The Big Reset. Don’t Get Left Behind.

The Big Reset

It’s a gloomy, rainy day outside and I’m stuck in front of a computer.

That makes it the perfect day for thinking about the future of the global system and why resilient living isn’t an option, it’s a necessity.

A highly likely future to explore, as opposed to the very unlikely “Zombie Apocalypse,” is a global financial collapse.  In this “Zombie Apocalypse” the zombies don’t eat your brains, they eat your financial assets.

How might a financial collapse occur?  I found a presentation that Raoul Pal gave late last month in Shanghai that makes a very compelling case for financial collapse.

Raoul is a Goldman Sachs alum that went on to co-manage one of the world’s largest hedge funds in London. He now writes research for senior money managers at the Global Macro Investor from his (early) retirement home on the coast of Spain.  In short, he’s an insider’s insider.

The presentation is very straight forward, incisive, and very dark. It makes a clear case why the current version of our global financial system will collapse and what the results of this collapse will be.

Stick with me on this, there’s something to be learned here. Something we can plan against.

The Big Reset

Why will the financial system collapse?

Raoul’s answer is simple:  too much debt.   Debt that can’t be repaid.  Worse, this $70 trillion in debt serves as collateral for $700 trillion in financial derivatives (an amount 12 times larger than the entire global economy!).

Raoul then points out that our ability to service this massive public/private debt load is rapidly decreasing:  All of the big economies are now entering a new recession, at the same time.  This is the first time this has happened since the 1930’s.  Worse, these economies are entering a new recession without recovering the ground lost in the last recession, again the first time since the 1930’s.

This is a recipe for disaster.

How will the collapse play out?    Europe’s current meltdown will result in huge bank and sovereign defaults since there isn’t a mechanism that can stop them from occurring.

These early defaults will cause a domino effect of sovereign and bank defaults.   These sovereign and bank defaults will be so large that they will be beyond the ability of central banks and governments to prevent them.

Worse, it will happen as a tsunami (huge and fast).  The damage of each sovereign default will be both a) amplified and b) quickly spread throughout the entire global financial system by a hideously complex tangle of financial derivatives.

As the collapse occurs, the dollar and gold will be the only remaining forms of wealth still liquid. However, even that won’t last. When things settle down, it will be clear that the entire system we built on fractional reserve banking and fiat money will be gone.

So, what happens after that?  Raoul makes the case that a new financial system will be built. In short: it will be a Big Reset with new forms of wealth replacing old, bankrupt forms. So, what should you do to prepare for the Big Reset? Raoul recommends urgent action, but uses a conventional, rearranging the deck chairs on the Titanic, approach that falls well short of what is really needed:

“We have around 6 months left of trading in Western markets to protect ourselves or make enough money to offset future losses.   Spend your time looking at the risks of custody, safekeeping, counter-party etc. Assume that no one and nothing is safe.  After that…we put on our tin helmets and hide until the new system emerges.  From a timing perspective, I think 2012 and 2013 will usher in the end.”

The Best Way to Prepare for the Big Reset

Unfortunately, the Big Reset isn’t fantasy.

It’s a highly likely outcome given our current precarious situation.  As a result, preparing for it isn’t optional.

The only remaining question is: how do you prepare for it?  The real answer is quite simple.

Live resiliently.

Become a producer rather than a consumer and help your community to do the same.  

In a Big Reset, local production is king.  It trumps all other forms of wealth.

Resilience doesn’t only produce the tangible wealth you need to ignore the effects of a decade of  global economic depression.  It ensures that you and your community will be in a good position to help decide what the next global economic system looks like (rather than being told).

So, how do you build a resilient lifestyle that enables you to avoid the effects of a Big Reset while improving the quality of…

  • your health,
  • your wealth, and
  • your relationships?

Finding the answer to that is what is all about.

The future is bright folks.

Join us.

PS:  If Raoul is as smart as his background and presentation suggests, he’ll be using whatever virtual, ephemeral wealth he has today to finance a resilient community around the home he lives in today and in as many locations as possible.

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  • Richard Lee

    I need a bit of clarification please.

    “It’s not even clear that gold or the dollar will survive intact.”

    Can you expand on this just a bit. I completely understand what you mean by the dollar no surviving in tact but I don’t know what you mean about gold not surviving intact.

    Please elaborate. Thanks!

    -Richard Lee

    • John Robb

      Sure. A reset can mean lots of things.

      What if most of the major trade relationships become bilateral barter — food for oil? What if goods are rationed domestically?

