Which Assets Are Most Likely To Survive The "System Reset"?

Tyler Durden's picture

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

Your skills, knowledge and and social capital will emerge unscathed on the other side of the re-set wormhole. Your financial assets held in centrally controlled institutions will not.

Longtime correspondent C.A. recently asked a question every American household should be asking: which assets are most likely to survive the "system re-set" that is now inevitable? It's a question of great import because not all assets are equal in terms of survivability in crisis, when the rules change without advance notice.

If you doubt the inevitability of a system implosion/re-set, please read Is America In A Bubble (And Can It Ever Return To "Normal")? This brief essay presents charts that reveal a sobering economic reality: America is now dependent on multiple asset bubbles never popping--something history suggests is not possible.

It isn't just a financial re-set that's inevitable--it's a political and social re-set as well. For more on why this is so, please consult my short book Why Our Status Quo Failed and Is Beyond Reform.

The charts below describe the key dynamics driving a system re-set. Earned income (wages) as a share of GDP has been falling for decades: this means labor is receiving a diminishing share of economic growth. Since costs and debt continue rising while incomes are declining or stagnating, this asymmetry eventually leads to insolvency.

The "fix" for insolvency has been higher debt and debt-based spending--in essence, borrowing from future income to fund more consumption today. But each unit of new debt is generating less economic activity/growth. This is called diminishing returns: eventually the costs of servicing the additional debt exceed the increasingly trivial gains.

What happens when the bubbles pop, despite massive central bank/state interventions? The entire socio-political/financial system goes through a "system re-set" in which all the fantasy-based valuations, political denials, false promises and fraudulent claims collapse in a heap.

In a crisis, the privileged Elites will change the rules in a desperate attempt to expropriate the income and wealth of the bottom 99.5% to preserve their own power.

The trick is to do so in ways that won't spark an immediate political insurrection.

We can better understand their policy choices by asking: What's easy to expropriate, what's difficult to expropriate?

Those assets that are easy to expropriate will be expropriated first. Those that are difficult to expropriate are far less likely to be grabbed, due to the high costs of expropriation and the high risks of sparking a political insurrection.

History suggests the privileged Elites will pursue two basic strategies to expropriate the income and wealth of non-elites:

1. They will expropriate what is easy to expropriate: financial assets in centralized institutions the state controls: banks, brokerage accounts, insurance policies, etc.

2. They will use the time-honored "stealth expropriation" methods: inflation and taxes.

Any "money" held in a centrally controlled institution can be expropriated overnight. The rules will change without warning, so there will be no opportunity to escape the system.

Direct expropriation takes many forms. Your funds could be "bailed-in" (transferred to the bank). Large currency bills could be declared worthless. IRA and 401K accounts could be transferred into government bonds, to "protect the account owners from risky investments." (Naturally, any expropriation will be presented as "for your own good.")

Or a new currency could be issued that strips away 90% of the purchasing power of the old currency. It could be a New Dollar, an SDR global currency, or a state-issued cryptocurrency. The point is to strip away 90% of the wealth held in the old currency.

Indirect "stealth" expropriation has several forms: slow currency devaluation, also known as inflation, or higher taxes and junk fees (not called taxes, but you receive no additional value for the higher fees).

The end result of these policies is you may receive the $2,000 monthly pension you were promised, but after inflation, currency devaluation and taxes, your real purchasing power is $100 in today's currency.

So what's difficult to expropriate? I present some answers in my books An Unconventional Guide to Investing in Troubled Times and Get a Job, Build a Real Career and Defy a Bewildering Economy.

It's impossible to expropriate one's skills, experience and social capital. These are intangible forms of capital and so they cannot be confiscated like gold, currency, land, etc.

Land and homes are difficult to expropriate for two reasons: private property is the backbone of capitalism and democracy, and the state confiscating private property would very likely spark a political insurrection that would diminish or threaten the power and wealth of the privileged Elites.

Secondly, it's very costly for the state to maintain the productive output of real property it has confiscated. Guards must be posted, sabotage repaired, and the immense difficulties of coercing a rebellious populace to continue working what they once owned for the benefit of the state and its privileged Elites must be solved and paid for.

The state can expropriate farms, orchards and workshops for back taxes (or some similar extra-legal methodology), but how do you force people to work these properties productively?

As a general rule, whatever the super-wealthy own will be protected from expropriation. Private real property is the foundation of the Elites' wealth, and while the land of debt-serfs may well be confiscated for back taxes (the wealthy will buy exemptions from rising taxes), those who own land and buildings free and clear constitute a political force to be reckoned with.

