This book explores ten mega-threats that are hurtling towards us.
When you put these massive threats together, you can see how they overlap and reinforce each other.
There are connections between debt accumulation and debt traps, prolonged low interest rates and financial crises, artificial intelligence (AI) and automation, deglobalization, geopolitical conflicts between major powers, inflation and stagflation, currency collapse, income inequality and populism, global pandemics and climate change.
Each problem also interferes with solving other problems.
A single threat may be just a nuisance.
But the 10 mega threats occurring simultaneously are a much, much more serious problem.
---From the "Introductory Note"

Indeed, in the spring of 2022, International Monetary Fund Managing Director Kristalina Georgieva and two colleagues, on edge like never before, warned that the world economy was on the verge of its “biggest test since World War II” and was “facing a ‘confluence of catastrophes’ that could strike at any moment.”
---From the "Introductory Note"

Financial democratization makes money more accessible and lowers the cost of credit, but it also eliminates the rigorous and thorough scrutiny that should naturally be required.
In the early 2000s, consumers flocked to real estate to buy homes with cheap debt.
This led to the publication of the 600-page Financial Crisis Inquiry Report and numerous other reports.
And now, thanks to low interest rates and video game-like stock trading apps, even novice investors have new excuses and new ways to borrow.
These apps promote stocks that have no correlation to the company's value and cryptocurrencies that have no intrinsic value.
---From "Chapter 1: The Debt Crisis Caused by a Blind Market"

Excessive capital borrowing came back to haunt us in 2022.
The Fed's tight monetary policy sharply raised the premium paid by "high-yield" bonds over safer bonds, thus significantly increasing the borrowing costs of leveraged firms that relied on "subprime" bonds.
Then defaults began to increase.
---From "Chapter 2: Failure of Private and Public Sector Policies"

Without sustained and robust economic growth, a shocking event will eventually occur, causing the global debt bubble to burst.
The COVID-19 pandemic has pushed us to the brink.
The next shock will completely knock us off our feet.
---From "Chapter 2: Failure of Private and Public Sector Policies"

It was a time when long lines for free meals stretched across the city, but the economy was actually healthier.
Why was that? Because the global economy shook, but didn't collapse.
It's an easily overlooked fact, but there were two important benefits for the crashing stock market and the hungry people at the time.
In other words, the advanced countries of that time had little debt and still had much room for growth.
The United States could borrow money and repay it with increased tax revenue.
The Social Security system (passed in 1965) ensured that retired workers had access to pensions and health care.
As the workforce continues to grow, so too does the program's funding, even as the number of retirees increases.
---From "Chapter 3: Demographic Time Bomb"

We are not moving forward, we are moving backward.
In the 1960s, there were five active workers for every retired or disabled worker in the United States.
According to the Social Security Administration, the ratio fell to less than 3 to 1 in 2009 and is projected to drop to 2 to 1 by 2030.
---From "Chapter 3: Demographic Time Bomb"

Of course, actual inflation fluctuates constantly.
But the principle is consistent.
If there is robust real income growth and inflation, the debt-to-income ratio will decline, provided that debt does not grow faster than nominal income growth.
But inflation is not a panacea for soaring debt.
Runaway inflation can quickly wipe out debt, but new borrowers and those who defer repayments pay the price of unsustainable interest rates.
---From "Chapter 4: The Trap of Low Interest Rates and the Cycle of Boom and Recession"

Indeed, by January 2019, the Fed had reversed course again.
Federal Reserve Chairman Jerome Powell announced that interest rate hikes and quantitative easing would be halted.
As the months passed, the market began to lose momentum. Unconventional financial products like repurchase agreements (RPs) were blocked from the capital markets.
The Fed prepared for the recession in the usual way.
They lowered interest rates below 2 percent and resumed quantitative easing.
About a year before the coronavirus crisis changed everything, the Fed couldn't even afford to slightly tighten its policy.
They fell into a debt trap.
---From "Chapter 4: The Trap of Low Interest Rates and the Cycle of Boom and Recession"

