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The 'Big Reset' Is Coming: Here Is What To Do

Tyler Durden's picture


A week ago, Zero Hedge first presented the now viral presentation by Raoul Pal titled "The End Game." We dubbed the presentation scary because it was: in very frank terms it laid out the reality of the current absolutely unsustainable situation while pulling no punches. Yet some may have misread the underlying narrative: Pal did not predict armageddon. Far from it: he forecast the end of the current broken economic, monetary, and fiat system... which following its collapse will be replaced with something different, something stable. Which, incidentally, is why the presentation was called a big "reset", not the big "end." But what does that mean, and how does one protect from such an event? Luckily, we have another presentation to share with readers, this time from Eidesis Capital, given at the Grant's April 11 conference, which picks up where Pal left off. Because if the Big Reset told us what is coming, Eidesis tells us how to get from there to the other side...

First of all, what is systemic risk?

Typical Systemic Risks:

  • Wide-spread defaults, sovereign debt crises, devaluations, capital controls, bank holidays, etc.

How it usually happens:

  • No warning;
  • Emergency announcement over a weekend;
  • Drastic measures to “protect the public” against [insert suitable culprits];
  • Outcome- someone’s value gets expropriated.

Yes, it can happen here –it has in the past.

Usually, the best warning indicator of a major systemic "event" are soaring cross-asset correlations: something we are experiencing right now.

  • Crisis of 2007-2009 was a “High Correlation” disruption:
    • Multiple institutions and majority of the population were affected.
  • Reducing systemic risk called for lowering correlation, i.e. “firebreaks”, de-coupling, etc.
  • Instead, governments’actions since 2008 have been increasing correlation:
  • Fiscal Policies –sovereign debts are higher than ever and still growing fast;
    • Monetary Policies –broken price mechanism = system-wide misallocations and mispricings;
    • Too-Big-To-Fail –bigger than before the crisis;
    • Euro Zone Crisis –“solutions” keep increasing interconnectedness – a “mutual suicide” pact;
    • Financial Regulation –was supposed to reduce the risk but stalled through stiff opposition:
      • A single JP Morgan trader is reported to run $100 bln CDS book?!?!?!?!?! [ZH: now confirmed, and we all know the story since]
    • Lack of Transparency –more opacity since the crisis; mark-to-market remains suspended.

Everyone knows this but only few are willing to accept the implications; fewer still are willing to act.

What are the key systemic risks:

  • The already unfolding crises:
    • The Euro zone, Argentina.
  • Redistribution of wealth:
    • ZIRP –Taking from net savers for the benefit of net debtors.
    • Inflation targeting –Debasing debts at the expense of savers and bond holders.
    • Pending tax hikes for top earners.
  • Financial Marshall law:
    • FBAR and FATCA raise penalties and tighten reporting on all financial assets held offshore.
    • Argentina –Currency controls; “Dollar-sniffing”dogs at the airports and border crossings.
  • Governments co opt banks to police the assets within the system:
    • FATCA - all foreign financial institutions to report on all US customers or face 30% withholding.
    • Swiss banks have been firing US clients; deal on reporting is inthe works.
    • Swiss banks have agreed to report on their German and UK customers’accounts.


What to look for:

  • There are always losers and winners –many more losers than winners.
  • Majority has “normalcy bias” – tendency to underestimate risk of disaster.
  • Only a few heed the risks and make proper contingency arrangements.
  • Historically, financial disaster preparedness has enabled accelerated wealth creation.

Systemic Insurance is the only way to protect wealth from “High Correlation” events.

But more than anything, the one biggest giveaway is near endless complacency: the more the pros exhibit it, the closer we are:

  • Western economies have enjoyed V-shaped recoveries and domestic peace for over 65 years.
  • Mainstream investors have never experienced a “reset” or repression, financial or political.
  • Disdain for history and post-WWII Western exceptionalismunderpin collective hubris:
    • "There can be few fields of human endeavor in which history counts for so little as in the world of finance.Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of the those who do not have insight to appreciate the incredible wonders of the present.” - John K. Galbraith

Complacency is misplaced – despite apparent normality, the risks are high and growing.

One simple example of the true cost of systemic risks in vitro:

  • Analyze This: Crisis of September 2008 Without The Bailouts = ? $$,$$$,$$$,$$$,$$$

What's the big deal: they bailed us out before, they will do it again.

