Gold is King!: Did we actually get something right?

Last October (LSS 26 10 24) we published a fanciful piece which purported to come from June 2025. In it, we suggested that US President Donald Trump had raised tariffs to 60% on China and 20% on the rest of the world. (nah, impossible-ed)The resulting disquiet in the bond markets general loss of confidence in US assets and a fall in the dollar, seriously affected its status as the world’s reserve currency. In such circumstances we couldn’t in all honesty see any alternative to gold as the de facto reserve, with all the obvious disadvantages that brings. You will forgive us a modest cough, gentle readers, if we suggest that our little blog, for all it got wrong, seems oddly prescient if you fast forward( or back) to April 2025, a full month ahead of our crystal ball gazing!

Because the recent IMF report [1] suggests the very dangers to which we so modestly adverted you. are now real. Of course, the IMF is not perfect; it too will have its biases and unconscious assumptions like everyone else. But it is compiled by some of the sharpest and most knowledgeable financial minds on the planet, which is why their arguments should be at least engaged with respect. Which is why one aspect highlighted by the Guardian among others [2] has caused us particular disquiet. The writer points out that in the panic after COVID 19 got going back in March 2020, and the famous “dash for cash” it was only the Fed rescuing the US Treasury that prevented a total rout. However:

The real concern here is not technical dysfunction in treasury markets or the mechanics of the Fed, which are the bedrock of the global financial system. It’s about the politicisation of the monetary-fiscal nexus under a Trumpian regime that is fundamentally hostile to the norms of liberal-democratic governance. When even the dollar is no longer a safe haven, what – or who – can be?

There are signs already that gloom can be overdone. As we write these words, Mr Trump and his acolytes appear to be signalling a weakening of their stand on China. While his latest stance on Ukraine suggests bets on his resolve on any issue may be misplaced. In which case the world may breathe a little more easily. Stocks rose yesterday: and gold has fallen back, a little. We are not economic experts nor financial advisors. But as humble citizens with an eye for History we have to at least ask: how long can the dollar, and US Treasuries stay on top of this sort of thing goes on?

[1]https://www.imf.org/en/Publications/WEO/Issues/2025/04/22/world-economic-outlook-april-2025

[2] https://www.theguardian.com/commentisfree/2025/apr/22/the-guardian-view-on-the-imfs-warning-donald-trump-could-cost-the-world-a-trillion-dollars

#donald trump #USA #china #IMF #world trade #gold #bonds #equities #economics

Declining Life Expectancy: a sure sign of a declining civilisation

You , your children and your grandchildren are going to live a lot less than you should have done. That’s the stark message from Andrew Gregory of the Guardian,[1] who has been busy reviewing a major study of life expectancies across 20 European nations. It’s a topic which has concerned us before here(LSS 21 12 21) and not only is it not going away but we think it is a sign of something deeply general going wrong.

The first signs that the old Soviet Union was in real trouble came in the 1970s when astute researches suddenly realised they weren’t returning their annual health figures to the WHO and other bodies. Their economy was no longer delivering, people were going hungry: and you just can’t spin health statistics over the long term. Within a few years the system had fallen in on itself. According to a study by the University of East Anglia the long rise in life expectancy which we have taken for granted for centuries has now stalled. Worried? You should be.

Greece(lashed by cataclysmic economic woes 15 years ago) is second worse. But it is the countries of the UK, one of the most unequal societies in the western world, which are doing worst of all. And we think we know why. Our old friends Richard Wilkinson and Kate Pickett [2] long pointed to inequality as the root causes of many evils such as obesity poor health bad diets over work and chronic illness[2] And -surprise, surprise! These are exactly the factors which the authors cite to be dragging UK statistics so drastically backwards. But can you forgive us one more observation, gentle readers? One country bucking the trend is Norway. Which some readers will recall set up a sovereign wealth fund with their share of North Sea Oil back in the 1980s of the last century.(LSS 6 7 20) While the British in the same years splurged theirs on new cars, shopping, time share villas and an utterly botched programme of de-industrialisation. Here are the consequences.

[1]https://www.theguardian.com/society/2025/feb/18/european-countries-experience-life-expectancy-slowdown-research-shows

[2] R Wilkinson K Pickett The Spirit Level Penguin 2010

#inequality #life expectancy #sovereign wealth fund #public health

Information Inflation: when the internet acts like a debased currency

Pump more money into the economy and you get inflation. It’s a lesson as old as time. The Roman Emperors of the Third Century successively put less and less silver into their coins, slowly debasing the currency. The result? Everyone needed more coins, and so the value of each unit fell. It was the same in the famous case of Weimar Germany where bank notes carried astronomically high face denominations, but were worth no more than than the paper they were made of.

Is it the same with information? The internet, news media, social media, feeds, all churn out a torrent of information. In such circumstances it becomes increasingly hard to know the value of any one piece and many people just give up trying. All information, any information, becomes worthless and people fall back on bartering local knowledge and techniques. We didn’t have this idea first of course: authors such as James Gleick [1] and Nicholas Carr have more than touched upon it. [2] Think how so many people choose to believe the facts that suit them. That is a perversion of the brain.

It’s interesting to see this convergence between information science and economics. If facts act like money, then they too can be debased. People who throw out streams of data, designed to flood, overwhelm and mislead are the greatest inflationists of all. If they can do it with data they can do it with currencies too.