What was the fundamental cause of the stagflation experienced by the United States and other advanced economies in the 1970s? The simple answer was the combination of the oil crisis and misguided policies that relaxed controls on inflation expectations.
---From "Chapter 5: The Coming of the Great Stagflation"

You can call me a contrarian.
But hearing prominent experts say, "That won't happen," only makes me more worried.
I wonder why the smartest people out there try to ignore the negative aspects of the problems right in front of them.
In 2020 and 2021, we were already pouring massive amounts of money and fiscal stimulus into a financial and economic system awash in cash and credit.
As asset prices soared, the investors who had the most to lose showed no fear.
If I see the coming disaster, they see the money on the table.
---From "Chapter 5: The Coming of the Great Stagflation"

Then came the pandemic.
Over the two years 2020 and 2021, the Fed expanded its balance sheet by more than $4 trillion to $8.66 trillion, from $4.31 trillion, through rock-bottom interest rates, quantitative easing, and newly invented credit and lending tools to protect financial institutions and the American middle class.
Risk-taking propensity has increased significantly.
In 2021, the Fed sucked up $80 billion a month from Treasury securities alone.
During the COVID-19 pandemic, central banks around the world created liquidity worth approximately $15 billion per day.
---From "Chapter 6: Currency Collapse and Financial Instability"

Trade restrictions primarily affected the movement of goods, but also slowed migration and capital flows.
Some commentators argue that the trade war was a major cause of the Great Depression.
I wouldn't go so far as to say that.
Manufacturing production fell by 20 percent and international trade fell by 60 percent.
However, there were other causes during the Great Depression, such as the failure to implement appropriate monetary and fiscal stimulus measures and the failure of thousands of financial institutions.
So, while trade restrictions weren't the sole cause, they certainly made the Great Depression longer and more severe than necessary.
---From "Chapter 7: The End of Globalization"

A closer look at the data reveals contradictions in the claim that Chinese, Indian, or Vietnamese workers have stolen most of the jobs in developed countries.
Contrary to popular belief, most of the jobs lost are actually victims of advanced technology, not globalization.
The McKinsey Global Institute (MGI) has debunked the myth that trade has caused the loss of most manufacturing jobs.
---From "Chapter 7: The End of Globalization"

That makes sense.
However, replacing human intellectual ability and replacing physical ability are completely different things.
The good jobs created by the decline of manufacturing and the rise of the service industry required brains, not brawn.
Everyone wanted to be a knowledge worker.
But now we have lost our monopoly on knowledge.
Artificial intelligence can handle the things people dream of and desire faster and more competently than the human brain can.
Of course, there will definitely be jobs for humans.
But who would want that job?
---From "Chapter 8 AI and Disappeared Jobs"

Daron Acemoglu of MIT and Pascual Restrepo of Boston University studied the impact of robotics adoption across various industries.
They found that for every additional robot per 1,000 workers, employment decreased by 0.2 percent and wages by 0.5 percent.
If you don't think that's a huge number, consider that this trend continues.
Jobs and incomes should increase over time.
But if automation reverses that trend, how can we move forward?
---From "Chapter 8 AI and Disappeared Jobs"

The less people earn, the greater the inequality.
Technological innovation is capital-intensive, biased towards high-skill technologies, and labor-saving.
If you own a machine or are in the top 5 percent of the human resource distribution, AI will make you richer and more productive.
But if you're a low-skilled, mid-skilled, blue-collar, or white-collar worker, AI will drive down your wages and make your job obsolete.
This trend is already visible in advanced economies, where social stability depends on the existence of universal opportunities for people to achieve success.