Wrong: "Due to massive new debts and politics governments’ capacity for future bailouts is limited."

Which means that systemic hedges should be used by everyone. At what cost though:

  • Price of Systemic Insurance = Probability of Disruption X Potential Loss Severity

As Eidesis notes: Insurance is cheap whenever consensus under?estimates the Probability of Disruption.

Or, worse, when the status quo is artificially keeping the price of systemic insurance low to prevent the general public from realizing just how precarious reality truly is. Remember:

  • "When it becomes serious, you have to lie" Jean-Claude Junker

So if we are handed cheap insurance options, where should we be looking? Long-time Zero Hedge readers likely already know the answer:


  • Ideal Attributes – Valuable, uniform, divisible, portable, storable.
  • No One’s Liability–Physical form, unlevered, non-financial custody; no reliance on capital markets.
  • Multiple Exit Strategies – Diversity of buyers; ability to exit via different currencies.
  • Geographic Diversification ? The only feasible way to manage sovereign risks.
  • Flexibility – Ownership arrangements must be actively managed to address evolving conditions

Exposure to Safe Haven assets via financial instruments IS NOT Systemic Insurance


  • Proven Safe Havens for preserving value through the “trough” of a crisis:
  • Real Estate – “Real” but immovable; not uniform, usually owned with leverage; easily taxable.
  • Diamonds – Valuable, portable and storable but neither uniform nor divisible.
  • Art, Antiques, Collectables – Issues with subjective valuations, authenticity and provenance.


Which leaves...

  • Precious Metals can preserve value through a crisis AND provide liquidity during a crisis:
  • Silver–“Poor Man’s Gold” but impractical for large sums.
  • Platinum –The bullion is not as readily available as gold.
  • Palladium –Somewhat esoteric.

GOLD –Always liquid, widely available, universally accepted, deepest markets, global pricing

Gold – 2,500-year unbroken track record of liquidity and “Safe Haven” performance.

But don't take our word for it... Or that of Eidesis. How about that of... the Federal Reserve:

Here is the FRBNY explaining why people own gold:

  • “For centuries, gold had a profound impact on history, as a symbol and a storehouse of wealth accepted universally around the world.“
  • “When people are worried about political instability, war or inflation, they often put their savings into gold.”
  • “Gold functions as a medium of exchange, particularly in areas where currencies are distrusted.”

Why the US government nationalized gold:

  • The 1933 prohibition against gold ownership “prevented hoarders from profiting after Congress devalued the dollar (in terms of gold)”by 41%.


What else does the Fed tell us:


  • “As of early 2008, the Fed’s vault contained roughly 216 million troy ounces of gold“–“about 22 percent of the world’s official monetary gold reserves.”
  • “The United States owns approximately 27 percentof the monetary gold”–“262 million troy ounces as of 2007.”
  • “A majority of [the U.S.] reserves is held <…> at Fort Knox, Kentucky, and West Point, New York. Most of the remainder is at the Denver and Philadelphia Mints and the San Francisco Assay Office.”


Which means that as we approach the date with the Grand Reset which Raoul Pal predicted could come as soon as the end of the year, and which Soros has as under 3 months and counting, there is only one question:


Do You Have Systemic Insurance?


Full Eidesis Presentation:


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Fri, 06/08/2012 - 03:26 | 2506446 Savvy
Savvy's picture

You have a really big mouth too dumbass.

Fri, 06/08/2012 - 04:58 | 2506482 tahoebumsmith
tahoebumsmith's picture
I could be a Zebra, a clown, an elephant or the ring master..... It doesn't matter BITCHEZ...It's just one big dog and pony show anyway.... Just never thought I would be the feature attraction... SLUT



Fri, 06/08/2012 - 05:20 | 2506491 Disenchanted
Disenchanted's picture




what's your plan for spike strips?


jus askin...

Fri, 06/08/2012 - 06:41 | 2506544 Go Tribe
Go Tribe's picture

Anything that large is going to attract attention from all the wrong people. I hope you can park it at a friend's farmhouse that has 500-yard shooting lanes on all sides and a fortified cellar.

Fri, 06/08/2012 - 07:41 | 2506617 gaoptimize
gaoptimize's picture

Well, I consider you a prepper.  It is regrettable that TPTB have implanted the meme that preppers are crazy.

