The Evolving Risks of the Global Financial System

The modern global financial system has gone through 3 main eras of instability the Gold Standard, Bretton Woods, and the current Dollar Reserve system.

Each system was highly efficient but unstable due to excessive leverage and lack of constraints on money supply growth.

The current Dollar system has two main instabilities structural trade deficits to supply dollars globally, and ever-rising sovereign debt levels.

With global disinflationary pressures fading, unstable fiscal policies are more likely to directly manifest as inflation.

While financial resets can be disruptive, life tends to go on. Investors should have a balanced portfolio despite fiscal uncertainty.