DR-WALPURGIS-SOC-ETH (Rev-E): An analysis report on social and ethical shocks after DDC

I. Executive Summary

This report analyzes mechanisms, size, and regional differences in the chain of systemic social and ethical shocks caused by the US Treasury market (DDC). This analysis assumes the quantitative framework of the preceding B1 (financial and political) and B2 (resources) reports.

DDCs are not merely financial crisis, but rather the rapid and structural collapse of national capabilities in developed countries. The main route of its transmission is the simultaneous destruction of private assets and national revenue, which drives a self-reinforcement cycle of austerity, mass unemployment and social unrest. The current institutional framework is fatally underprepared for this type of complex shock.

Key forecasts (medium-term scenario) The baseline for this report, "L2: Catastrophic Scenario," predicts the following situations: Global financial assets losses reach $12 trillion to $21.6 trillion, which will seriously damage the real economy. Global U6 equivalent unemployment rates rise by $10-15$ percentage points (pp) from baseline, comparable to the Great Depression. This will result in 50-80 million international and domestic migration (immigrants and refugees) over the first six months. Violent crimes and property offences increased by $30-50% year-on-year in developed countries, resulting in significant deterioration in social order.

Major Regional Vulnerabilities The impact of shocks varies greatly from region to region.

• North America and Europe : It is the epicenter of the financial system, and the collapse of the labor market and deterioration of social cohesion are the most serious issues. In the EU, the governing dilemmas of fiscal discipline (stable and growth agreements) and response to social unrest threaten the survival of the Union itself.

• Middle East and North Africa (MENA) and Sub-Saharan Africa : Loss of food and energy import capacity will lead to massive famines and national collapse, creating unprecedented immigration pressure on Europe.

• East Asia : The main risks include a chain of bankruptcy in the manufacturing industry due to evaporation of export demand and a cutting-off of supply chains for important supplies.

Strategic Implications This analysis highlights three serious strategic challenges: First, there is a very high risk that many countries, including democratic states, will invoke emergency powers to maintain domestic order and will move towards authoritarian governance. Second, although it is theoretically possible to distribute essential resources for survival, such as food and medicine, it faces serious operational difficulties due to the decline in national capabilities and the expansion of the black market. Third, information environments where disinformation and incitement are prevalent will accelerate social division and significantly lower the psychological threshold for violent behavior. The post-DDC world will be an era in which not only financial order, but liberal democracy and the social contract itself will be fundamentally reexamined.

II. Mechanism Map: The Mechanics of Social Collapse

How will the financial shock of DDC lead to the collapse of social structures? The causal chain is characterized by multiple self-enhancing feedback loops. This section dissects its propagation mechanism over time and presents the logical basis for subsequent analysis.

2.1. Propagation of initial shocks (T+0 to 30 days): From financial collapse to cataclysmic economic upheaval

The ignition point for the DDC is a technical failure of US Treasury bids, as defined in the B1/B2 report. This means the disappearance of global "risk-free assets" and instantly leads to a reassessment of global risk. The estimated losses for financial assets in the L2 (catastrophic) scenario are

It reaches $12 trillion to $21.6 trillion. Asset destruction of this scale spreads immediately into the real economy.

Its main transmission path is the "asset effect feedback loop." The US financial assets to GDP ratio is about six times higher, and the evaporation of wealth on such a scale will crush the confidence of consumers and businesses, causing a sudden halt of spending and investment.

This early shock is amplified by the very regulatory framework that was built after the 2008 financial crisis. In particular, complementary leverage ratios (SLRs) and margin requests by central clearing agencies (CCPs) have a procyclical nature that absorbs liquidity from the system as market volatility increases. This creates a self-enhancing and catastrophic "liquidity death spiral," which freezes the credit market and cuts the blood supply to the real economy.

2.2. 悪循環（T+1〜6ヶ月）：失業、緊縮財政、社会不安

The credit market freeze and evaporation of demand creates a wave of massive layoffs. Historically, the financial crisis first hits the credit-intensive construction and manufacturing industries, and then spreads to the services and public sectors. Given the scale of the DDC, this process is expected to be faster and more extensive than any previous crisis.

The collapse of economic activity destroys the national tax revenue base. Under the DDC environment, new borrowing from international markets is not possible, and governments have no choice but to match their expenditures. This means that the nation will force forced superausterity to the nation at the very moment when social security demand is maximized.

