Part IV-C — The Social & Ethical Shocks

Updated: 2025-09-30 · Glossary

This report analyzes the chain of social and ethical shocks triggered by the Dollar Default Crisis (DDC). This analysis builds on the financial, political, and resource shocks detailed in previous reports.

The DDC is not just another financial crisis; it signifies the rapid collapse of a government’s ability to function. Its primary impact comes from destroying private wealth and government tax revenue at the same time, which drives a vicious cycle of extreme budget cuts, mass unemployment, and social unrest. The basic rules of government are fatally unprepared for this kind of shock.

Key Projections: In our baseline “Catastrophic Scenario,” global financial asset losses will reach $12 trillion to $21.6 trillion. The global U6-equivalent unemployment rate (a broader unemployment measure that counts discouraged and part-time workers) will rise by 10 to 15 percentage points, a scale comparable to the Great Depression. This will trigger waves of 50 to 80 million refugees and migrants within six months. Violent and property crimes will increase by 30% to 50% in developed countries, leading to a breakdown of social order.

Key Regional Vulnerabilities:

North America & Europe: As the crisis epicenter, they will face Depression-era job losses and collapsing social trust. The EU will be torn between enforcing budget rules and preventing riots.
MENA & Sub-Saharan Africa: The inability to import food and energy will lead to widespread famine and failed states, creating unprecedented refugee pressure on Europe.
East Asia: The evaporation of export demand will cause cascading bankruptcies in the manufacturing sector, shattering critical supply chains.

Strategic Implications: This analysis reveals three profound challenges. First, many countries, including democracies, will likely declare states of emergency to maintain order, shifting toward authoritarian rule. Second, rationing essentials like food and medicine will become nearly impossible as governments lose control and black markets thrive. Third, an information war fueled by disinformation will shatter societies and normalize violence as a tool. In the post-DDC world, not just finance but democracy itself will be on trial.

Why This Matters to You

This isn’t abstract theory—it is a direct threat to your daily life. It determines whether your savings survive, whether your job exists, and whether your streets remain safe. The following sections explain how the financial collapse translates into a crisis for every household.

II. Mechanism Map: The Dynamics of Social Collapse

The path from financial shock to social breakdown is a series of feedback loops. This section explains how it happens, step-by-step.

2.1. Initial Shock (T+0 to 30 days): From Wall Street to Main Street

The DDC is triggered by the failure of a U.S. government debt auction. The world’s “risk-free asset” vanishes, and trillions of dollars in financial wealth are wiped out instantly. This is not just numbers on a screen—it is people’s savings and retirements disappearing overnight.

This hits the real economy through the “wealth effect.” When retirement accounts and savings evaporate, consumer and business confidence shatters. Spending and investment stop cold.

This shock is made worse by post-2008 regulations. Rules meant to make individual banks safer (such as the SLR and CCP margin calls) force them to hoard cash and sell assets during a panic. This creates a catastrophic “liquidity death spiral,” freezing credit markets and cutting off the lifeblood of the real economy.

2.2. The Vicious Cycle (T+1 to 6 months): No Jobs, No Money, No Order

The credit freeze and demand collapse trigger a massive wave of layoffs, faster and wider than any previous crisis. This is when the images of the breadlines and job queues of the Great Depression become a modern reality.

The economic collapse destroys national tax bases. Unable to borrow, governments are forced to implement drastic budget cuts just as social support is needed most.

Research has shown a clear and statistically significant link between the scale of government spending cuts and the frequency of social unrest (riots, demonstrations, general strikes). Under the DDC scenario, such drastic cuts will be so severe that social unrest is projected to more than double.

This unrest further damages the economy and increases security costs, forcing even deeper cuts and fueling more anger. This is the feedback loop that grinds society down.

Causal Chain Map: DDC (Financial Shock) → Asset Value Collapse → Credit Contraction & Demand Evaporation → Mass Unemployment → Tax Revenue Collapse ↓ Increased Social Unrest ← Public Service Cuts ← Forced Austerity ↓ Further Economic Stagnation & Security Costs → Worsening Fiscal Position → (Loop)

In plain terms: A financial crash destroys wealth. This kills jobs. Governments lose tax money, forcing them to cut essential services. Unrest rises, which further damages the economy, and the cycle repeats, getting worse each time.

2.3. Systemic Failure (T+6 to 24 months): State Dysfunction and Survival Dynamics

When the vicious cycle crosses a critical threshold, the state can no longer perform its basic functions: keeping order, maintaining infrastructure, and providing a safety net. To hold onto power, governments will resort to emergency decrees and rationing.

At the same time, people will begin to seek survival on their own terms. This triggers large-scale refugee waves across borders. Internally, black markets and underground economies will spread uncontrollably, further eroding the government’s authority and ability to collect taxes. At this stage, the crisis is no longer about money; it’s a political and social collapse that questions the very existence of the state.