TL;DR: We are entering a strange economic paradox: gadgets are cheaper than ever, but life has never been more expensive. This "Prosperity Depression" mirrors the overproduction crisis of 1929, but with a terrifying new variable: AI. Unlike previous industrial shifts, AI isn't just replacing tools; it is replacing the function of the human operator. This article explains why the convergence of Chinese manufacturing overcapacity and AI automation is triggering a "Great Reset," and how to survive the "Garbage Time" of history.
James here, CEO of Mercury Technology Solutions.
I’ve been hearing the same sentiment from everyone lately: "Since the pandemic, it feels like the world has entered a depression. Stuff is cheap, but the cost of living is skyrocketing, and money feels tighter than ever."
Yet, simultaneously, the stock market keeps hitting all-time highs. What is going on? Has history seen this before?
The answer is yes. 1929.
Back then, before the crash, US factories were churning out radios and cars faster than people could buy them. In 2026, the protagonist has swapped from the US to China, and the goods have swapped to the "New Three": EVs, Lithium Batteries, and Solar Panels.
This is the age of Overproduction. And when you combine overproduction with the rise of AI, you get a recipe for a "Great Reset."
The Schizophrenic Economy: Cheap Goods, Expensive Life
Data shows that China’s production capacity for these new technologies is nearly double the global demand. With domestic consumption in China weak, these goods are flooding the global market.
This creates a split reality:
- The Deflation of Goods: TVs, phones, EVs, and everything on Taobao/Amazon will get cheaper and cheaper. To survive, businesses are engaging in throat-cutting price wars. This kills profit margins, bankrupts tier-2 companies, and suppresses wages.
- The Inflation of Services: Conversely, anything requiring a human—dining out, travel, healthcare, insurance—is getting more expensive. Labor shortages in the service sector are keeping these costs high.
In 2026, you will feel this divide acutely: You can afford a 4K TV, but you can't afford to see a dentist.
Why AI Makes This a "Great Reset" (The Horse Fallacy)
Optimists love to cite the "Horse and Buggy" analogy. They say, "When the car replaced the horse, the drivers didn't disappear; they just learned to drive cars. AI will be the same."
They are wrong.
AI is not the car. AI is the replacement for the driver.
This is why this era is a Great Reset. In previous revolutions, technology created more jobs than it destroyed by making humans more efficient. AI is designed to make humans obsolete.
- The Efficiency Trap: High-wage roles that are technically low-complexity or repetitive are vanishing first. If one robot can replace a $100k/year employee, a CEO has a fiduciary duty to choose the robot.
- The End of the Factory Floor: Complex, tedious jobs like manufacturing are being taken over by smart robotics that can work 24/7 without error.
- The Recursion Loop: Even the argument that "we need humans to fix the robots" is failing. We now have robots capable of repairing other robots.
AI creates a massive surplus of production (supply) while simultaneously automating away the jobs that provide the income (demand) to buy that production. Prices fall further, but fewer people can afford even the cheap goods because unemployment rises.
This is not a cycle. It is a structural break.
Survival Guide for "Garbage Time"
We are living through what historians might call the "Garbage Time" of an economic cycle—the messy, chaotic end of an era before the new order stabilizes.
What did 1929 teach us? When overproduction meets a debt bubble, the most important strategy is Defense.
1. Deleverage (The "Hold" Strategy)
Do not use leverage in a storm. When the waves are high, debt is the anchor that drowns you. Cash flow is survival.
2. Embrace "Low Desire"
Enjoy the deflation. Enjoy the cheap technology and entertainment. But lower your expectations for asset appreciation in the short term. Do not play the status game when the board is tilting.
3. Invest in "Cognitive Equity"
In an era where AI causes "labor oversupply," the only asset that cannot be stolen, copied, or automated away is what is inside your head. Your ability to synthesize, to lead, and to understand complex systems is your only moat. Learn to swim while the tide is low.
4. Hold Assets, Not Fiat
I buy assets and keep only a small amount of cash. In a world where governments will likely print money to subsidize the displaced workforce, fiat currency will continue to depreciate. Hard assets are your hedge against the debasement of money.
Conclusion
The intelligent machine is not just a tool; it is a new species of worker. It will generate massive wealth for the system but massive displacement for the individual.
The Great Reset is here. The split is widening. You can be the person complaining that the "horse jobs" are gone, or you can be the one learning how to build the engine.
