for new defense technology companies.

Priority Capability Areas for 2030

To ensure readiness, European member states have identified nine initial priority areas for rapid capability development. These include an integrated air and missile defense shield, unmanned fleets of drones and counter-drone systems, and strategic enablers such as airlift and maritime awareness. The EU aims to accelerate the deployment of these disruptive technologies, reducing the time from development to military iteration to less than 12 months.

The Integration of Ukraine

A significant component of the 2030 readiness plan is the integration of the Ukrainian defense industry into the European technological and industrial base. By establishing an EU-UA Task Force, Brussels aims to coordinate industrial cooperation and leverage Ukraine’s combat-tested innovations to bolster European security. This further reinforces the "Buy European" paradigm, as the EU looks to build a self-sustaining defense ecosystem that includes its immediate partners in the East.

Conclusion: Resilience in the Interregnum

The convergence of "wrecking-ball politics" and the U.S. fiscal crisis has effectively ended the era of predictable transatlantic cooperation. As the United States struggles with $39 trillion in debt and a core inflation rate that limits its policy flexibility, its role as the global security anchor is being replaced by a transactional dominance that alienates long-standing allies. Europe, sensing the "destruction" of the old order, is responding with a monumental industrial and military pivot through ReArm Europe and the pursuit of strategic autonomy.

In this environment, traditional wealth anchors like real estate and broad equity indices are being devalued by inflation and high interest rates, leading investors toward the DeFi digital frontier of tokenized assets and vintage collectibles. Simultaneously, the economic pressure from Agentic AI represents the most significant labor-market disruption in history, creating a national security emergency that requires the reskilling of 65% of the American workforce to avoid a catastrophic skills gap.

The future order is currently "Under Destruction," and the period ahead of widespread change will be defined by the ability of states, corporations, and individuals to adapt to this systemic rupture. For Europe, the challenge is to achieve industrial sovereignty before the transatlantic bond fully breaks. For the United States, the challenge is to manage its domestic fiscal and technological crises before they permanently erode its global standing. In this disordered interregnum, the only certainty is the speed of change and the necessity of resilience, so the prospect of uncertainty is likely to remain in the next decade.