This situation serves as a powerful accelerator that destabilizes society. Ponticelli and Voth (2020) studies show that there is a statistically significant and strong positive correlation between the scale of government spending reductions and the frequency of social unrest (riots, demonstrations, general strikes, etc.). According to their baseline model, a 1 percentage point spending reduction in GDP ratio increases the log expectation for social anxiety events by 0.049. Under the DDC scenario, spending cuts of more than 5% of GDP will be inevitable in many countries, and the frequency of social unrest can increase nonlinearly, potentially more than twice the baseline.

This social unrest further hinders economic activity and increases public safety maintenance costs. This creates a catastrophic feedback loop that forces governments to cut further expenditures, which leads to further unrest. This is the core mechanism in which financial shocks directly lead to degradation of social cohesion (analysis area D).

Causal chain map

DDC (financial shock) → Asset value crash → Credit contraction and demand evaporation → Mass unemployment → Tax revenue declines dramatically

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Increase in social unrest ← Reducing public services ← Forcing austerity

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Further stagnation in economic activity and increased security costs → further deterioration in fiscal conditions → (loop)

2.3. Systemic collapse (T+6 to 24 months): Mechanics surrounding national dysfunction and survival

Once the aforementioned vicious cycle exceeds the critical point, the state begins to lose its ability to carry out basic functions (preservation of public order, infrastructure management, and social security). At this stage, the government will resort to more authoritative measures to maintain the legitimacy of its governance. In other words, the activating emergency authority (analysis area B) and the introduction of a system for distribution of resources essential for survival (analysis area C).

At the same time, the loss of the security and opportunities offered by the nation will begin to seek survival on its own. This triggers the large-scale cross-border migrant and refugee outbreak (Analysis Area A). In the country, black markets and underground economies that are not governed by the state will expand, further eroding tax revenue bases and national legitimacy. At this stage, the crisis completely transforms from an economic to a political and social aspect that questions the very existence of the nation.

III. Scenario fork: Contained recessions, prolonged crises, systemic collapse

The consequences of post-DDC society do not follow a single path. The severity diverges greatly depending on the speed, consistency and political feasibility of early policy responses. This section presents three different scenarios based on the L1/L2/L3 framework of the B1/B2 report.

3.1. Definition of a scenario and branching conditions

• Scenario 1 (mild): Contained recession (L1 compatible)

  • Branching conditions : After the DDC occurs, policy coordination on an overwhelming scale will be realized, extremely quickly (within T+72 hours) and unpopularly constrained. Specifically, it includes the Fed's immediate exemption of SLRs, the G7 central bank's launch of unlimited dollar swaplines, and the coordinated implementation of large-scale quantitative easing (QE).

  • probability : Considering the political dysfunction detailed in the B1 report (attack on the Fed's independence, fiscal brink policy), the probability of realising this scenario is extremely low.

• Scenario 2 (Moderate): A prolonged crisis (L2 response)

  • Branching conditions : Policy responses are delayed and political conflicts limit the scale of the system. The Fed is hesitant to act and insufficient measures are taken after the SLR/CCP amplification mechanisms have caused serious damage to the real economy. While a complete meltdown in the financial system is avoided, the economy is plunged into a severe and long-term recession.

  • probability :This is the analysis of this report Baseline scenario It is.

• Scenario 3 (catastrophic): Systemic collapse (L3 compatible)

  • Branching conditions : Policy responses fail completely or are not implemented due to political paralysis. The financial crisis will shift to a crisis of national trust, and international cooperation will completely collapse (e.g., weaponizing the dollar swap line). Furthermore, exogenous shocks such as power grid failures overlap, causing core infrastructure such as payment systems and supply chains to become physically malfunctional.

  • probability : Low probability, but with catastrophic results that cannot be ignored as tail risk.

3.2. Master Scenario Matrix

The following table summarizes interval estimates, typical policy responses, and social consequences for key social indicators in each scenario. This table translates abstract financial scenarios into concrete social impacts and provides quantitative criteria for risk assessment and policy making.

Table 1: Splitting of socioeconomic scenarios after DDC (Attachment specifications: CSV output possible. Header: Scenario ID, Indicator, Unit, Light Scenario Estimate, Medium Scenario Estimate, Catastrophic Scenario Estimate, Policy Response Profile, Social Outcome Profile)_

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Note: Unemployment estimates adjusted cases of the 2008 financial crisis ($4.7$pp in the US) and the Great Depression (25% peaking in the US) at a more severe shock scale for the DDC. The immigration and refugee flow extrapolated the Syrian crisis (a pace of over 2 million people a year) as a global crisis. Increased crime rates referenced research into unemployment-crime correlations and cases of the Argentine crisis.

IV. Global fault lines: Comparative analysis by region

The social shocks brought about by DDCs do not occur uniformly throughout the world. The form of manifestation differs greatly depending on the economic structure, political system, social vulnerability, and geopolitical position of each region. This section compares the inherent risks and impacts of the crisis for each major region.