As I discuss in my book Resistance, Revolution, Liberation: A Model for Positive Change, there's one other asset the state and its ruling Elites cannot expropriate: community.

The state will also have difficulty confiscating assets that are outside its reach. This explains the propularity of owning assets in other nations, and the debate over cryptocurrencies: will states be able to confiscate all cryptocurrencie at will, or is that technically unfeasible?

The main takeaway is this: your skills, knowledge and and social capital will emerge unscathed on the other side of the re-set wormhole. Land and real property you own free and clear (no debt) is likely to remain in your possession, as long as you can pay soaring taxes/junk fees during the crisis phase. Your financial assets held in centrally controlled institutions will not make it through unscathed; they are simply too easy for central authorities to expropriate.

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unrulian's picture

These guns will survive, welcome to the gun show bitchez

This Might Hurt's picture

This video is the answer, fodusing on highly liquid assets, precious metals and bitcoin compliment eachother amazingly well.   http://www.themonetaryreset.com/2017/02/complimentary-precious-metals-an...

VinceFostersGhost's picture

 

 

Food.......guns......gold......silver.....water.

 

Just shootin from the cuff here.

 

Oh yeah.......whitehouse cufflinks.

clade7's picture

 Bic Lighter and a plastic tarp?

The Saint's picture
The Saint (not verified) clade7 Feb 6, 2017 10:51 AM

3 data points does not a reliable predictor make.

 

Paul Kersey's picture

75% of Americans don't have dick now. They are living on credit. If the day comes, when credit is no longer extended to them, expect chaos. Go long gated communities guarded by highly skilled mercenaries. Being heavily armed and living in a bunker full of canned food will not protect you from hungry mobs. However, there can be some safety in numbers, to protect you when the wrong folks come calling. Too bad we don't have an Alfred the Great to repel the Danes (only these folks won't look like Danes).

eforce's picture

The Protocols suggests the next reset/revolutions will be aimed at removing the money changers and letting the people think they are free when in fact they will be chained down by capital even further (crypto?).

Being chained by a rigid free market doesn't sound so bad...unless you're a libtard...

AVmaster's picture

Keep stackin bitches....

Herd Redirection Committee's picture

The Mark of the Beast...  That is the only remaining play.

But I don't see how they can pull it off.  They have always been patient, but now that things are unraveling for them (btw: apocalypse means 'to reveal, to uncover', as does: revelation) they are losing their patience, which will be their undoing IMO.

If they can't 'sell' us on what a success demonetization has been in India, they can't sell it 'organically', they will be seen to be forcing it.

BTW, we have been told 'discrimination' is bad, our entire lives (if you are Millenial esp.) when really, discrimination means the ability to 'recognize a distinction', or 'differentiate'.  You know, like the difference between real news and fake news?  The distinction between propaganda, disinformation and the truth?

 

Justin Case's picture

when the wrong folks come calling.

Hopefully there's moar of right folks than the rong folks. Be like the old west, a shoot out. The time when we had amnesty in Canada, on turning in unregistered weapons, someone turned in a 50 cal. Not too many places in suburbia to hide from them rounds. Live by the gun, die by the gun. Best is to run for the hills and let the city burn. When the military is in control it' might be safer to return.

JamesBond's picture

Land, madam.  If you can keep it.

 

 

HardAssets's picture

Ya saw what happened during the recent coup attempt in Turkey. Troops armed with automatic weapons were dragged out of their vehicles and beaten to death by huge mobs. When people get angry and/or desperate enough. 'highly skilled mercenaries' won't do squat.

BarkingCat's picture

Problem with pussy is that is has a rapidly declining value.

A good old fashioned woman might be like wine, but modern pussy is like milk.

Justin Case's picture

What do ya call a room full of 50 yr. old women?

A whine and cheese party.

ATM's picture

How is a vagina like a tin roof?

If you don't nail them good they will both end up at the neighbors.

Justin Case's picture

What do they call that part between the vagina and the asshole?

Chin rest.

Arrow4Truth's picture

They refer to it in the south as taint. 'Taint pussy and 'taint asshole.

vato poco's picture

short shelf life of pussy not really a problem. always more girls on the girl tree. watch the marquees of your town's various strip clubs in May/June: they *will* have something to the effect of "now hiring class of 2017"

GubbermintWorker's picture

You need to include lead for those lead delivery systems.

