CHAPTER 1Default-Cost Asymmetry: Humpty Dumpty Was Pushed

Even in discounting economic conditions, people have a tendency to think in terms of extremes. For this reason, the outcomes investors assign to the future are pretty binary: über-deflationary collapse or hyperinflationary explosion. Why does everything have to be so über and hyper? Whatever happened to flat prices and high inflation?

It is true that the world’s financial tail-risk killers—central banks and politicos—do everything they can to preserve the status quo, but in the end, all their effort amounts to jousting with windmills? Nature is too complicated, crafty, and feral for policy to fix everything. Time and the path of least resistance are the only cures. Determining just where ...

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