Fri, 06/08/2012 - 16:16 | 2508549 WolfePaq
WolfePaq's picture

you are talking about fundamentals which absolutely no bearing on the market whatsoever- the market can remain irrational longer than you can remain liquid.


Thu, 06/07/2012 - 23:00 | 2506093 Turin Turambar
Turin Turambar's picture

Better yet, can we burn our Keynesian central bankers on a pyre of paper fiat money?

Fri, 06/08/2012 - 00:06 | 2506233 Shazam342
Shazam342's picture

Can we burn our Keynesian economic books on a pyre of paper fiat money?


Sounds like fun!

Fri, 06/08/2012 - 01:33 | 2506354 indygo55
indygo55's picture

I'll bring the wennies.

Fri, 06/08/2012 - 08:22 | 2506698 j0nx
j0nx's picture

A wennie?

Fri, 06/08/2012 - 01:11 | 2506327 SomebodySpecial
SomebodySpecial's picture

What good is insurance on the end game? Insure with me...I won't go bust with all the rest.

Fri, 06/08/2012 - 01:19 | 2506337 Freddie
Freddie's picture

Sadly Zero Hedge has a few 2008 Hope and Chains voting pederasts.  Like that weepy union stooge in Wisc the other night.

Fri, 06/08/2012 - 05:55 | 2506515 kita27
kita27's picture

None of you have a clue about how modern economies work. Well, some do, but most of you dont. Your all a bunch of parrots who hold a grudge against the system because you are all losers in that system. 

The rest of us are winners and think the system is fine and dandy, and when it's time, we will get the fuck out before the market collapses and leave the rest of you schmucks to clean up the mess with your 401k's and modest stock portfolios. 

ha ha ha, i love FIAT!!!!    


P.S i junked most of you.

Fri, 06/08/2012 - 07:02 | 2506572 cranky-old-geezer
cranky-old-geezer's picture



None of you have a clue about how modern economies work.

Yes, I agree. 

Most here (including the author of this article) believe there will be a collapse event followed by some sort of reset.

A collapse will occur, but it won't be an event, it will be a slow steady slide, and there won't be any so-called "reset".

The only thing in the way of an event that would cause a sudden change is WWIII ...and America wouldn't survive it.

Fri, 06/08/2012 - 13:56 | 2507992 Treeplanter
Treeplanter's picture

If we nuke Pakistan and Iran everything will be groovy.

Fri, 06/08/2012 - 09:01 | 2506793 Bogdog
Bogdog's picture

What's to prevent the US Govt from confiscating or taxing the heck out of your physical gold again? 

Answer: nothing.

Fri, 06/08/2012 - 10:38 | 2507196 oddjob
oddjob's picture

Answer: What's a Gold?

Fri, 06/08/2012 - 13:53 | 2507988 Treeplanter
Treeplanter's picture

There are many types of ammo that can be be used.

Fri, 06/08/2012 - 13:51 | 2507980 Treeplanter
Treeplanter's picture

No. Your kids can build playhouses and forts with those books.  There will be a big demand for fiat as wall paper. 

Thu, 06/07/2012 - 21:30 | 2505905 rustymason
rustymason's picture

Was there news in there somewhere?

Thu, 06/07/2012 - 21:47 | 2505943 junkyardjack
junkyardjack's picture

This post made me think of


Fri, 06/08/2012 - 01:10 | 2506325 essence
essence's picture

These days, the honest depiction of reality is NEWS

Fri, 06/08/2012 - 02:58 | 2506423 the tower
the tower's picture

Some people bought gold at the peak and are now desperate to have it go up again. That's why we need this "news".

Thu, 06/07/2012 - 21:30 | 2505906 EvlTheCat
EvlTheCat's picture


Thu, 06/07/2012 - 22:23 | 2506017 CrashisOptimistic
CrashisOptimistic's picture


More gold hype to satisfy the readership and maintain the click revenue business model.

I'm not a gold hater, but this is a quote from the article:

GOLD –Always liquid, widely available, universally accepted, deepest markets, global pricing --

Universally accepted?  No, it's not.  Shave yourself off a few wedges and offer them to the cashier at Walmart to pay for your groceries and see what happens.

There is way too much gold focus here.  




