Recession

Federal monetary intervention couples with pandemic lockdown policies and subsequent stimulus have created an environment for a protracted recession. This recession will have global impact and will disrupt many industries, most notable residential real estate, commercial real estate, automotive, banking, logistics, construction, and tech companies.

While the CPI remains stubbornly high, sectors like real estate, logistics, manufacturing, automotive and banking have shown signs of substantial weakness with more downside expected. Because of this bifurcated economic situation, we expect inflation to remain elevated until the economy is sufficiently broken and market sentiment readjusts. The best indicator of this is performance of the S&P 500.

ESG Score Reshuffle

The push for ESG (Environmental, Social, Governance) scores has failed to gain traction. The World Economic Forum, who once championed the effort, has become increasingly critical of ESG scoring schemes. Multiple investment funds have moved away from ESG scoring as a factor in investment allocation.

Despite this, ESG is far from dead. We expect to see declining interest in ESG, which will quickly be replaced with a new scheme. This new scheme will have a new name and will attempt to include government regulators: Instead of having third-parties develop and implement their own ESG standards, governments will set the standards. Third parties may still be relies upon for scoring organizations. Governments may attempt to obscure their involvement in the new scheme by setting up a non-profit to set industry scoring standards. This non-profit will be directly and indirectly controlled by government actors. This is similar to the way the Federal Reserve functions.

Internet Crackdown

Governments have long used control of news to manipulate their citizens. With the dawn of the internet and rise of alternative media, the government’s ability to maintain effective and wide-reaching propaganda through captured corporate media outlets, has been severely degraded. In response, governments will continue to expand control over the internet and various platforms.

These control mechanisms will be in the form of ISP-level blocking of specific sites, services and traffic. Use of VPNs, encryption, foreign hosting providers and any service or platform that facilitates (intentionally or not) the evasion of these controls, will be fiercely targeted by governments.

Rising Crime

As economic conditions and quality of life continue to degrade, crime will increase globally. This is a trend that will continue even after populist political movements displace entrenched political leaders. Even though many of these populist movements will likely target crime through tough-on-crime policies, these will have only moderate effect on the overall trend. Underlying economic and social conditions will continue to drive crime key economic obstacles are resolved and prosperity generally increase.

Mass shootings at shopping centers / malls

Worsening driving – road rage, auto accidents

Crypto Crackdown

Cryptocurrency represents a direct alternative to CBDC and other regulated digital currency efforts. Government-backed digital currencies are viewed as a critical control mechanism, so alternatives like cryptos will be treated as a threat.

One pretext that will be used to target crypto is its energy use. Crypto mining operations with hundreds or thousands of servers consume massive amounts of power. As governments around the world continue to build on climate crisis narratives, this provides a great pretext to target crypto infrastructure.

Many crypto proponents believe that government cannot effectively target and disrupt cryptocurrencies. We believe this is false. Governments have a wide variety of ways they can disrupt crypto. First governments can target mining operations, nodes and crypto exchanges. Taking out major players will severely degrade crypto infrastructure and scare many away from investing or holding crypto. Governments can also target individual crypto holders too. One strategy is to ban holding of cryptocurrencies and very publicly arrest and prosecute a few dozen holders to make an example out of them. Another option is for the government to target them through taxation and fines. For example, in the United States, the government is expanding the IRS as well as bank reporting requirements. It would be relatively easy for the government to start mass auditing, taxing and fining crypto holders. With this strategy even small holders could be readily targeted.

Rise of the Popular Right

In response to the growing failures of the managerial class in the US, and the rise of woke culture inside key institutions, a new right-wing populist movement is forming. This group is gaining followers from traditional right-wingers, new right, disaffected liberals and libertarians.

This group is primarily reactionary; their focus is on stopping and undoing the cultural and institutional damage being wrought by current US leaders. As a reactionary force, they are not held to same moral or legal constraints of the right-wing of the past. If they succeed in taking over federal power structures, many adherents of this new movements will have no issue violating Constitutional rights or previous moral norms to defeat their enemy.

Most of the power of this movement is limited to state and local-level politics currently: The national GOP is still dominated by political players who do not challenge institutional corruption. For the movement to succeed, it must begin to purge the national GOP of leaders who defend the current regime. This is the next major obstacle to watch: Can this movement take over the GOP nationally? If they fail to take control of the national party, the movement may remain as coalition of state-level politicians and power-brokers, which could fuel further balkanization.

