Indicatively, when looking at total exchange and OTC traded derivatives, which eventually are converted into some form of credit money, the total tally at last check is just over $1.3 quadrillion. This is about 20 times the total economic output in the world each year. It becomes very clear why the current status quo is unsustainable absent a major global corporate and sovereign liability restructuring: In the bankruptcy business, this process is known as “growing into your balance sheet.” Yet the main reason why the kleptocratic elite has been so opposed to this act is because no debt impairment is possible without eliminating the equity tranche below it. And in an ironic twist in which the Fed supports both the debt and equity markets, there is now about $13 trillion in equity capitalization in the US, which is backed by debt that for all intents and purposes needs to be impaired.
As a result, unless stakeholders in the liabilities of corporate America realize that the assets that collateralize these liabilities are woefully insufficient and come to a compromise in which either they alone or in combination with the creditors come to a consensual “restructuring” of the underlying claims, there is no other possible outcome than a free-fall bankruptcy. However, this will not be some Chapter 7 filed in the bankruptcy court of Southern District of New York. This will be the end of the current financial system. This is also what some consider a "deflationary death spiral." And yes, no matter how much paper the Fed prints, this outcome is inevitable: All the Fed does through money printing is dilute the claims on both sides of the ledger. The best the Fed could then hope for to counteract the deflationary outcome is to generate hyperinflation through a collapse in the reserve currency (i.e., the Zimbabwe outcome). And since this is far more palatable to the Fed, we believe that one way or another, whether by fire or ice (to paraphrase Robert Frost), the existing, very unstable financial system will reach a point when the global systematic reset is inevitable.
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