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Alex Adamov's avatar

Good nuanced take Erik. Balaji raised another point: modern technology amplifies panic and herd behavior. This in turn precipitates loss of confidence effects.

In this light, it is useful to run a scenario: when large holders of US long term treasuries and US government guaranteed mortgage-backed bonds start to sell their holdings because they believe they will be sitting on permanent losses. What happens to the equity of banks, insurance companies and pension funds ? What happens to institutions or sectors that rely on these financial institutions? What happens to real estate valuations and what effects do they have on consumption and investment?

The abandonment of the US reserve currency status may happen relatively quickly because of large scale loss of confidence. Gold as an easy alternative for other central banks and for large financial institutions is freely available and can become an alternative reserve currency quickly. All that is needed is the beginning of a collective shift in belief that gold is more trustworthy than the US government/Fed.

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Swag Valance's avatar

Balaji lost me when he said we'd all become seasteaders and land won't matter for the rule of law anymore. This seems to pile on to his growing cognitive disconnect with reality.

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