Praetorian Guard's picture

In all honesty, I really do not think the vast majority grasp, I mean REALLY grasp, what a "system reset" means. It means war, food shortages, chaos, death, and if it continued long enough without food, medicine, infrastructure, etc. in a first world nation a HIGH percentage of the populace would cease to exist within a few months time. 

 

I want reform, TRUE reform, I pray we NEVER have a true reset in the absolute. Neither will you. It means that it becomes a crap shoot, a roll of the dice, and pure luck, as to who lives and who dies. My guess is Lady Luck would not smile on the vast majority.

fockewulf190's picture

Yeah, I can easily see a Great Reset taking billions of lives. There are billions of people living on a few bucks a day. You don't need to think too hard to figure out that once those few dollars vaporize into hyperinflationary nothingness, starvation will be the result, and it will be rampant.

Dr. Spin's picture

Hey Vince,

You forgot booze and cigarettes...

;-D

ItsyBitsy90's picture

Real question here (not scarcasm)...so what do ZH's recommend the average middle-class job-dweller do?  Most of my assets are in 401k....own a small, summer house.  Divest 401k into precious metals and land?  Really curious what others would suggest?

HRH Feant's picture
HRH Feant (not verified) ItsyBitsy90 Feb 6, 2017 4:36 PM

Welcome to reality. I suggest you keep on reading. Pay attention to that queasy feeling in your stomach.

Did you read the article? Reread it and click on all of the links read those articles and /or buy the books. That is a start. CHS leans a little too far to the left for my taste but there are other authors out there writing about what could happen and why and what to do about it.

I would suggest you stop taking your comfy job for granted. And your 401K. That 401K could go poof in an instant. Imagine your $250K 401K going poof: that was how much you "owned" on Friday and on Tuesday (after a bank holiday) your 401K is worth $25K. You hope. When many people will be scrabbling to buy groceries no one is going to care that your net worth decreased except for you.

What are you doing to create other income streams for yourself? Start thinking like a business person about yourself and your household. Are you in debt? Get out of debt. Do you have extra food and supplies? Have you invested in yourself? What skill have you learned that can provide extra cash flow?

If the system is shut down for days or weeks do you have cash on hand to buy basic items if the credit / debit card system is shut down? Do you have silver or gold bullion coins? Do you have a gun and a way to protect yourself and your family? Do you shoot that gun on a regular basis? Paying for firearms instruction might be a good idea if your skills are rusty or non-existent. Make time to visit your local gun range and practice.

Archibald Buttle's picture

and learn how to grow your own food. it's a little more complicated than going to home despot and buying supplies. even if you live in a city, put some pots on your porch and try some indoor gardening. there is a learning curve, and you would be well-advised to be somewhat down the x-axis of said curve when TSHTF.

Crush the cube's picture

Check and see if your plan allows loans, most will.  Generally you can borrow up to half your balance, than pay off any debts that could do damage, or use it to buy hard assets and necessities to make it through the turbulence ahead.  Any interest paid back to your 401K goes back into your account, you can choose the time/ amounts of monthly pay backs.  Side benefit, if they do seize it, they only get half, if the 401K shits you only lost less than half, if everything goes down including losing your job, they really can't make you pay it back, you will still get what's left over if anything.  You are your own bank, and these bastards don't want you to know it.

I've always used it to make major purchases, than pay myself interest and keep minimal market exposure, they have noting but toxic choices to invest in any way.  The bastards who manage them are under no obligations to put your money into what you dictated any way, they merely track the funds and make you take the losses accordingly.  They invest with the goldmans who don't lose and than keep the gain, plus what you supposedly lost. 

Putrid's picture
Putrid (not verified) ItsyBitsy90 Feb 6, 2017 11:46 PM

There was a meeting of Hedgers in Shanghai a few weeks ago, my network has been dicussing this issue recently. 

I think you should leave the USA, it's the heart of the crisis. I've moved to a tropical beach just north of Macau. Some guys have detailed plans for Russia, New Zealand etcetera. 

I've stored physical gold in China, Switzerland etc. So if one place collapses I can move easily, so a network approach is best. But since I'm connected I can say with confidence that the Reset is planned and should go smoothly for some nations.

If you're near Macau let me know and we can hang out,

Putrid,
www.beforethecollapse.com/about 

 

unrulian's picture

I really have no idea where that came form...Monday I guess

JRobby's picture

So if you are stupid, you end up in Chicago or some other inner city hell hole and get shot to death?

Oh right, check.

 

Saucy-Jack's picture

Does Charles pay Tyler money so articles that promote his book get published on this site?