Thu, 06/07/2012 - 22:33 | 2506037 Dick Buttkiss
Dick Buttkiss's picture

“Fiat money, in extremis, is accepted by nobody. Gold is always accepted." -- Alan Greenspan, testifying before Congress in 1999

Hope you can translate "in extremis."

Thu, 06/07/2012 - 22:40 | 2506052 CrashisOptimistic
CrashisOptimistic's picture

As long as there is food at Walmart, there is no extremis.

If there is no food at Walmart, no one will sell it to you for anything at all.

Thu, 06/07/2012 - 23:02 | 2506098 old naughty
old naughty's picture

Oh yes, those who stock up food will gladly sell bag of potatoes, rice, soybeans... to you for your gold,

But he has no small changes, so one oz gold coin/bar for 5 kg of rice, perhaps?

Some barter.

Thu, 06/07/2012 - 23:33 | 2506170 Uber Vandal
Uber Vandal's picture

Is there a differnce between that scenario and exchanging tens of thousands of dollars for cancer medication to help a person make it another month?

That is some barter, too.

Fri, 06/08/2012 - 07:18 | 2506592 cranky-old-geezer
cranky-old-geezer's picture



Nobody is worth 10 grand to keep them going another month. 

Fri, 06/08/2012 - 12:52 | 2507737 emersonreturn
emersonreturn's picture

cranky-old-geezer...steve jobs...hawking...there are minds and people out there that are either either rich enough or society values enough...

Fri, 06/08/2012 - 08:09 | 2506669 lightning
lightning's picture

Barter is alive and well right now.  Craigslist has a section on it, which is how a friend of mine saves her resources.  If there is a huge reset, it is probable that some of the best barter items will be medicine, ammo, guns, and food.  Good on those that have these items especially if the government attempts to confiscate various forms of people's wealth (gold, 401k's, silver, etc).

Fri, 06/08/2012 - 09:13 | 2506830 PivotalTrades
PivotalTrades's picture

Really,,,are you that cluless.. melt, shave , scratch and weigh..no wonder the world is fucked up

Thu, 06/07/2012 - 23:06 | 2506106 jeff montanye
jeff montanye's picture

check under precious metals and barter items: http://www.survivalmonkey.com/forum/general-survival/2715-ferfal-some-fi...

some of the most dangerous words ever are it can't happen here.

and, since a crash is optimistic, even if it doesn't, the best assets to own in equity bear markets historically have been gold and related stocks.

Fri, 06/08/2012 - 01:44 | 2506360 Cursive
Cursive's picture

@jeff montanye

The part about SHTF driving is when you begin to understand, from personal experience, what he is warning you about.  I see that he just fled Argentina and moved to northern Ireland.

Fri, 06/08/2012 - 05:06 | 2506484 Seer
Seer's picture

"If there is no food at Walmart, no one will sell it to you for anything at all."

I think you're forgetting that there are actually people who grow/produce food, and can do so in abundance (read "has excess capacity [beyond personal needs]").

Fri, 06/08/2012 - 07:54 | 2506634 kanenas
kanenas's picture

-in extremis-

During the second world war, Greece was under German occupation, food reserves were sent to German troops and production was under German control, citizens in the cities were starving to death.

Inflation was soaring (Jan1941 1GBP=1.200 Drachmas, Oct1944 1GBP= Drachamas). Soon people were getting small (if any) rations/coupons. 

When the shortage came to a peak, among citizens that couldn't flea to the country side, the ones with better chances to surving were Gold holders. Some holders of productive assets came out of the war really wealthy. Others were executed during the occupation for trying to help their compatriots.

Thu, 06/07/2012 - 22:37 | 2506048 RockyRacoon
RockyRacoon's picture

The only thing there is too much of here is the number of people who don't understand gold and spout-off to show their ignorance.

Fri, 06/08/2012 - 00:41 | 2506281 EvlTheCat
EvlTheCat's picture

Maybe some of us understand gold more than you think Racoon!  We are tired of the same old hyperbole and want some definitive action plan!

Fri, 06/08/2012 - 00:56 | 2506303 Dr. Sandi
Dr. Sandi's picture

It's your job to come up with the plan. If you're waiting for the 'coon or somebody else to teach you to tap dance to automatic weapons fire, you're only screwing yourself.


Fri, 06/08/2012 - 05:07 | 2506485 Poor Grogman
Poor Grogman's picture

The Central Banks have their plan, why not you?

