For many years I have predicted that the “slow burn” would continue. As we begin 2017, the heat has been turned up dramatically. The financial coup d’état drained trillions of assets from sovereign governments, pension funds, municipal and community institutions, and households. Falling interest rates have compounded these losses.

Now, the debt growth model is over and the cost of capital for these existing institutions is rising. It has become more difficult for some to “kick the can.” It is impossible for others. What remains in the existing institutions are liabilities.

We are currently witnessing an acceleration of “controlled demolitions” of existing liabilities as pension funds, insurance companies, and businesses must renegotiate or abrogate their contracts. Sovereign governments – who have the capacity to print currency and to issue more debt – must engage in a deeper re-engineering of government assets and operations.

The most important question before the United States is whether or not we will re-engineer the return on investment to taxpayers of government investment, credit, contracts, appropriations and regulations from a negative to a positive return. If we do, we will create explosive wealth. If we do not, we are in for a long, harsh financial squeeze at best…or civil war at worst; perhaps even a repeat of the “rape of Russia.”

In our 2015 Annual Wrap Up (and in numerous recent quarterly and annual wrap ups), the Solari Report focused on the growth of a new, networked economy which we call Global 3.0 and the reinvestment of funds shifted through the “financial coup d’état.”

In this year’s report, we have chosen to focus on the traditional industrial economy of Global 2.0 and to ponder how the demolition of liabilities will be managed in 2017 and beyond. But much is happening — including continued growth — in Global 3.0, so we’ll mention some of the highlights.

Given Brexit, the change in the US administration and the upcoming European elections, 2017 will be a year of transition. Looking down the road over the next 5-10 years, we face a wide variation in what is possible. If we succeed in coming into balance with the environment and make a successful transition to a multipolar world — including the implementation of new technology in productive ways — investors will enjoy significant opportunities. If we do not, the risks will continue to rise.

Will the Dow rise to 30,000 or fall to 10,000? Either scenario is a possibility.

I. Global 2.0: From Slow Burn to Pressure Cooker

A. Controlled Demolitions Accelerate

Pension Funds:

Insurance Companies:

Bankruptcies and Failures:

B. The Debt Growth Model is Dying The War on Cash:

The End of the Bond Bull:

Negative Interest Rates Turn to Rising Interest Rates:

US Dollar Rising:

The Future of the Euro:


US Budget Hot Potato:

II. Inside the Pressure Cooker: Will We Expand or Shrink the Pie?

A. Return on Investment to Taxpayers: Will It Turn Positive Or More Negative?

Productivity Growth: Labor vs. Human Productivity:

B. Piratization: Could the Rape of Russia Happen Here?

C. National Security State Costs Out of Control

D. More Cut & Run

E. Corruption: Out of Control

Pedophilia & Control Files:

Voter Fraud:

F. Decentralization: Can We Re-Localize? Can It Work?

G. Equity Creation Greater than Controlled Demolitions?

H. Covert Cash Flows: Black Budget, Secret Dividends

III. Global 3.0 Rising

A. Space

B. Automation

C. 5G is Coming

D. Surveillance Capitalism

IV. How Will Investors Handle This Much Uncertainty?

A. Artificial intelligence and the Financial Markets

B. The Rise of Index Funds

C. Volatility

D. The Rise of Investment Screening