Divergence of the Fascists and Communists

Most of the western leaders are aligned with fascism; specifically they desire stronger relationships between government and business. This arrangement makes it easier to obfuscate corrupt dealings including embezzlement and self-enrichment schemes behind private businesses who aren’t subject to the same disclosure and transparency requirements as the federal government. The private-public partnership also facilitates policy change through private business. If unpopular legislation fails to gain traction, like digital ID for example, it can be pushed through private businesses like Google and Apple. This gives the appearance that some of these control mechanisms are the product of market forces, when they are really an artificial construct of a conspiracy of wealthy business stakeholders, politicians and power-brokers.

These same western leaders have widely enabled movements like Black Lives Matter, ANTIFA and others. Many in these movements are communist, not fascist, and advocate for nationalization of key industries over the public-private partnership. Further, sympathetic ideologies have been encouraged to propagate across key US institutions.

This arrangement will likely create friction as Western leaders are at odds, philosophically, with the “useful idiots” they support. How exactly this friction manifests it difficult to predict, but we expect to see increased conflict between the formerly sympathetic elite class and groups like ANTIFA and other single-purpose groups.

Infrastructure Failure

With indebted nations, popular unrest, deteriorating social factors, and increasingly corrupt and incompetent leaders, infrastructure failure will be a recurring theme. Major infrastructure failures have already occurred including the Flint Michigan water disaster, the botched response to the Ohio train derailment and hazardous chemical release, the I-40 bridge damage, and the Jackson, Mississippi water crisis.

Expect these types of failure to continue with increased frequency. Failures will occur across a wide variety of infrastructure including power systems, water systems, sewage, roadways and internet. Some of these failures will be caused by hostile actors (foreign and domestic) while others will result from mismanagement, corruption and incompetence.

The distribution of infrastructure failures will likely be uneven: Right-wing states with net positive migration patterns will experience fewer failures than left-wing states with significant population outflows. States with population outflows will experience budget pressure in addition to other factors previously mentioned, which will exacerbate infrastructure management issues.

World War III

Western nations are facing degraded ability to project their power globally. This is due to a variety of factors including aggregated bad will, indebtedness, continued public military and political failures, and internal (domestic) pressures on entrenched leaders. A growing contingent of rivals seek to overturn the western-dominated world order and replace in with a multi-polar one. These rivals include China, Russia, Brazil, Iran, North Korea, and Saudi Arabia.

As these rival factions fight for dominance under a new world order, conflict will inevitably follow. So far this conflict is taking the shape of a new cold war, dominated by secret cyber skirmishes and proxy conflicts. However, a miscalculation or provocation could quickly turn the cold war hot. A hot war between technologically advanced nuclear powers will feature new tactics like anti-satellite weapons, drone strikes, cyber attacks, infrastructure sabotage, deniable biological agent releases (including DNA-targeted viruses), high altitude nuclear detonations (EMP) and possibly even conventional nuclear strikes.

The US has become highly dependent on complex and fragile networks and systems that rivals have become quite adept at targeting. While the US military will likely remain the largest and best equipped in the world for some time, new tactics and targets have the potential to shift the battlefield in ways military planners fail to understand.

A key decision point to watch is the invasion of Taiwan. With the current US administration, a Chinese invasion of Taiwan would be met with a full commitment of US forces, which would quickly escalate to a hot world war. Despite this, we expect China to gradually ramp up pressure on Taiwan over the next 24 months+ as it make preparations for a complex amphibious and air assault on Taiwan.

Popular Unrest

While popular unrest represents a tremendous opportunity to remove entrenched elites, it also presents some hazards. With popular unrest comes disruptions to supply chains, mobs, mass violence and opposing crackdowns.

As popular unrest grows be weary of being caught in the crossfire of mobs and opposing forces.

MRNA Vaccine Proliferation

MRNA vaccines are being deployed to zoos, animal sanctuaries and livestock operations. The effects of consuming animals who have received MRNA vaccines in unknown. Public pushback has halted some of these efforts, but don’t be surprised to discover some of the meat you consume was injected with mRNA vaccines.

As this is a developing trend, we don’t have strong or concrete predictions about the effect, but we will update this threat accordingly as more information becomes available.

Restructuring of Competence Hierarchies

What many refer to as “woke” ideology is a strategy to restructure dominance hierarchies. The goal is to displace hierarchies that have in the past heavily relied on competence, and replace them hierarchies based on race or sexual orientation. Under this strategy, people will no longer be promoted at work, get accepted to to universities, or serve as leaders because they are highly competent. Instead they will ascend to those positions because they are black or trans.

