The Evolving Risks of the Global Financial System
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The modern global financial system has gone through 3 main eras of instability the Gold Standard, Bretton Woods, and the current Dollar Reserve system.
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Each system was highly efficient but unstable due to excessive leverage and lack of constraints on money supply growth.
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The current Dollar system has two main instabilities structural trade deficits to supply dollars globally, and ever-rising sovereign debt levels.
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With global disinflationary pressures fading, unstable fiscal policies are more likely to directly manifest as inflation.
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While financial resets can be disruptive, life tends to go on. Investors should have a balanced portfolio despite fiscal uncertainty.
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