In today’s issue:
- The Gold Summit approaches
- Our money will be used to light cigars
- Revaluing gold could save us surprisingly well
It’s over to one of your fellow subscribers for today’s Fortune & Freedom. He just did a better job of describing the country’s position than we could’ve.
But first, a quick reminder. The Gold Summit is just days away. To give yourself time to check out the warm-up material, you’ll want to sign up now.
Now, on to R.C.’s email:
Hi Nick
Strangely this sort of story doesn’t get much coverage at all in the mainstream media – I wonder why?
I might be wrong, but I think it was Gordon Brown who gave the Bank of England the powers they now have. It was probably the single biggest blow to UK democracy ever in my opinion. And selling our Gold Reserves at the bottom of the market was another one of his huge mistakes that cost us millions/billions.
What with the other Chuckle Brother Tony Blair leading us into a war with Iraq under false pretences, these two pretty much turned the Labour Party from being the Party of the working class into becoming the Socialist Party of the rich that we know and loathe today. Harold Wilson must be spinning in his grave.
We live in very troubled times and it is getting increasingly difficult to see how things are going to end well as they currently stand. I don’t envy you your task of trying to predict markets when so much of what we see happening is so ground-breaking that it is difficult to find any reference points from the last fifty years that are even remotely relevant to what we are seeing today.
The massive movement of people both legally and illegally not just from one country to another but across continents is unprecedented.
At the same time Globalism (which we have always been told is a good thing) is really back-firing big time on Europe now and coupled with our net-zero policies, is having a dreadful impact on our manufacturing on a scale that is clearly damaging all Europeans.
The knock-on effect is potentially going to be staggering over the next five to ten years, if not sooner.
Most people are blissfully unaware of the near on collapse of German car manufacturing. The implications that this has for the EU and the rest of Europe beggar thinking about.
I do worry that because most of us in Europe have not lived during a war, we don’t understand how wars actually start. I’m thinking especially about civil wars in particular!
In these turbulent times gold has to be the safest bet. You might not make much money and you might even lose a bit, but holding assets denominated in euros and pounds or even dollars is far more risky in my opinion.
Oil tycoons around the World will always buy gold, but the way things are going soon they will only use our paper money to light their Cuban cigars.
R.C.
You’re right that the last 50 years aren’t a good enough guide to what happens next. But you only need to go back a little further to understand perfectly.
Government debt, inflation, central planning and all our other challenges have been faced before. Except, perhaps, the demographic collapse and its immigration cousin. That’s a new one to plug into the equation.
But the solutions, or resolutions, are also in the history books. And that’s what allows you to predict what happens next.
The big macro thinkers that I follow have been arguing whether we’re facing the 1920s, 40s, or 70s. In an economic policy sense, I mean.
Inflation, capital controls, taxes, strikes, debt and so much more is surprisingly familiar if you go back that far.
What’s surprising is how little the average investor knows about these periods.
For example, it’s crucial to understand that inflation is a deliberate government policy to devalue an impossibly high level of debt. It is not something that just happens, leaving us all to wonder how and why. It is as direct a policy tool as taxes.
Here’s a nice example from a recent Telegraph article which highlights this:
HMRC swamped by panicked pensioners surprised by ‘retirement tax’ bills
[HMRC’s] Sir Jim [Harra] said: “The state pension has always been a taxable source of income but obviously a combination of the frozen tax allowances and the triple lock mean that more and more state pensioners find that their total income is large enough to be subject to income tax.”
It is of course completely absurd that state pensioners are paying income tax. Unless you work for the HMRC and like your job security. Robbing Peter to pay Peter is just the sort of thing civil servants think worthwhile.
But the point is that inflation is being used by the government to improve its financial situation. And it’s going to cost you very directly.
Most people may well be aware that the government is in a dire financial position. But how many understand this means inflation is likely to be imposed on them?
If the government’s obligations are unaffordable, they will be inflated away. That goes for benefits promises as much as government bonds. It’s the way of history, if not just maths.
This is just one example of how understanding history can help you predict what happens next.
Another popped up repeatedly at the Gold Summit we just finished recording.
Almost all of our guests pointed out that the countries that own a lot of gold are in a peculiar position. One way to solve their vast debt problems is to allow the gold price to skyrocket. This gives them an asset to offset their vast debts with.
It’s called a gold revaluation. And it might just be the most painless way to reset the overindebted financial system. You just revalue one of your key assets dramatically higher.
There’s plenty of historical precedent for this too.
The question is, how high would the price of gold have to go?
And who will be holding onto the precious metal as it is allowed to appreciate spectacularly enough to rescue the financial system?
Until next time,
Nick Hubble
Editor, Fortune & Freedom