      What if next generation currencies are based on valuable commodities like kWh or barrels of oil and not gold? What if private gold ownership is outlawed (with steep penalties for even minor infractions) or confiscated?

      What if most trade becomes local/regional and/or the only currency used is new local currency based on locally produced commodities?


      • Robert

        Say you have money in savings – what can we do with it? What would be safe?

        • John Robb


          It really depends on how the situation unfolds. You need to live in the current world, so $ are important. Some gold is always useful. However, what I think is important is to be able to produce locally. I’ll write up the three pillars of a resilient nest egg soon. JR

    • John Robb

      Sure. A reset can mean lots of things.

      What if most of the major trade relationships become bilateral barter — food for oil? What if goods are rationed domestically?

      What if next generation currencies are based on valuable commodities like kWh or barrels of oil and not gold? What if private gold ownership is outlawed (with steep penalties for even minor infractions) or confiscated?

      What if most trade becomes local/regional and/or the only currency used is new local currency based on locally produced commodities?


  • Daniel


    In light of this what do you think about student loan debt? I’m just graduating college, and have been thinking about what to do about the ~$25,000 in debt I have accumulated. I doubt the Swedish government will forget about my debt just because the financial system cracks down. More likely they’ll get even more eager to collect it.

    My first plan was to pay it off in 3 years, but I’ve entertained the thought of instead paying the minimum amount and putting all that money towards building my resilience. That would involve investing in myself and in my business. In the long run I’m thinking that should have a far greater return on my money than becoming debt free right away, but at the same time becoming debt free is essential for becoming resilient.

    The question I guess is what gives me the greater return of investment over the long term, and if it will get easier or harder to pay off debt in the future.

    Another thought that struck me is this: The real visionary companies look a few years into the future and are building products and services that will be needed two or three years from now. When the Big Reset comes what products, services, and apps will be needed? What can you as an entrepreneur start building right now to help your community become producers after the Big Reset? Many existing businesses will surely be struck hard, but many businesses who plan ahead will thrive. What’s the super app for the post-Big Reset society?

    • John Robb


      I’d stretch out the student loan debt and pay min possible (hoping a chance to pay it off fast with highly inflated currency or forgiveness by some future government trying to curry favor with a restless population).

      What to invest in?

      For those just starting off? Find ways to help people become more productive at the local level. Foodscaping. Water harvesting. High end composting. Geoexchange installs. Passive solar heating/cooling. Biodigesters. Greywater systems. Lots to do.


    • El

      Are you sure the Swedish government as it exists now will still be around? This is more serious than you think. No one is going to be spared. Think Great Depression, but this time, much more of the population is dependent on the global economy, they can’t just farm. Tens of millions are going to DIE of starvation and violence.

  • Marcus Wynne

    There’s some useful information and anecdotal data about the collapse of the Argentinian economy in several places, most notably at this blog: The points most germane to this discussion are FerFal’s anecdotes (and photographs) of what kind of businesses cropped up in the Argentinian “reset” (good term) and how people resorted to barter and exchange of services for necessities like food, protection, water, medicine, etc. It’s also a good reality check for the “Zombie Apocalypse” enthusiasts (though the recent rash of flesh-eating crazies makes me wonder, sometimes…) — as life goes on. You’re not likely to be painting your face up and running down the street with your tricked out M4; you’re more likely to be biking, walking or sharing a ride to work, surrounded by dramatically higher levels of street crime, standing in lines waiting to get what goods you can, and rapidly evolving your personal definition of “crime” and “breaking the law” in order to survive — much like the huge working poor class in the United States faces, but on several orders worse.

    I wonder though, sometimes, whether people will take what appears to be complicated measures RIGHT NOW or whether they will wait to see a bank holiday announced over a long weekend, or when the ATMs and the credit/debit cards no longer work. From where I’m at, the people I see best prepared are those who are already poor, “edge-dwellers” in alternative lifestyles, rural agriculture/farming folks, and a growing number of suburban guerrilla gardeners. Most of them are at least looking at or starting to grow food, so many are at least thinking about that. What most of them are completely overlooking is what they might have to barter for food or clean water, or what they need to deal with that; the impact transportation and fuel controls will have, and how to manage realistically a dramatically increased rate of street crime by desperate people who either don’t have the skills or the desire or the opportunity to make it any other way.

    It’s a series of questions I ask people to assess their resilience — things like how is their real support network, where would they get food if the supermarket closed, who would take care of their kids, how would they get around without a car, what would they do if their house caught on fire and 911 didn’t work, etc.