The implications of this are many. Competent students will not get into good universities and will not have a fast-track to high-level job opportunities. Those who do not meet the new hierarchy will be passed over for jobs and promotions. Government contracts will favor minorities leading to more inefficiencies, fraud and abuse. Altogether, larger segments of younger generations will feel alienated from society and cut off from opportunities to succeed, resulting in resentful division. This resentment may be expressed through protests, riots, violent actions and the promotion of racialized ideas like re-segregation.

This ideology has been somewhat successful across a variety of public institutions and private business, however, opponents have responded aggressively and the growth of the strategy has slowed. Expect this strategy to fail in the long-turn. Some public institutions and companies will continue to follow this new hierarchy, but these organizations will fail while those who stick closer to traditional competence hierarchies will experience above-average success.

Collapsing Military Readiness

Attempts by elites to apply “woke” ideology to the Department of Defense, and purge dissenters, is resulting in declining military readiness. Recruitment will continue to face severe challenges, although recession will bump recruitment numbers. Naval and air accidents will become more common. Discipline issues and abuse will increase. Meanwhile our military’s ability to fight and win wars will degrade.

Meanwhile, the wide network of military contractors will extract greater amounts of money from the government and diminishing returns, leading to major technology and equipment shortfalls. These shortfalls will be exploited by America’s enemies.

Failing Health Systems

Covid  cemented the policy-driven medicine system: Doctors have sacrificed their autonomy in exchange for bigger paychecks, bonuses, incentives, government grants and status. Our society is destroying doctors’ ability to exercise discretion and logic in diagnosing and treating disease.

Combine this with increasingly poor health of the American population due to vaccine injury, poor dietary and exercise habits, and a broken food system, and the result is significant and negative: Health care quality will decline. Shortages and waiting lists for key specialists will be common place. Many providers will stick to government and pharma-sponsored protocols that do not improve health outcomes.

There will be a positive resistance that grows out of frustration with this current system. Independent doctors will expand their own private offerings. These renegade providers will not be accepted through most government programs and insurance providers, but will accept cash or offer subscription plans in exchange for higher-quality service. Americans seeking high quality health outcomes will move away from health insurance schemes and opt to pay providers directly. Those who reject these new health care models, will suffer at the hands of the policy-driven medical establishment.

Civil War

The cold civil war is well underway. Entrenched elites are openly spying and prosecuting their political enemies under increasingly fragile pretexts. Meanwhile, political enemies of the state are mobilizing in opposition with a majority forming that we describe as the right-wing populists. This group is large, well-resourced and holds far more power than it realizes. As the right-wing populists seek to gain power and disrupt the entrenched elite’s agenda, conflict follows.

The battle has been fought with proxies like Black Lives Matter, ANTIFA, Proud Boys and Oathkeepers. Violent confrontations remain small, but growing unrest and disillusionment of American institutions and safeguards increase the chance of larger scale violent conflicts. Additionally, left-wing extremist groups are escalating; using more dangerous attacks and weapons including firearms, fireworks and explosives. Meanwhile, government law enforcement agencies continue to find flimsy pretexts to target government dissidents. All of these trends will increase conflict, and any one conflict could become a “shot heard around the world” that galvanizes an aggressive response, turning the cold civil war hot.

DNA-Based Bioweapons

DNA-based weapons allow nations to target, disrupt or even eliminate populations of a nation or even targeted segments of a population. These can be spread widely, disabling enemies while leaving friendly population largely unscathed.

Covid exposed various government bioweapons programs including US and Chinese operations. It is very likely every major nation is engaged in some level of bioweapons development. DNA-based or targeted bioweapons would be the ultimate weapon. Whether development of such a weapon is possible or feasible in the near future is an open question.

Dedollarization

The United States is the creator and enforcer of the existing global monetary system, but that is quickly changing. America has abused this privilege through unsustainable debt financing to maintain a world-leading military and the employment of financial sanctions – cutting America’s enemies out of the global financial system – that have eroded global trust in the American-led system.

Combine this with perceived weakness in American leadership, and this provides a great incentive for nations to start building an alternative global financial system. This rival system is even discussed openly under the umbrella term, multi-polar world order. The nations primarily engaged in pushing for a competing world order are China, Russia, Brazil, India, Saudi Arabia and Iran.

