Instruments · Reinhart–Sbrancia & the 1% shift
The math that makes the brief non-optional.
Three models from the working paper: how negative real yields liquidate a debt stock, why a 1% rotation cannot clear through physical supply, and whether a given book sits inside or outside the perimeter.
01 · Silent default
Debt dilution
When the policy rate is pinned below realized inflation, the real burden of the debt shrinks without a vote. Cash and long bonds pay for it.
Δbₜ = (rₜ − gₜ) bₜ₋₁ + dₜ
ρₜ = iₜ − πₜ
Real yield
-5.0%
Cash PP after 10y
46%
of original purchasing power remains
Start D/GDP
120%
End real D/GDP
91%
24% real reduction
02 · Exit capacity
The 1% shift
Paper claims on the bond and credit complex: $160T. Annual mine supply of gold: $543B. Rotate even a sliver of the former into the latter and the physical market cannot clear.
Bid into scarcity
$1.60T
Years of global gold mine supply
2.9
Paper still remaining
$158T
Bar is 8× exaggerated so a 1–2% bid is visible against the $160T stock. The doors are mathematically too small for everyone.
03 · The book
Perimeter score
Allocate 100 across sleeves. Inside money is a claim on a counterparty. Outside money is not. The buffer is the only inside-adjacent paper the brief defends — six to twelve months of operations.
Physical gold (possession)
Allocated metal you can touch. Not an ETF.
Bitcoin (self-custody)
Offline keys. Exchange balances do not count.
Productive real assets
Cash-flowing land, farms, infrastructure on fixed-rate debt.
T-bill / cash buffer
4-week bills or physical cash. 6–12 months of operations.
Long sovereign bonds
Duration that is being silently defaulted.
Private credit / funds
Illiquid. Gates drop when you need the door.
Bank deposits (excess)
Beyond the operational buffer. Counterparty risk.
Sum 100%