    Sobering questions, and I’m always surprised by how many people say: “I don’t want to think about that.”

    That response may be a luxury no one will be able to afford in coming weeks.

    I dislike sounding gloomy as well, but my view from street level supports that perspective. Your Mileage May Vary.

    cheers, m

    • John Robb


      The way around that is to just focus on making money building resilient local business and improving your life while building production to your home/community. The rest will take care of itself.


      • Marcus Wynne

        Morning, John. Yep, that’s the truth. Like you, I worry about the time ‘tween reset and resilience. Or rather, I do the best to control what I can and let God handle the rest. What I see from my perspective here in IL (the Greece of the United States as far as the economy goes) is there’s a polarization: one pole starting to gather resources, training and shift gear to local-based resilience; another pole that’s increasingly angry at the violation of the “contract” that things should be the same, and in the middle a much larger number of those who don’t want to know or whose idea of preparation starts and stops with watching DUAL SURVIVOR or PREPPERS on TV.

        My personal position shifted back in 2008 from rather stridently (and according to some of my network, boringly) repeating the message, to focusing my energy, support and efforts on those who *actually do* something. Anything. Grow a garden. Take a class. Do something. Be a participant in your own rescue. That’s what I appreciate about what you’re doing here in this blog — the information’s there, and its up to the individual to make their decision and act accordingly.

        Or not, and reap the consequences.

        Thanks, John.

        cheers, m

        • John Robb

          Thanks Marcus. Keep up the good fight. JR

          • Marcus Wynne

            “Keep up the good fight.” It’s what I do, John. As do you.

            cheers, m

  • Justin

    J.R., I am a contrarian on this, having changed my thinking just recently. I do not think there will be a financial collapse/reset. The main reason that will not happen is because such an event is political, not economic.

    Greece looks like they are about to have a collapse/reset, because they are about to POLITICALLY repudiate their debt and currency.

    Will the USA follow such a path? I hardly see how. The Creditor Class is in complete control. A high debt load and general deflation is exactly what they want. For, you see, the Creditor Class is enriched immeasurably by deflationary depressions (as their cash piles allow them to vacuum up fire-sale assets).

    If we have a debt jubilee, it will happen via the political process. Otherwise we will get exactly what we are getting now: savings crushed via permanent Zero Interest Rate policies combined with low grade monetary inflation, along with the crushing of asset values via general deflation. See the latest post at my blog for my take on this.

    Your practical prescription is exactly true though: become a Producer. The New Economy will have to reset on the basis of real wealth creation.

    • John Robb

      Thanks. Lots of ways this can play out. JR

  • Duff

    The question that always runs through my head when reading things like this is, “What would stop a tank full of army guys with machine guns from taking over your resilient home and your vegetable garden if the SHTF?”

    Also in a famine, the first thing people do is abandon their farms.

    • John Robb

      Duff, Not sure what you are talking about. A tank full of soldiers? Why? Abandon their farms during a famine? That’s only for famines due to pestilence/drought/war that causes farms to fail — not a financial crisis. JR

    • kunkmiester

      You’d need a lot more than one tank. Lone tanks with no other support are easy prey–read any guerrilla warfare work. A single community won’t need to worry about a lone tank, and a enough of a unit to pose a threat to one will find itself facing a much larger united band.

    • El

      A single tank with no infantry support is easy pray to a variety of techniques. Look up David’s Toolkit. Fun read.

  • alanw27

    Can I be contrarian (or perhaps offer a glimmer of hope) and note that the SMI and Oil stocks are nowhere near breaking downward through support as the presentation shows.

    • John Robb

      That’s the only thing that’s hopeful about that presentation. I suspect he’s projecting where he thinks it will be going.

  • David D

    Hi John, I have been reading you for years and I love your analysis. I am joining the few other people here wondering about the violence aspect of this. When the SHTF, the unprepared ones (the majority?) might see farms, energy sources, and other productive assets as targets. As a military expert you probably have thought thoroughly about defense strategies for resilient communities — care to share perhaps in a future letter?

    Another person I admire is Piero San Giorgio who just published a book about this whole topic and talks about building “Durable Autonomous Bases”… Fascinating views (in French):

    • John Robb


      Thanks so much. Definitely, I need to do that. A report would be a better format.


      • Marcus Wynne

        This is a rich topic, John. There are some recent (and IMHO excellent) studies coming out of the special operations community on militia building and village defense based on old lessons from VN and renewed and refreshed from SF efforts in A’stan and Iraq. Some interesting insights.

