In today’s issue:
- How to learn to surf, quickly
- Monetary systems define investment trends
- This week, I’ll show you how to surf monetary systems
I’ve taught many people to surf. The secret is to jump into the deep end, literally. That’s because the whitewash most people learn to surf on is too weak and slow to provide enough stability for the surfboard.
It’s a bit like learning to ride a bike. If you roll along too slowly, it’s very wobbly. If you pick up a bit of speed, the bike stabilises itself a little.
The rush of an unbroken wave under your surfboard is firm enough to keep it stable. Bubbly whitewash is wobbly because it’s soft and slow.
The caveat, whether you’re riding a bike or learning to surf, is to keep someone experienced with you personally. Unbroken waves can pick you up and throw you. Or tip up the back of your board and push you into a nosedive. So you need to know where to avoid hanging about, where is safe to sit and wait for the right wave, and which wave to paddle onto.
That sort of attention isn’t economical for conducting surfing lessons at scale. And so they usually consist of a large number of tourists flailing around in the whitewash with only one dreadlocked instructor trying to stop them from face planting into the sandbank – the only real risk of injury.
That’s no way to learn. So, let’s jump into the deep end of surfing the cycle of monetary systems together…
Money changes
You might think that money is inherently something the government and central bank provide. But there are many different types of monetary system.
In fact, history is an endless cycle back and forth between them. That’s because each one is doomed to fail eventually. Some because they are inherently flawed. Others because human nature falls for the promise of a free lunch every time.
Tomorrow, I’ll explain what some of these systems are, and how you can take advantage of them. For now, consider why now is a good time to learn about all this…
I believe we are on the cusp of a change. Our current financial system has reached the end of its useful life. The signs are all around us.
Inflation, impossibly large government debts, bond market instability, QE, Russian assets being confiscated to rebuild Ukraine, geopolitical instability in the Middle East, high tax rates, and plenty more.
These examples may seem unrelated. But they all show the same thing. Trust in the current monetary system is collapsing. Its assumptions are being questioned. Its institutions undermined.
Countries can no longer trust in the financial gatekeepers in Europe and the US to respect their property rights. So why would the likes of China and South Africa use a monetary system that permits confiscating assets?
Consumers can no longer trust their money will be worth a respectable amount in a few years’ time. So why save in that currency?
After several bank failures in the US last year, large companies can no longer trust that a bank can keep their deposits safe.
Government debt is so high that spending will have to be drastically cut and taxes painfully hiked to prevent a major financial meltdown. If that point is near, is our political system stable? Can pensioners make retirement plans based on tax incentives and welfare payments that might be cut?
Financial institutions like banks, pensions and investment funds keep failing their customers. Where is your money safe?
Perhaps most concerning of all, the price of gold is surging. Why is that bad news? Because gold is the opt-out asset from the monetary system. For millennia it has protected the purchasing power of people’s savings despite wars, inflations, stock market crashes and countless other crises.
So, when its price is rising, it’s a barometer for declining trust in the monetary system.
Most people see all this as isolated events and trends. Or they might attribute a common cause to these forces. Things like demographics, or China challenging America’s geopolitical dominance. But it’s monetary systems that encompass it all.
The power of money to move markets and militaries
Monetary systems decide who wins wars and what happens to the loser. They cause the success and failure of ideologies, and trigger the emergence of empires. Most of all, they drive wealth creation and destruction.
If you understand what type of monetary system you’re in, you know which investments to buy, and which to sell. They define the financial trends that enrich or impoverish entire generations.
Usually, these cycles play out so slowly that not many of us are even aware of them. Most of us live in a period where we take the existing system for granted.
We all “know” things like “getting on the property ladder is the path to riches” and “stocks go up in the long run”. Our parents and grandparents “knew” that exchange rates remain fixed to each other, or a weight of gold. Their parents knew the Empire was built on the pound and City’s financial domination of the world.
But these are just symptoms of the monetary system we liver under. And that system can change. It always does eventually.
Exchange rates go from fixed to floating. We leave the gold standard. Inflation rips through the economy for a decade. Negative interest rates allow governments to borrow money for cheaper than free. Property prices can remain stable for generations and stocks can go nowhere for a lifetime.
Radical change does occur. Things nobody could’ve imagined become the new normal.
Investors who understand where in the cycle they are can predict what happens next. Will the current system last long enough for you to profit from its stability? Or is turmoil just around the corner, requiring an entirely new investment asset allocation?
This week, I’ll teach you how to surf the coming wave of change in our monetary system. It’ll be a rough ride regardless. But some of us will harness the wave to make money while the rest get dumped. I hope you’ll get on board and join me.
To find out what might be over the horizon, tune in tomorrow.
Until next time,
Nick Hubble
Editor, Fortune & Freedom