Table 2: Regional comparison of social impacts after DDC (Attachment specifications: CSV output possible. Header: Region, Unemployment Profile, Migration Profile, Security Profile, Rationing Profile, Governance Profile)_

V. Early warning dashboard and policy response

To detect early signs of a crisis and to assist in policy response decisions, this section presents practical surveillance tools and types of policy options.

5.1. Early warning dashboard

The following 10 indicators are leading and concordant indicators indicating that socioeconomic stress has reached a dangerous level. Each indicator defines a standard for alert levels (green, yellow, red) to indicate the severity of the situation.

Table 3: Social and Ethical Shock Early Warning Dashboard (Attachment specifications: CSV output possible. Header: Indicator ID, Indicator Name, Alert Level Green, Alert Level Yellow, Alert Level Red, Update Frequency, Primary Data Source)_

5.2. Policy Typology: Tradeoffs in Crisis Management

Under extreme circumstances like the DDC, there is no ideal policy. All options involve serious trade-offs. Politicians need to recognize these trade-offs and then choose the route that will have the least damage.

• Type 1: Exception status (emergency authority)

  • Purpose : Maintaining social order, preventing capital outflow, and suppressing panic.

  • means : Martial law, restrictions on freedom of assembly and movement, management of financial transactions, censorship and communication blockade.

  • trade off : In exchange for short-term order maintenance, it carries the risk of halting democratic processes and human rights violations. Once invoked, there is a high risk that it will lead to permanent or abuse of authority. Historically, power-initiation during economic crises can further undermine government legitimacy and lead to greater repulsion (e.g. Argentina 2001).

• Type 2: Survival allocation (distribution system)

  • Purpose : Equivalent distribution of rare daily necessities (food, medicine, fuel).

  • means : Distribution booklet (card) system, prioritization (elderly people, infants, and those with underlying medical conditions), and national distribution offices.

  • trade off : In exchange for ensuring fairness, this leads to large-scale inefficiency and the emergence of black markets. Success requires extremely high administrative capabilities, public trust, and resistance to corruption (e.g. WWII, UK). In a situation where national capacity has declined, the distribution system itself becomes a hotbed of corruption and rather expands inequality (e.g., the Special Cuban Period).

• Type 3: Market intervention (price control/subsidy)

  • Purpose : Controlling hyperinflation and ensuring access to the necessities of the poor.

  • means : Set the highest price, subsidies for food and fuel, and cash transfers to certain classes.

  • trade off : In exchange for short-term price control, this leads to a decline in productivity motivation, a shortage of supply, and an increase in fiscal burden. Price controls risk vanishing goods from the market and causing prices to rise further on the black market (e.g., the Republic of Weimar). Cash benefits could accelerate inflation.

• Type 4: Border management and international aid

  • Purpose : Reducing the burden on domestic resources and services, and alleviating the humanitarian crisis.

  • means : Border closures, establishment of refugee camps, requests and acceptance of international aid.

  • trade off : In exchange for domestic stability, they take the risk of breach of international law obligations and humanitarian tragedy in border areas. The acceptance of aid may be constrained in part of sovereignty (conditions for receiving), and the spread of aid supplies and corruption can be a factor that increases domestic dissatisfaction.

These policies do not function on their own, but are combined depending on the situation. The optimal combination depends heavily on the initial conditions of each country (administrative ability, social cohesion, financial reserve), but both choices are inevitable that a "painful decision."

VI. Historical Cases: Lessons from Past Crisis

Similar cases of socioeconomic collapse in the past provide valuable indications in predicting the future. This section analyzes three particularly important cases in detail and breaks down the factors of success and failure in terms of institutional design, enforceability and corruption resistance.

6.1. Case 1: Argentine Economic Crisis (2001) - Financial collapse and the dissolution of social order

• overview : The collapse of the fixed-price system and defaults have led to large-scale social riots (Caserolasso), a state of emergency, and political turmoil in which five presidents are replaced one after another.

• 運用分析 None

  • Emergency authority : The de la Rua administration issued a state of siege on December 19th, attempting to limit freedom of assembly. However, this further fueled the public's anger, and attempts to censor the media failed. The next day, the president escaped from the presidential office by helicopter, and the restoration of order by authority completely failed.

  • Impact on society : The unemployment rate exceeded 20% and the poverty rate reached over 50%. Middle class-led Casero Lasso has shown that the financial crisis has the power to destabilize not only certain classes but society as a whole.

• 教訓 None

  • Failure in system design : The policy of a direct binding on citizens' assets, called deposit blockade, was seen as a fundamental betrayal of the social contract, and led to an explosive backlash.