---From "Chapter 8 AI and Disappeared Jobs"

Make up your mind.
A new Cold War between the US and China could reshape the global economy and geopolitical landscape, potentially forcing authoritarian China to set new rules.
In this Cold War, both countries will rely on their allies to confront each other.
The United States has NATO allies in Europe, South Korea, Japan, Australia and others in Asia, and is now increasingly moving closer to India, which fears the rise of China.
On China's side are Russia, Iran, North Korea, and Pakistan, all revisionist states that challenge the economic, financial, and geopolitical world order established by the United States and other Western powers after World War II.
Thus, a broad-based cold war is rapidly escalating between the West and China (and its allies).
---From "Chapter 9: Geopolitical Conflict and the Beginning of a New Cold War"

In the worst case, we may return to the primitive era.
The soil will burn black.
Deserts spread widely and fires destroy communities.
Hurricanes will occur more frequently and in greater numbers, and tornadoes will cause far more extensive damage than before.
Supply chains break down and negative shocks can cause the situation to spiral out of control.
Wealth will evaporate and migration of people will occur on a monumental scale.
Those who fail to see the massive threat posed by climate change today might wonder why they did nothing when they had the opportunity to act.
---From "Chapter 10: Uninhabitable Earth"

The bubble will burst sooner or later.
The question is not whether dystopia will actually arrive.
The question is when will the bubble burst and how much pain will it cause?
The latest major asset bubble burst in 2022.
Policymakers have exhausted vast monetary, credit, and fiscal resources.
Because we've exhausted our policy ammunition, the next financial crisis may be impossible to rescue the beleaguered households, businesses, banks, and middle class.
---From "Chapter 11: The Scenario Approaching"

Initially seen as a tool for opposing and resisting authoritarian regimes that spread lies and hypocrisy (remember the Arab Spring and the protests against the Egyptian government that began on Facebook?), social media is increasingly inciting attacks on democratic institutions and leading to racist violence.
Just look at the January 6th riots at the U.S. Capitol or the Rohingya genocide in Myanmar.
This trend will accelerate as artificial intelligence and machine learning become more sophisticated in how they manipulate people's minds through transformer technology.
---From "Chapter 11: The Scenario Approaching"

On the one hand, high economic growth will alleviate many of the debt problems plaguing the global economy.
The sustainability of debt, whether private or public, explicit or implicit, domestic or foreign, household or corporate, depends on the income of the borrower.
If income growth could outpace debt growth, we could afford to shoulder the massive debt burden that is currently spiraling toward ruin.
Strong growth provides the best solution.
And the key to this lies in cutting-edge technologies that accelerate growth.
---From Chapter 12, "Is a Future Close to 'Utopia' Possible?"

But what if the past 75 years were the exception rather than the rule? What if the past three-quarters of a century of exceptional stability has led us to assume the next few decades will be much the same? Have we forgotten the lessons history taught us a century ago? In the first four decades of the 20th century, we experienced a world war, the devastating Spanish flu of 1918-1919, deglobalization, hyperinflation, and the Great Depression.
And this led to a massive trade war, a financial and debt crisis, and deflation.
This was followed by the rise of populism and authoritarianism, and the rise of militarily aggressive regimes (Nazism in Germany, fascism in Italy and Spain, and militarism in Japan), leading to World War II and the Holocaust.
---From "Outgoing Writing"

Can we survive the coming crisis? Earlier, I briefly presented two possible futures, condensing them into several possible scenarios, to illustrate the seriousness of the danger posed by ten interconnected, super-threats.
These two outlooks represent extreme directions for an uncertain future.
Unfortunately, the more likely of the two scenarios appears to be dystopian.
Because the super-threat is progressing slowly, its solution does not seem urgent.
Alexandr Solzhenitsyn, novelist and Nobel Prize winner in literature, once defined paradox as a truth twisted around for the sake of attention.
A super-threat can attract attention without having to show off any tricks.
Even though people largely failed to grasp the important lessons and took little meaningful action to avoid the consequences.

---From "Outgoing Writing"