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

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.

Credit to Zero Hedge

FEBRUARY 6th, 2017...MORE THAN 1 OBJECT BELOW THE SUN!

Record radiation level detected at Fukushima reactor could kill human from even brief exposure

(Natural News) Radiation levels inside a damaged nuclear reactor at the Fukushima Daiichi nuclear power plant in Japan have hit a record high since the plant suffered a triple nuclear meltdown almost six years ago. The latest readings – described by experts as “unimaginable” – now pose a serious challenge as officials prepare to dismantle the disaster-hit facility safely.

Tokyo Electric Power (Tepco), the plant’s operator, said atmospheric readings inside the containment reactor No 2 are as high as 530 sieverts an hour, which is far greater than the previous record of 73 sieverts an hour. Reactor No 2 is one of three reactors that experienced a nuclear meltdown when the plant was crippled by a huge earthquake and tsunami in March 2011. (RELATED: See more news about the Fukushima disaster at FukushimaWatch.com)
A one-square-meter hole created by melting nuclear fuel

Tepco said recent image analysis revealed a one-square-meter hole in the metal grating beneath the reactor’s pressure vessel. The hole was probably created by melting nuclear fuel that penetrated the vessel, Tepco’s spokesman Tatsuhiro Yamagishi told AFP. Also, for the first time since the disaster, images were released showing dark lumps beneath reactor No 2. Experts believe the dark matter to be melted uranium fuel rods.

Even though specially-made robots designed to probe the underwater depths around the reactors have previously crumbled and shut down due to the highly toxic conditions, Tepco intends to send another remote-controlled robot to check the actual conditions inside the containment vessel.

The robot, however, will not last long. They are designed to withstand exposure to a total of 1,000 sieverts, meaning it will only survive for less than two hours in the presence of these dangerously high radiation levels. Nonetheless, Tepco’s spokesman Tatsuhiro Yamagishi said that the captured images will offer very useful information regarding the actual conditions inside the reactor.
A huge challenge in the history of nuclear power

These extraordinary high readings will make it very hard, and dangerous, for thousands of workers involved in dismantling the power plant, a process expected to take about four decades. Furthermore, medical professionals have never considered dealing with this level of radiation in their work, an official of the National Institute of Radiological Sciences told Japan Today.

To give you an idea of the severity, radiation doses of only 0.1 sieverts already significantly increase the risk of cancer. A single dose of one sievert is enough to cause radiation sickness, nausea, infertility, loss of hair, and cataracts. Exposure to five sieverts could kill half of those exposed within a month while a single dose of 10 sieverts could prove fatal within weeks.

After six years, Tepco and its business partners at the Fukushima Daiichi plant have yet to identify the location and condition of melted fuel in the three most severely damaged nuclear reactors. As reported by The Guardian, “the government has now estimated the cost of decommissioning the plant and decontaminating the surrounding area, as well as paying compensations and storing radioactive waste, to rise to 21.5tn yen [or about $190 billion],” which is nearly double the estimate released in 2013.

Even if they manage to clean up this nuclear mess shortly, Yosuke Yamashiki, Doctor of Engineering from Kyoto University, told RT that the complete reduction of the radiation will take hundreds of thousands of years. (RELATED: For more info on how to prepare yourself for future disasters, visit Preparedness.news)


Credit to Natural News

Poll Shows Merkel Losing Chancellorship If Elections Held Today

Overnight we reported that Germany's default swaps spiked to the highest level since Brexit as a recent poll showed that Merkel's lead in the polls had slid to multi-year lows ahead of Germany's elections later in the year, provoking some concerns that a formerly unthinkable "tail risk" outcome was becoming more likely. However, according to new data unveiled today, Merkel's headaches are only just starting, because in a brand new poll released this afternoon, the CDU would get 30% of the vote, while the suddenly resurgent SPD would get 31%. This means that the SPD's new head, Martin Schulz, would enter any coalition talks as the leader of the largest party, hence becoming Chancellor, leading to a stunned reaction by JPMorgan.

In a note released this afternoon by JPM's Greg Fuzesi, the strategist writes that following the recent resignation of Sigmar Gabriel as leader and chancellor candidate of the SPD, there has been much attention on how his replacement Martin Schulz would perform. Having spent most of his career in the European Parliament, most recently as its president, and being relatively unknown in Germany, this is not easy to predict. In his first major TV interview, he was recently pressed to explain how exactly he differs from his predecessor Gabriel and also from Chancellor Merkel, and what his focus on fairness would mean in practice. This was not entirely straightforward for him.

Nevertheless, opinion polls were beginning to show a bounce last week and this appears to be continuing. 

This afternoon, a new opinion poll from INSA showed the SPD gaining further support and overtaking the CDU/CSU for the first time in many years. If elections were held now, the INSA poll suggests that the CDU would get 30% of the vote, while the SPD would get 31%. This means that Schulz would enter any coalition talks as the leader of the largest party, hence becoming Chancellor. 

It also means that a SPD-Green-Left coalition would currently win exactly 50% of seats, so that a government without the CDU/CSU could even be possible. In effect, the SPD has gained 10%-pts of support in past two (weekly) INSA polls, taking votes away from all other parties (see second chart below). Interestingly, the AfD has also suffered a significant decline.

Given that Schulz is relatively new to German politics, a novelty factor may be partly responsible for the jump in the polls. It is far too early to say whether this will endure, given that the election campaign has yet to properly begin. It will also be important to see whether other polls replicate the swing. The SPD has gained support in all recent polls, but these are all a week or more old and do not show the latest jump in the INSA poll. That said, there is no reason to dismiss the INSA poll. It is the newest organization and the only one to be done entirely online, but it (arguably) performed only marginally worse than other polls at the last Bundestag election.

A Schulz-led SPD-Green-Left coalition or a Schulz-led grand coalition would certainly be a huge event in German politics. Such possibilities no longer look like tail risks. A SPD-Green-Left coalition would bias German policymaking towards greater fiscal expenditure and investment, and center-left policies. But, even such a coalition would not mark a dramatic break with the past in many areas and would, we expect, continue Germany’s strong support of the EU and single currency.

In short, "Chancellor Schulz" may be just what Brussels, and to a lesser extent President Trump, ordered.

Credit to Zero Hedge

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