The process of moving from the American-dominated financial system to a world governed by two or more competing systems will be long and complicated.

Note these active indicators of dedollarization:

• New diplomatic ties established
• Reopening or construction of embassies
• Increased economic cooperation between former rivals
• Novel and largely symbolic transactions in foreign currencies (Primarily for trust building and establishment of precedent)
• Development of alternative trading blocs and economic development programs which exclude the US
• Development of alternative settlement systems to Swift
• Increased international interest in gold-backed currencies

Expect more action across the noted indicators in the future, however, there are several indicators and milestones which have not yet been fulfilled:

• Development of a new gold-backed currency
• Global de-pegging from the dollar
• Widespread adoption and use of that currency
• Undermine US efforts to stop the rise of an alternative currency

So while significant progress has been made towards removal of the US Dollar as the global reserve currency, there are still significant challenges ahead: It will be some time before potential dedollarization efforts could succeed.

If efforts to dethrone the US-led global financial system are successful, the effects on the United States will be great and terrible. The Us government relies on debt financing to continue funding the American military and social programs like social security and medicare. The end of USD reserve status means these systems could no longer be funded through new debt. Instead these systems would either have to be allowed to effectively collapse, or the US government would have to print more dollars to cover the massive shortfall, a cycle that will result in hyperinflation and the complete collapse of the economy in approx. 3-5 years.

Gun Control Desperation

Left-wing gun control efforts have largely failed. Over half of the states in the United States have passed some form of Constitutional or permitless carry. The Supreme court’s Bruen decision – which requires gun restrictions to take into account the plain text and history of the 2nd amendment – will ultimately render many existing gun control actions unconstitutional.

However, this has not stopped gun control efforts. The Biden administration has launched a huge gun control push using the ATF. The ATF is unilaterally redefining terms like a firearm, machine gun and short barreled rifle (SBR) in an effort to crack down on guns. We expect these efforts to ultimately fail, but not before many innocent Americans are raided, fined, imprisoned and killed in the government’s desperate war on guns.

The Rise of Artificial Intelligence (AI)

New AI tools will rapidly change the nature of work. Jobs like copy-writing and basic journalism will be replaced with AI technicians and data science roles. Productivity in many industries will increase reducing costs. The changes will have severe impact on some industries, and hardly any impact on many others.

The biggest threat of AI is not mass unemployment, but improper use. Much of the AI conversation is dominated by debates over whether current AI systems have AGI – Artificial General Intelligence – and the implications of a smart AI. These conversation, we believe, miss the point. Whether or not these AI systems have true intelligence, they are flawed and biases based on their training data and governing rules programmed in. They are also far from perfect. AI language models, for example, use probability to determine what a correct answer might look like. They do not use logic, reason or critical thinking to deliver a result. As a consequence of this operating model, AI systems frequently deliver incorrect answers and even invented facts.

The biggest danger is that these biased systems with unpredictable results are given control of key systems and infrastructure like power grid management, drone piloting, missile defense systems, cyber threat response: If flawed AI systems are given the ability to directly govern critical infrastructure and weaponry, the results could be catastrophic.

Economic Death Throes

As national debt continues to accrue without any capacity to pay it down, and the FED’s ability to manage boom bust cycles degrade, economic conditions will deteriorate.Eventually, the United State’s ability to issue debt will end as counter parties will lose faith in the nation’s ability to even pay interest on the debt and the only option left will be printing more dollars, reducing purchasing power and ultimately resulting in hyperinflation.

Social security and medicare will face collapse. Attempts to cut back on benefits will be met with aggressive protests and even riots. Standard of living for most Americans will fall. Pension systems will also begin to fail en masse. Most likely, bailouts will follow which will require money printing or debt financing.

City, County and State governments, desperate for more cash will increase taxes, propose new taxes like exit taxes on people leaving their states, increase fines and fees, and may even begin seizing assets from small businesses.

Technocratic Serfdom

Western elites and other parties are aggressively advancing a group of technologies we refer to collectively as the technocratic serfdom, because the successful implementation of these mechanisms results in the subjugation of a large portion of the world, for the benefit of a few privileged elites.

Examples of these control mechanisms are a transition to a service-based economy – you will own nothing and be happy -, social credit scores, digital ID systems, AI-powered surveillance state in partnership with big business, universal basic income, and centralized digital currencies.