  • Limits of execution ability : The government's power-raising, which lost widespread support from its public, exposed the limits of its ability to enforce, and rather quickly led to the collapse of the government.

  • Implications for DDC :DDC is equivalent to the global version of Coralite. Even the stable middle class in developed countries is likely to show similarly strong resistance to the freeze and destruction of assets as in Argentina.

6.2. Case 2: Comparison of distribution systems - Britain (during World War II) and Cuba (special period)

• overview : The factors that distinguish the success or failure of a state-led distribution system are extracted from two contrasting cases.

• 運用分析 None

  • U.K. : Since 1940, a sophisticated system has been introduced that combines distribution notebooks and point systems for food, clothing, fuel, etc. Supported by the government's high administrative capabilities, effective public relations through the BBC, and the social unity of "all-in-the-people unity," the system functioned fairly and effectively. As a result, it is said that the nutritional status of the people has improved since before the war. Although there was a black market, it was not on a scale that covered society as a whole.

  • Cuba : The economy collapsed during the "special period" after the collapse of the Soviet Union (early 1990s), and the existing libreta system faced an absolute shortage of supplies. The amount and amount distributed has decreased dramatically, making it completely insufficient to support the survival of the people. This created a serious disparity between the dollar-bearing and the have-nots, with the black market being the de facto main source. The distribution system became a formal system that was not just fair distribution, but merely managed shortages.

• 教訓 None

  • System design and execution ability : The success of a distribution system depends not only on the system design but on the robust national enforcement capabilities (logistics, data management, law enforcement) that underpins it, and on the trust of the citizens in the system.

  • Corruption Resistance : The scarier the supplies become, the more incentives for transit and corruption in distribution channels. If this cannot be suppressed, the distribution system will become a device that promotes inequality.

  • Implications for DDC : In a post-DDC world, administrative capabilities are predicted to be significantly reduced in many countries. Therefore, the distribution system introduced will have a very high risk of dysfunction, closer to the Cuban model than the British model.

6.3. Case 3: Hyperinflation in the Republic of Weimar (1923) - Information Environment and Thresholds of Violence

• overview : Astronomical inflation destroyed the monetary economy itself and wiped out middle class savings. This disintegrated the moral and ethical foundations of society, paving the way for political extremism.

• 運用分析 None

  • The collapse of social order : Bartering became the norm, and farmers refused to sell food on unworthy banknotes. Urban residents plundered rural areas in search of food, and food riots frequently occurred. Law and order have practically collapsed.

  • Information environment and psychology : Loss of trust in currency has led to distrust in the government and the entire existing social system. Conspiracy theories that sought "traitors" and "speculators" became widespread, fueling social division. Economic predicament has driven people from rational judgment to action based on anger and resentment.

• 教訓 None

  • Threshold for violence Hyperinflation is not just an economic phenomenon, but a process that destroys the psychology of society. When hope for the future and trust in fair rules are lost, the psychological threshold for people to resort to the direct means of violence drops dramatically.

  • Implications for DDC : The collapse of US Treasury, which is "risk-free assets," is the destruction of the foundation of trust in the modern financial system, comparable to the collapse of currency in Weimar. This suggests that in a post-DDC world, irrational fear and anger are the main forces that drive society, and there is a high risk of creating an unpredictable cycle of violence. The role of radio (RTLM) in the Rwandan genocide should be referenced as an extreme example of how incitement of hatred can be easy and destructive in modern social media environments.

VII. 前提・不確実性・感度分析

The analysis in this report is based on certain assumptions and contains multiple uncertainties. These factors can have a significant impact on the actual development of a crisis.

• Price, supply, and unemployment resilience : This analysis assumes that elasticity between economic variables in past crises (e.g., unemployment response to demand shock) works similarly after DDC. However, because DDC is an unprecedented scale of structural disruption, these relationships can change nonlinearly, causing unemployment and shortages to worsen at a rate that exceeds expectations. In particular, the disruption of the global supply chain will fundamentally transform the relationship between price and supply.

• The impact of policy delays : As the scenario branch shows, the consequences of this report are extremely sensitive to the timing of policy responses. The analysis assumes delays of weeks to months due to political paralysis, but if this delay is further prolonged, even moderate scenarios (L2) can easily move towards catastrophic scenarios (L3). The time lag from policy decision to implementation is one of the most important variables that determine the severity of a crisis.