        That’s one of the biggest disconnects I see in the burgeoning resilient community efforts; lots of efforts focused on food production, energy production, etc. — but not much on how to provide protection for the community and/individuals in an environment where the so-called “rule of law” doesn’t necessarily apply evenly, or at all. When I talk with people working on developing their individual/clan resilience, that question *always* comes up.

        I studied the model of the “Black Rock Rangers” @ Burning Man, and how they interfaced with law enforcement, quite closely as I was very curious about how you maintain order and safety in an autonomous zone with over 50,000 people. Some good lessons there, especially in training and discernment for moderators so they may make a determination about when you need to call in the heavy hitters.

        There’s an excellent tribal model among the indigenous Australian aboriginals, the concept of “The Men of the Law” — the strongest, toughest men are the enforcers, but the ones who make the decisions are the old wise ones, who will make final determinations. Actually pretty much the same structure we saw across the board in sociology in tribal structure.

        I look forward to your report on this. Very valuable and much needed, as it’s one of the cornerstones necessary to a successful resilient community: food, water, energy, production of needed goods, transportation, medical/health, safety/security.

        Thanks, John.

        cheers, m

        • John Robb

          Marcus, Excellent. Would love to see a write up of the Black Rock Rangers that could be folded into a future security report (and any other good examples you have found). JR

          • Marcus Wynne

            Hey John — okay, I’ll add that to my list. Some good data there. There’s also some excellent insights from the Rhodesian War, and how some of those techniques have been up-modded for farmer protection Kommandos in South Africa. Main bullet points from there:

            *Pool of trained (or trainable) and willing volunteers

            *Trusted leadership and leadership pushed down to the lowest level (ala LGOPs, and a hat tip to GEN Gavin)

            *Reliable local comms, dedicated transportation, and familiarity with local terrain.

            *Committed to protecting their own (family/friends/community, in that order)

            Appropriate use of local drones with wireless cameras can extend patrol/comms range as well, and some excellent low-tech response stuff from our SF guys on horseback in A’stan or the VN bike cavalry, or modifying Amish horse and buggy rigs (What goes clip clop clip clop BANG clip clop clip clop BANG? An Amish drive-by).

            It’ll be a little while. I’ll e-mail it to you when I get it sorted.

            cheers, m

          • El

            The main thing about using horses in a combat context is that firearm noises scare the hell out of them. It would likely take a lot of work to condition horses for that sort of combat, they’d also be prone to being shot, as they can’t take cover.

  • alanw27



    Another thought generated by Raoul Pal’s presentation. If the financial/political collapse occurs suddenly – say, within weeks – has anyone considered sending out notifications where relilient communities are in the process of being built right now so that a migration to these locations could take place? I live in a suburb of about 60,000 people and I’m certain that I am likely the only person in the city that has heard of resilient communities. Everyone around here will just panic and not know what to do.

    • John Robb


      There isn’t much of a list of fully functional communities yet. Lots of early efforts and a huge number of individual efforts to add resilience at the household level.

      Hopefully, as this group grows, we’ll be able to assemble a list of communities that are looking for new members.

      I’m much less worried about a the weeks/months/year that it takes a financial reset to occur than the decade of economic depression, systemic failures, and political turmoil that follows.


  • Lana

    Dear John,

    Immensely pleased that I found your site, for a plethora of reasons. Let me preface all of this, however, by stating that I am a woman. Yes, yes, the testosterone fest here needs to have some estrogen injections :)

    And therein lies the root of the problem…you are advocating resilience….and I wholeheartedly concur. But that can not just be a cerebral debate amongst men. Not to buy into the cliche, but even in modern times, women are the core of the home, they are the fulcrum. If you truly advocate resilient living, especially if you predict a dire financial and/or social collapse in the future, then in my honest opinion you need to find a way to garner the interest, support and HEARTS of women. And I’m not just talking about the stay at home homeschooling moms who already live on homesteads and have fantastic gardens and are as resilient as they come. I’m talking about igniting a true paradigm shift in women everywhere. It’s always been inherently ironic to me that the liberal feminist agenda thinks that it has the best interests of women. I believe that I am as much of a woman as you can imagine….and I like to think that I represent the best of both sides of the political arena in that I am concurrently a highly educated professional woman (I’m a writer and musician–and to illustrate the dichotomy here–I’ve written for both bridal/women’s magazines AND NRA publications) while also being a homeschooling mom. Believing in my innate womanhood does NOT mean that I need to burn my bra and detest all of the formal and traditional markers of femininity: Marriage, Family, Homemaking.