Despite the enormous amount of resources pouring into these mechanisms, we believe it is very unlikely such a system will successfully be implemented. First, inter-elite competition will hinder implementation and create geopolitical struggles that divert resources away from such efforts. Next, governments have a history of failing to execute on large-scale technology systems, especially in an environment filled with corruption and abuse. Popular sentiment is widely against many of these efforts and is already providing resistance to progression towards the technocratic serfdom. Finally, many of the technologies continue to struggle with technical obstacles.

Viral Cascading Popular Reactions

While more Americans than ever are realizing their governments are corrupt and constructed to protest the interest of a small elite class, this has led to a rise in reactionary thinking. As people discover that existing corporate news sources are merely “dressed up” propaganda outlets for government and elite interests, they will struggle to find reliable sources of news and information. This yields two notable results. The first is that newly red-pilled people seek out new sources of news and information to replace their previously trusted news sources. These alternative news outlets vary radically in their truthfulness. The second result is that large masses of people tend to believe the truth must be the inverse of what the government says since they commonly lie.

In reality the government will say whatever is useful to advance their target narratives. Sometimes this means completely lying, sometimes it means circulating the truth and sometimes it means disclosing a partial truth.

This reactionary thinking leads to the advancement of false narratives and panics. One example of this is the Ohio train derailment which many claimed would led to widespread disease across nearly half the US. While the derailment and subsequent chemical release was an enormous health danger for those close to the derailment, dilution of these chemical compounds in the air and waterways means the health impact on people dozens or hundreds of miles away would be negligible.

As trust in the government declines, the risk increases that these false narratives gain traction and lead to widespread poor decision-making. Be careful what narratives you believe.

Mass Crackdown on US Gov. Dissidents

Mass crackdown is a term that encapsulates multiple phenomena including genocide, prison camps, forces labor and re-education camps. These are typically associated with authoritarian governments cracking down on dissidents, in an attempt to maintain or consolidate power.

Crackdowns can occur in a variety of ways. In a one-shot crackdown, a government engages in rapid mobilization and oppression of a targeted group, typically a small minority of the population. When targeting a larger segment of the population, incremental crackdowns are employed. These start small and gradually ramp up both in scope and in the violence of tactics.

Another less common tactic is for governments to incite supporters to attack and oppress a targeted minority group. Government officials will fuel hate against the targeted group and create a legal environment where violence against the targeted group is tolerated and even rewarded, at least socially.

There is another, perhaps more dystopian, version of a crackdown, where people are not executed or imprisoned, they are simply unpersoned. Targeted dissidents are cut off from access to financial services meaning that can no longer buy or rent a house or apartment, they can’t go to a restaurant, they can’t even buy groceries at the store. This version of a crackdown is more technologically complicated as it requires universal digital IDs, more consolidation of private businesses, expansive and sophisticated surveillance, and central bank digital currencies.

For more details on different crackdown scenarios and progress view our detailed analysis.

Inconvenient Demographics

Social norms and public policy have resulted in rapid demographic changes that we predict will result in a wide variety of effects.

Younger generations, especially in Western nations, are having less children. This is a trend that was ongoing before the pandemic and has been accelerated due to increasing fertility issues, likely caused by mass MRNA vaccination programs. This ongoing trend will result in younger generational cohorts having smaller populations than older cohorts. This poses several problems:

1. A shrinking pool of young people means less people will be paying into social welfare systems. Many of these systems are already facing large shortfalls. Demographics pressure will exacerbate this problem.

2. The average population will get older. That means young workers, consumers and military-members will be available. Western nations may experience persistently shrinking economies in part due to this demographic trend. And as the threat of war continues, Western nations will have smaller pools of young people to draw from for military service. Labor shortages could create constant headaches.

3. With and aging population and smaller younger cohorts, caring for the elderly will become increasingly difficult. Who will pay for nursing home care, food and other expenses? Typically this burden is shared by multiple children, but with fewer children per retiree and decreasing retirement payouts, more retirees will not be able to afford basics necessities and will have to stay in the workforce longer.

China is facing another unique demographic problem. As a result of their now-eliminated one-child policy, in younger generations males significantly outnumber females. This disparity will lead to nihilism, unrest and even mass violence.

Once nations begin to realize the severity of the demographic problems, they may try to reverse course, with some offering tax benefits, grants or other incentives to encourage more people to have children. Western nations may try to utilize more immigrant labor to fill labor shortages.