After the Bomb: Why Economic Reset Is No Longer Possible
For most of modern economic history, excess eventually cleared.
Debt accumulated, imbalances widened, and pressure built, until something broke. A war. A depression. A nationalist reset. The system absorbed the damage, restructured, and restarted under new rules.
This assumption remains embedded in most economic thinking today. Markets are expected to correct. Cycles are assumed to complete. Equilibrium, however delayed, is treated as inevitable.
This briefing argues that this assumption no longer holds. Not because policymakers lack discipline or because cycles have been postponed, but because the historical mechanisms that once enforced reset have been structurally removed.
How Economic Systems Used to Reset
Historically, large-scale economic imbalances were resolved through three primary mechanisms.
Great power war functioned as the most decisive reset. It destroyed physical capital, erased sovereign debts through default or inflation, and allowed the victor to impose a new monetary order. The Bretton Woods system, for example, was not the product of negotiation among equals; it was enforced by the United States after World War II, backed by unmatched industrial capacity, gold reserves, and military dominance.
Reserve currencies have always been instruments of power, not consensus.
Systemic deflation provided a second path. Credit contractions liquidated unsound debt, collapsed asset prices, and restored price signals. The deflationary episodes of the late 19th century and the 1930s were socially painful, but they cleared accumulated excess and re-established financial discipline.
Nationalist consolidation offered a third option. When global systems fractured, states imposed capital controls, subordinated foreign creditors, repriced labor, and restructured domestic economies around national priorities. These measures were politically extreme, but economically effective.
Each mechanism was costly. Each worked.
None remain available today.
The Nuclear Constraint
The introduction of nuclear weapons fundamentally altered the logic of great power conflict. War between nuclear-armed states no longer produces a decisive victor capable of imposing a new order. It produces mutual destruction.
Cold War deterrence demonstrated this reality in practice. Despite decades of geopolitical rivalry, the United States and the Soviet Union avoided direct conflict. The same constraint now governs relations among the world’s largest powers. Proxy wars and regional conflicts cannot substitute for system-resetting wars; they do not destroy sufficient capital, eliminate enough claims, or establish durable monetary authority.
The historical link between war and economic reset has been permanently broken.
Why Deflation Is No Longer Viable
Deflation has also been structurally disabled.
Modern sovereign debt levels are so large that deflation would rapidly destabilize the state itself. In the United States, interest payments on federal debt now exceed $1 trillion annually and are projected to rise substantially over the next decade. Roughly one-third of outstanding Treasury debt must be refinanced each year.
Deflation would raise real interest costs while collapsing nominal tax revenues, creating a feedback loop that no post-war government has survived. Faced with this tradeoff, governments consistently choose monetary expansion over systemic failure.
This pattern has repeated across every major stress event since 2008. Monetary expansion is no longer countercyclical policy. It is a structural requirement.
Globalization and the Limits of Nationalism
The third reset mechanism, nationalist consolidation, is constrained by financial globalization.
Supply chains are international. Sovereign debt is globally held. Capital moves at digital speed. A genuine attempt to impose 1930s-style capital controls today would likely trigger immediate capital flight, undermining the very consolidation it sought to achieve.
As a result, modern nationalism tends to be rhetorical rather than structural. Sovereignty is asserted politically while global financial accommodation is maintained in practice.
Time as the New Transfer Mechanism
If economic excess can no longer be cleared through war, deflation, or nationalist restructuring, it is redistributed instead.
The mechanism is time.
New money enters the economy unevenly. Governments, financial institutions, and large asset holders receive liquidity first and deploy it before prices adjust. Wages and salaries adjust later. This temporal gap transfers purchasing power from labor to asset holders.
This is the Cantillon effect operating continuously rather than episodically. Asset prices respond quickly to monetary expansion; wages lag behind. Employment can remain strong even as living standards erode.
The widely discussed “K-shaped recovery” is not a temporary phenomenon under this regime. It is a structural outcome.
Asset Prices in a Post-Reset World
This framework helps explain why asset prices increasingly appear disconnected from traditional fundamentals.
During the 2008 financial crisis, mispricing occurred within a relatively stable monetary unit. When cash flows failed, prices collapsed in real terms. That environment allowed investors like Michael Burry to profit from valuation-driven dislocations.
Today, the constraint is monetary rather than purely financial. Assets increasingly reflect expectations about currency debasement alongside, and sometimes ahead of, earnings power. An asset can appear expensive by historical valuation metrics and still rise nominally if the purchasing power of the currency is declining faster.
Relative valuation still matters. Absolute price levels increasingly reflect regime expectations.
Gold as a Signal, Not a Speculation
Gold’s recent behavior underscores this shift.
Central banks have accumulated gold at the fastest pace in decades, citing its lack of counterparty risk and immunity to monetary debasement. Gold does not require refinancing, policy credibility, or institutional trust.
Its price movement is not an expression of speculative excess. It is a signal of declining confidence in fiat stability.
A Regime of Perpetual Extension
The result is neither classical capitalism nor ideological socialism.
Markets persist, but they are no longer neutral. Profits remain private, while losses are increasingly absorbed by the public balance sheet. Access to liquidity matters more than operational efficiency alone.
Quantitative easing did not end. It evolved. Liquidity now enters the system through guarantees, backstops, regulatory forbearance, and targeted interventions designed to preserve continuity rather than restore equilibrium.
Housing illustrates this clearly. Prices remain elevated while transaction volumes fall. Liquidity concentrates. Price no longer implies market depth.
Political Pressure Without Release Valves
When economic pressure cannot be released outward through war or downward through deflation, it turns inward.
Governments respond by expanding administrative capacity, surveillance, and capital management. These responses are not ideological outliers. They are convergent adaptations to shared structural constraints.
Final Thoughts
Modern economic systems are no longer governed by the assumption that imbalances inevitably correct.
Nuclear deterrence removed decisive war. Debt removed deflation. Globalization constrained nationalism. What remains is a system managed through extension rather than reset, where redistribution occurs through time, access to liquidity determines outcomes, and policy is shaped more by constraint than ideology.
Understanding this regime does not require predicting collapse. It requires recognizing that the mechanisms which once restored balance no longer exist.
Sources & References
Brodie, B. The Absolute Weapon: Atomic Power and World Order. 1946
Cantillon, R. Essay on the Nature of Trade in General. 1755
Congressional Budget Office. The Budget and Economic Outlook: 2025–2035. January 2025
Congressional Budget Office. How the Federal Reserve’s Quantitative Easing Affects the Federal Budget. 2022
Committee for a Responsible Federal Budget. Trillion-Dollar Interest Payments Are the New Norm. December 2025
Curran, M.P., & Dressler, S.J. “Monetary Growth and Wealth Inequality.” Economics Letters, 2019
Dalio, R. The Changing World Order. 2021
Federal Reserve Bank of Minneapolis. Wage Growth by Income Quartile. 2025
World Gold Council. Central Bank Gold Reserves Survey. 2025
U.S. Department of the Treasury. Monthly Treasury Statement. September 2025