    And to be truly resilient means that I will need to not only espouse those aforementioned traditional markers of womanhood, but I will need to live them out to the best of my ability in terms of any future unrest of any kind.

    Adding to all of this, my husband is a Naval Officer who is currently deployed to Afghanistan.

    So, of course all of this has been weighing on my mind heavily as I’ve read and researched more and more. I’ve tried to become as prepared as possible while still living in my McMansion. :)

    And yet I know that I can not be an island.

    But I believe that the true revolution needs to occur in the thinking of women, as I mentioned before. For the most amount of people to be as resilient as possible, let alone to prosper, there needs to be a paradigm shift in the estrogen population.

    I think that men are inherently (sorry to be trite, but I do believe it’s applicable) able to grasp these concepts more readily than women….not because they’re smarter (ha!), but because that intrinsically have a physiological protection mode AND culturally they’ve been trained to look more at economic and war structures.

    But what about the woman’s nesting instinct? That’s resilience, too.

    Except we’ve been sold a lie by contemporary politicians and liberally biased media into thinking that we are “less” if we don’t eschew all of the traditional actions that would by their very nature allow us to be more resilient.

    And all of that to say…….how would you suggest we go about reaching women with these not only valuable, but perhaps even potentially life-saving ideologies?

    Of course we have to present them as more than just ideologies….we need, I think, to present them as PRAGMATICS.

    But when? Where? To whom? To what extent?

    How do you strip down all of the background to get a “soundbite” worthy of igniting a real passion for resilient living quickly? Hopefully that would then turn into an in-depth research and prep mission, but we have to start somewhere.

    Any ideas? Just point me, please, in the right direction and I will go.

    Thanks ever so much,


    • John Robb

      Lana, Hmmm. Let me cook up an answer to this. John

    • James Bowery

      Unfortunately, the problem of making resilient living appealing to women is at the heart of the social-stigma land mine laid down by the Zeitgeist that I mentioned. A huge part of it has to do with what Elizabeth Warren, in her earlier — AND MORE AUTHENTIC — incarnation as a researcher into family bankruptcy, discovered: family formation is simply not affordable anymore for US households. Resilient living is going to appeal most to women with children — or the strong prospect of nurturing children — as their health and safety is literally at stake. For those unmarried women still engaged in the unnaturally extended courtship phase of life, leaving the environments in which there are maximum mate prospects — quantity is what counts unfortunately — is a severe impediment to resilient thinking. The global economy has tapped into this weakness in human nature to keep humans coming into its centers of control. Its a very old game of centralization going back to the earliest organized religions no doubt.

      • Marcus Wynne

        Hi Lana — I welcome the insight of women. Something I’d offer up in the way of a pragmatic way to enlist other like-minded women is to start with something that women can be good at with the attributes you list in your post: identify and locate nexuses of like-minded women and approach them about a meeting in which skills, experiences (and food!) can be shared. Specific track: local farmer’s markets (talk to the vendors, hang out and discuss with other women with kids); community gardens (met a very interesting woman at one of mine yesterday); Maker Spaces (take the kids to a Maker Faire); or, maybe, post a meeting at your local library (with flyers in the kids library and passed around to the children librarians) and see who shows up.

        In my preparedness consulting, i’ve found women to be the most pragmatic about a realistic approach to long term resilience and sustainability, and much less likely to get sidetracked into endless discussions about Zombie armament and what guns to buy.

        Just my two cents worth. I look forward to your further contributions to this community, and thanks!

        cheers, m

        • Deidre

          I LOVE the comment about how men get “sidetracked into endless discussions about Zombie armament and what guns to buy” – excellent, concise. While defense may be a necessity in our future, we really do need to eat first.

    • Banh

      Lana, I hope you get to read this. I have a suggestion for women which would help to strengthen our society against a parasitic “management system”.

      Bring yourself up to speed on people like Ron Paul, who espouses using our personal power and sovereignty to erase the apathy which has left us victimized by the Machine which is currently eating our lunch for us.

      Women desire security more than they desire liberty. When a very clever program designed to separate the sexes and offer the “perception” of security was proposed to women (the Feminist movement), millions jumped on it. The end result was two encapsulated genders which don’t communicate well because an artificial animosity has grown between us. “Big Daddy” government became the feminists’ best friend and the man of the house became useless, hated, ridiculed as a loser, etc.