Koba the Dread's picture

What do you call some moron who believes his home armament can withstand an assault from professional, organized and trained combat troops? You call him a dead man.

Get real! Your "arsenal" is popguns, mere dick extenders until the real conflict starts.

Herd Redirection Committee's picture

The insurgents in Iraq and Afghanistan seem to be able to survive...

Its a question of not being the 'low hanging fruit'.  You know, the old "Can you outrun a bear?"

"No, but I can outrun you!"

gatorengineer's picture

Physical Fiat for early in the crisis, and then after that gold, silver, lead, and skills...

dark fiber's picture

Anything with tangible and/or utility value will survive.  Holding on to it is also an important issue.

HRH Feant's picture
HRH Feant (not verified) dark fiber Feb 6, 2017 4:43 PM

Or having enough common sense to be able to hide or disguise what you have. Hiding things in plain site is a motto I find valuable. I also like the phrase "going grey." Are you grey? Can you move around and not stand out and attract attention? If people think you have nothing of value they will leave you alone.

GlassHouse101's picture

nunchuck skills, bow hunting skills  . . .

dasein211's picture

Physical fiat? Did you just see what India did? Physical gold? Anyone remember the Great Depression and its gold confiscation? Unless they shut down the internet it will be digital money. Own some gold and digital. It's the safest way to keep assets you can quickly spend with you. Holding land may not be an option as the government can just wipe all the titles away as well. Having land deeds and contracts attached to a digital currency may be the best thing but it's difficult to convince an army you own something when you don't have an army yourself.

RedDwarf's picture

They're not going to confiscate gold in Ameria again.  Only the soverign wealth funds, central banks, and the very wealthy now hold any meaningful quantities of gold.  Sure there are a few stackers like some of us out there, but they are a infinitesimal percentage of the gold holdings in America.  In India the people hold a lot of gold, so yeah they're confiscating gold there, but America went through that already.

So give it a rest about the gold confiscation story.  Not going to happen.

SeuMadruga's picture

it wouldn't be necessary, for in that case gold would not be used again as a mean of exchange (bc most of the people are already stripped of it...)

El Vaquero's picture

Yes, the state will change the rules to whatever suits it.  The problem is, it doesn't have the manpower to enforce those rules if enough people collectively say "NOPE!"  It is going to have to impose its will upon a group that has two speeds:  Peaceful and Total Warfare.  After dealing with the SJW snowflake meltdowns for months, and the inevitable nuking of their pensions, the state and local enforcers are not going to be on their side.  

umdesch4's picture

I'm not worried about gold confiscation. I don't have any. It's amazing I still have a boating license with all the tragic accidents I've had.

Cloud9.5's picture

This time is different for several reasons.  The right has held that the government has been illegitimate with the election of a foreign national as president for many years.  Now the left has jumped on board with their mime that the Russians rigged the election and they are in open rebellion against Trump.  An edict to confiscate or ban anything at this point is going to fall on a lot of deaf ears. Compliance is required for any system to work.  Outside the cities most people will not be turning in their precious metals or lining up at the train station.

 

Seventy five percent of my net worth is virtual, living on a hard drive.  That can be confiscated with a mouse click.   The rest, they will have to come and get.   They, whoever they wind up being, do not have enough people to go door to door.  Cash is a tiny portion of the money currently in circulation.  Shut down the banking system and that cash is all we little people have to conduct transactions.  Barter will cover a lot of small transactions.  Gold and silver and in extreme circumstances lead will cover the more serious transactions.

shamus001's picture

As soin as the banks shut down, if digital wealth is confiscated, if there is a financial reset- stores will be wiped out just like you. Transport of giids will cease, commerce grinds to a halt, and in that period of darkness no one knows who , what might happen! All tge computer scenarios likely point to regional usurpers, and loss of control.

THIS is why this has been forstalled!

Mr Kurtz's picture

Stock up on toilet paper and tampons. Trust me, your neighbors will gladly give up food, ammo, and liquor for these "essentials" when the old lady is OTR.

ClassicalLib17's picture

"gold, silver, lead, and skills..."  I agree.  I intend to find my sustenance in WHATEVER I shoot on the street! I've read that there exists today ancient jungle cultures that continue this practice. Now if they aren't God's Children then who am I?

brushhog's picture

Yup. Thats why I like farm land and equipment as a primary form of wealth. Not only do they store well, but it can be worked for cash flow.

GlassHouse101's picture

yes, so long as you can defend it.