Which Assets Have Performed Best During Economic Resets
The Secret Winners of Every Economic Collapse
History has been marked by numerous currency changes over time. Like it or not, the dollar, euro, yen, or pound sterling have not always been around. In fact, they have evolved significantly throughout history. It is estimated that over 5,000 different currencies have existed in history, of which only about 180 remain today.
Among the main reasons these currencies have disappeared, I would highlight three:
Economic Collapse: Prolonged economic crises that render a currency unsustainable.
Political Changes: Creation of new nation-states or monetary unions (e.g., the euro).
Forced Demonetization: Governments eliminating currencies for political or economic reasons, such as India's demonetization of high-denomination bills in 2016.
These types of changes, often referred to as "economic resets," have occurred throughout history and will continue to do so.
We’ve talked extensively about economic cycle changes or how Ray Dalio views society as being in the last stage of the economic cycle: decline.
Honestly, I completely agree with Ray Dalio on this. Many people cling to the status quo and what has happened in recent years, but I believe global discontent is at a boiling point.
The other day, I spoke with a former CEO of a multinational company, and he told me that the way investments are quantified within a company has completely changed. A clear example is automation. In the past, the cost of automation was assessed based on the cost of a worker. Today, you cannot assume that the worker will remain in the role—they might take leave, quit, or receive government benefits. This means that when companies calculate their costs, if they want to produce, they have no choice but to automate and robotize, regardless of the expense.
This is indicative of the end of a cycle and a potential economic reset. It has prompted me to explore which key assets have come out on top in such scenarios and how investors can protect themselves.
From the three reasons for currency changes, I think we should focus on the first and third. The second is most likely a consequence of the first.
We won't delve into the third today because the clear alternative in cases of forced demonetization would be Bitcoin, and this doesn't provide historical parallels. So, let’s examine the first option (and most probable one).