• The impact of missing data : As the crisis gets worse, the national capacity for collecting statistics will decline significantly. Even basic data such as unemployment, crime rates, and immigration flows can be less reliable and delayed or halted reporting. This will undermine the effectiveness of the early warning dashboard, inaccurate situational awareness, and risk policy decisions being "flying in the dark." Quantitative predictors of the analysis should be interpreted with broader confidence intervals, assuming this degradation of the data environment.

• Social psychology and irrationality of behavior : This analysis assumes to some extent people's rational responses to economic incentives. However, as the Weimar case shows, under extreme stress, irrational elements such as fear, anger and conspiracy theories can govern people's actions. The amplification of information through social media makes this irrationality even stronger in modern times. The "tipping point" of society (a turning point where violence becomes a norm) is unpredictable by pure economic models and is the biggest uncertainty factor in this report.

VIII. Appendix

A. Definitions, Formulas and Data Dictionaries

• DDC (Destabilization of Debt-securities market) : Systemic dysfunction in the US Treasury market. In this group of reports, the technical failure of a US Treasury bid as defined in B1/B2 is considered to be a fire event.

• U6 is quite unemployed : An indicator of the wider labor inability to use, including official unemployment rates, including unwilling part-time workers and marginal workers who have given up on job hunting.

• RSUI (Reported Social Unrest Index) : An index calculated based on the frequency of occurrence of social unrest-related keywords (e.g. "riots" and "protest") in media coverage. It is used as a proxy variable to measure the intensity of social anxiety.

• IPC/CH (Integrated Food Security Phase Classification / Cadre Harmonisé) : An international standard that evaluates the food security situation on a five-point scale. Phase 3 (crisis), Phase 4 (urgent), and Phase 5 (famine) indicate conditions in which emergency humanitarian assistance is needed.

• Black Market Multiple : The ratio of the black market trading price to the official price (or control price). 倍率 = 闇市場価格 / 公式価格 . A higher value indicates that the distribution and control system is malfunctioning.

• Estimation of the social unrest effect of Ponticelli & Voth (2020) : A negative binomial regression model in which the number of occurrences of social anxiety events is the explanatory variable. The main explanatory variable is the rate of change in government expenditure to GDP ( Δ(Exp/GDP) None

  ln(E)=β0​+β1​⋅Δ(Exp/GDP)it​+γXit​+αi​+δt​+ϵit​

  Here, $CHAOS {it}$ is the total number of social unrest events in the year t of the country $i$, $\Delta(\text{Exp/GDP}) {it}$ is the rate of change in government expenditure to GDP ratio, and $\beta_1$ is the main coefficient of interest.

B. Key Data Table

Table 4: Baseline of number of employees by industry (unit: 1,000 people) (Attachment specifications: CSV output possible. Header: Region, Year, NACE Code, NACE Description, Employment thousands)_

Note: The definition of industrial classifications differs slightly depending on the region and statistical source, so strict comparisons should be taken care.

C. Reference Case Digest

• Argentine Economic Crisis (2001)

  • 危機 : default and deposit closure.

  • Policy response : State of emergency declaration, deposit and withdrawal restrictions (Colarito).

  • Social consequences : Massive riots, collapse of government, unemployment rates above $20%, poverty rates above $50%.

  • 教訓 : The rate at which monetary policy failure leads to a direct crisis of political legitimacy. The dangers of policies targeting middle class assets. The ineffectiveness of authoritarian responses.

• British Wartime Distribution (1940-1954)

  • 危機 : The loss of imports and shortage of supplies due to war.

  • Policy response : A comprehensive distribution system with a distribution book and point system. Price control.

  • Social consequences : Achieving fair distribution, improving the nutritional status of the people, and maintaining a high sense of social unity.

  • 教訓 : A successful distribution system requires high administrative capabilities, public trust, and fairness.

• Special Period in Cuba (1990s)

  • 危機 : Loss of economic support and a serious shortage of supplies due to the collapse of the Soviet Union.

  • Policy response : Material management using the existing distribution system (Libretta).

  • Social consequences : The formality of distribution systems, serious nutritional deficiencies, the formation of large black markets, and the widening of economic disparities.

  • 教訓 : In the face of absolute shortages of supplies and declining national capabilities, the distribution system will lose its fair distribution function and encourage the black market.

• Hyperinflation in the Republic of Weimar (1923)

  • 危機 :Astronomical drop in currency values.

  • Policy response : Attempts to control prices (failure), and ultimately currency reform (issued by Rentenmark).

  • Social consequences : the disappearance of middle class savings, the return to a barter economy, food riots and looting, the collapse of law and order, the rise of political extremism.

  • 教訓 : The collapse of currency (or the modern fiduciary system) destroys not only the economic value, but also the foundations of social and ethical values, significantly lowering the threshold for violence.