Maybe you should just try and Emulate a Central Bank.

1. Buy gold by selling crap.

2. Not tell anyone you are buying it.

3. Pretend it has no value and you are only buying it for "tradition".

4.  Option 4 is not available to you as it involves invading countries that have gold and then "Corzining" it.

5. Likewise option 5 an individual cannot "Confiscate gold from law abiding citizens"


There it is, simple really, isnt it?


Fri, 06/08/2012 - 05:15 | 2506488 Al Gorerhythm
Al Gorerhythm's picture

Here is a plan for those with a chronic case of hyperbolisis or acute normalcy bias, who, although conceding that there may be some chance of political morass and some truth behind the mainstream press' reports of European soverign solvency issues and some truth behing the rumours of unpayable $16Trillion US debt. If you still have an aversion to gold as a safe haven then try my definative Ten Step program:

Step 1: Ask Jon Corzine for financial advice.

Step 2: Buy some call options on Greek debt (currency diversification)

Step 3: Buy a box of gift cards redeemable at Walmart.

Step 4: Load up on bank shares.

Step 5: Hoard cash. You can do this by locking it into a 5 year term deposit or invest/buy some 5 year JPM bonds.

Step 6: Prepay your utility bill for 2 years. 

Step 7: Adorn your house with party lights.

Step 8: Invest in 10 year treasuries.

Step 9: Organise an appocolypse street party for 2113.

Step 10: Party like it's 1999.


Fri, 06/08/2012 - 05:36 | 2506501 Poor Grogman
Poor Grogman's picture

Heaven help us if some one in China steals your idea and mass produces it....

Fri, 06/08/2012 - 09:07 | 2506805 old naughty
old naughty's picture

Many of these they are doing except #10 as they do not allow to hold public meetings of more than a couple of dozens; #7 as they are just into litting the streets with Chinese-made LED street lights (hummmmm).

Oh even their next "Prince" is getting advices from Geithner.

We should be looking at the two-headed chimerika (sorry, chimera) as it won't be pretty when it rears its heads.

There's only them and us sheeples.

Thu, 06/07/2012 - 22:53 | 2506073 JackT
JackT's picture

Except Wlmart cashiers in Utah. Although I believe it only applies to US Govt issued gold or silver coin

Fri, 06/08/2012 - 01:57 | 2506365 Bizaro World
Bizaro World's picture

Exactly....except that the key point is that they are accepting gold/silver now, today. If TSHTF, they would surely accept common forms of gold/silver, at least until they ran out of supplies or were looted.

Thu, 06/07/2012 - 22:56 | 2506082 The Monkey
The Monkey's picture

Gold is at a cross roads. Either the Fed prints big and gold gets off the mat, or prices move a lot lower before they move higher.

Hard to handicap.

Equities must move lower with the coming crunch in forward earnings forecasts.

Easy to handicap.

Fri, 06/08/2012 - 01:00 | 2506310 semperfi
semperfi's picture

The FED has been continually printing for years now. They just don't admit it, and easily deceive the sheeple. Those who don't think the FED is printing are naive.

Fri, 06/08/2012 - 02:35 | 2506407 John_Coltrane
John_Coltrane's picture

Yes, the monetary base is expanding.  But credit is contracting as a recent ZH article quantifies.  Debt is being deleveraged and defaulted upon and in our fractional reserve, fiat  system, debt=money.  This is the essence of the reset to which the article refers.  In such an environment it is still possible for the price of real things such as food and energy to increase due to shortages and natural catastropies.  Such stagflation has been the norm in Japan for nearly 3 decades.  It is likely our fate too.

Gold is useful, but the most useful asset is also the rarest-ability and skills, both physical and mental.  For the commentor worried about computer bugs taking down the internet or elecrical grid-highly unlikely for distributed system like tne internet.  A massive coronal mass ejection from the sun is much more likely as a cause of a total grid/network failure.  And not much we can do about that as we enter a new very active phase of solar activity.  If it happens we will have about 10-20 minutes notice to black out the grid to avoid taking out all the transformers.  And it would take months to make enough to bring it up again.  So, then we'd really appreciate chemical fuels!  But likely chaos would reign.  But it might be worth it to laugh at the morons who bought plug in electric vehicles.  I've got a really large oil storage tank, but I'd still be a hurting unit. 

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