      This system was successful in another region of the world as well. It was called Communism and it was a total success in the Soviet Union. Drive a wedge between a man and woman, sell the woman on the idea that her hubby is a louse, a drunk, a dead weight, offers no safety and security and show her that she only needs to put her faith in government.

      The best thing a woman can do is to reach out to the men in her life, get the connection to work again by expressing her concern for the future of our families, and you might be surprised at how a man might respond. Most men really need to be NEEDED, not despised. The feminist attitude begot the same in men.

      You sound very successful in life Lana. Please put your good attitude and inquisitive nature to work for the women around you. many of them have completely zoned out on politics and proactivity when it comes to these serious matters.

  • Pal

    How do you see such a reset would change the relative competitiveness and wealth of countries having currently sharply different profiles such as e.g. the nordic Finland and the Central-Eastern European Hungary? Finland has been highly successful on the back of prospering global economy, but they have difficult climate for agriculture and are geographically isolated from other markets to trade width. In contrast, Hungary has not been very successful in economical terms due to the long lasting aftermath of the communism but on the other hand has very good climate, plenty of fertile land and geographically quite centrally located in Europe.

  • Eduardo Martinez

    Two questions

    1. Would an ETF shorting one of the major indices protect your wealth?

    2. If you own property that you rent out. How would this fair?

    I’ll have a go at answering my own questions – see if people agree.

    1. Initially YES but you would have to take profits quickly before there is a total meltdown. Longer term you lose all your money.

    2. Short term NO because people will not be able or willing to pay you rent. Longer term YES because the new financial system that is created will enable people to pay their rent.

  • monk

    A “reset” implies that the system will be back to normal after a shut down. I don’t think this is a reset but part of a permanent global recession, as the problem lies with the system itself. It’s not just too much debt but increasing debt that’s part of a global capitalist system. What’s more dangerous than that is a threat of a resource crunch which it masks, in this case conventional oil production remaining flat while non-conventional sources which have lower energy returns are put online.

    • John Robb

      Exactly, if you lower economic activity by a considerable amount, you will radically reduce the strain on limited resources.

  • StopDemockery

    No bank in the so-called ‘free world’ has actually lent any money since 1933 when, in the Emergency Banking “Relief” Act, the banksters declared Americans to be “ENEMY COMBATANTS.” All bank debts are frauds. And all national debts are frauds. It’s against federal law for banks to risk (“lend”) their assets or those of their depositors. So, from exactly where does the money to fund bank debts come?

    Every time the Fed created a billion dollars out of thin air to “lend” to the government, the private owners of the Fed instantly became a billion dollars richer on paper. And, when you signed your bank’s promissory note for your mortgage, your bank deposited it as a credit instrument, upon which they could lend 900% more. Your signature created the money from the unlimited credit of your (secret) Treasury Direct Account. You funded your own “loan.” Then the bank charged you three times face, plus they chatteled your home all for nothing than book keeping entries. Further, in this fiat system, only the money for principle is created. No funds to pay interest are created. The system is designed to ultimately flood the world with fake debt that can not be repaid. It’s a house of cards. Welcome to the New World Order.

  • John

    Piling on to the dismal forecasts:

    Nouriel Roubini. A Global Perfect Storm. “…while the cloud over the eurozone may be the largest to burst, it is not the only one threatening the global economy. Batten down the hatches.”

    Dani Rodik. The End of the World as We Know It. “Over the next few years, the world economy slumps into what future historians will call the Second Great Depression. Unemployment rises to record-high levels. Governments without fiscal resources are left with little option but to respond in ways that will only exacerbate problems for other countries: trade protection and competitive exchange-rate depreciation.”

  • Ace

    This posting skipped a huge step in explaining how debt, fractional banking, and defaults all play into the big reset. As sovereigns issue debt, a liability, in record amounts, these pieces of “paper” and electronic entries are assets on the books of other institutions.

    These assets are then used as collateral to generate more debt, or electronic entries, which increases the money supply. This increases the price of other assets, such as real estate and stocks, which in turn elevates the value of potential collateral available to generate more electronic debt. Further, the central planners have actively pushed the value of debt higher (interest rates lower) to magnify the potential borrowing capacity on that debt, which further increases the electronic currency available to further elevate prices.

    At the end of the day, all currency in this fiat world is based on debt, which starts with the sovereigns. Once you break the faith that the sovereign debt will ever be repaid, the value of the currency down the chain vanishes as the collateral is liquidated. The reality is that there isn’t enough hard money in the system to support the current valuation of all markets and, eventually, all fiat currency will fall to its true intrinsic value as an electronic entry on some bank’s computer – zero.

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