In his book Deep Risk, Bill Bernstein describes two different types of risks: "shallow risk", a loss of real capital that recovers relatively quickly, say within several years; and "deep risk", a permanent loss of real capital. Put into different words, shallow risk, if handled properly, deprives you only of sleep for a while; deep risk deprives you of sustenance. The four main causes of deep risk according to Bernstein are hyperinflation, prolonged deflation, devastation (wars or geopolitical disasters) or government confiscation of assets. • Severe, prolonged hyperinflation, as occurred in Weimar Germany, in current-day Zimbabwe, and to a lesser degree after both world wars in many other major European nations. • Severe, prolonged economic recession/depression with consequent deflation, as occurred in post-1990 Japan, and the rest of the developed world during the Great Depression. • Confiscation of assets, as occurred after the communist takeovers in Russia, Eastern Europe, China...
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