[1] James Gleick Information: A History A Theory A Flood

[2] NIcholas Carr The Shallows: What the Internet is doing to our Brains

#inflation #information science #currency #economics

Larry Elliott’s balanced view on immigration. A Must-read

Nothing releases passion like the subject of immigration. Nor is anything so certain to unleash binary thinking, with defenders and attackers of this essentially economic phenomenon dividing into mutually hostile camps, high on their own anger and righteousness. It’s time for some balanced nuanced thinking. As ever, Larry Elliott of the Guardian is here to provide it, [1] In an article titled It’s not bigotry to worry about immigration

We won’t steal his thunder. You should read it. No, really, this time. it applies to your country too. But we will dare to adduce the two essential points

1 Immigration isn’t all bad-it has serious economic advantages

2 Immigration isn’t all good- it has serious economic disadvantages

Our thoughts? Those who call themselves leftists should be passionately against immigration, as it’s a classic example of a free market mechanism disrupting society. Those who call themselves rightists should be passionately in favour of immigration as it’s a classic example of a free market mechanism disrupts society, which is always the price for economic efficiency. Can we go back to some science now?

https://www.theguardian.com/commentisfree/2024/dec/11/migration-figures-britain-economy-keir-starmer

#economics #immigration #migration #poverty #economic development

From American Decline to World Government: fasten your seatbelts for a bumpy ride

When did America’s Decline end, and the Fall begin? Although future historians will debate, Tuesday November 5th 2024 will be as good as any other point to start from. For it was on this date that a concatenation of forces-economic, political, social-produced the re-election of Donald Trump, and all that was to follow. These forces included an irresolvable racial rancour dating back to slavery; a deep pollution of information in the public sphere; a chronic failing in public education and the ethos to support it. But above all it was the worship of money, and the catastrophic, merciless social and economic inequalities that this engendered, that brought everything low. Writing for The Nation, Tom McCoy details these rather well in the first part of his article [1] (Don’t read the second bit until we say you can) To cut a long story short, we could call this obsession with cash NeoLiberalism.

Let’s just jump across the Atlantic for a moment to say goodbye to Larry Elliott who quits his post at the Guardian after 36 years {2] He too is eloquent on the many things he has witnessed. Among them is this observation on this same cocky, self-satisfied NeoLiberalism

…… the free-market experiment has failed, as some of us said it would all along. Wealth did not trickle down, and instead the gap between the haves and the have-nots widened. The workers laid off when the factories closed in northern England and the US midwest did not find new well-paid jobs but were either thrown on the scrapheap or found low-paid insecure work …………

Financial speculation ran rife once controls on capital were removed, but growth rates in the west were slower than in the postwar heyday of social democracy. Warnings of trouble ahead were ignored until the world’s banking system came close to collapse in the global financial crisis of 2008. [2]

Producing an alienated and impoverished group of vast voting power) which was impervious to the imploring of reason, fact and education. And who could blame them? The exalted free markets have produced such insecurity that a nationalist backlash was inevitable. It is now tearing down every shibboleth that the neoliberals held dear. Low tariffs, free movements of capital and labour, cultural and intellectual exchange are going to the wall, and we can see nowhere that this process can now stop..

Except one. Because while Larry’s article closes with a final nod to the re-emergence of the Nation State, Tom’s goes further and look to the future.(OK, click on his article again) The problem with the Nation State is Pride. It is national Pride which will cause Donald Trump and his friends to start drilling for oil again. By which means all combined attempts to prevent global warming will collapse, as each nation looks to its own interest. Runaway global warming will produce such desolation that any economy and any body politic will become unsustainable, probably as early as the next decade. The resulting chaos will make a world Government essential for human survival. And tom details how this may come about, perhaps in the sixties or seventies.

The American hegemony is now certainly over, How ironic that this was hastened by an arch nationalist such as Trump!

[1]https://www.thenation.com/article/world/american-hegemony-climate/

[2]https://www.theguardian.com/business/2024/nov/10/from-thatcher-to-trump-and-brexit-my-seven-lessons-learned-after-28-years-as-guardian-economics-editor

#global warming #economics #climate change #donald trump #neoliberalism #free trade #protectionism

In a world without a reserve currency, Gold is King

It is June 2025, and the world has learned that it no longer has a reserve currency, a role hitherto held by the US Dollar. The chain of events which began with the election of Donald Trump by a disputed majority in the Electoral College (readers will recall he lost the popular vote) have now reached their logical conclusion. You will also remember how attempts to enforce the result by the US Supreme Court could not be accepted by some States who alleged, with some justification, that the Court was no longer an objective and unbiased institution, Their de facto secession, pending a recount, undermined the integrity of both the US Treasury and Federal Reserve. Meanwhile, attempts by the Provisional Trump Administration to impose import tariffs (20% on all comers, 60% on China) have only led to a retaliatory fire sale of Treasury Bonds and other US assets, which led to this morning’s news of the suspension of dollar convertibility. The United States of America (or rather the three new nations into which it seems to be splitting) is no longer at the centre of the world’s financial system.

But, as of this summer of 2025, do we still have a world financial system? Attempts by the BRICS nations to set up their own reserve must end in failure. The lack of transparency in their systems(one or two are more or less open kleptocracies) mean that no one dare trust them to hold their money . The Euro area is too small and fragmented to possibly bear such a role, and their can be other candidates. How can world trade now be anything more than a slightly sophisticated form of barter?

Yet there is one measure by which value is judged. And always has been. Gold has been prized as the ultimate yardstick of worth by humans, and has been by for millennia. It is transportable, it is tradeable, and its price is known at once by everyone in the market. History suggests that world trade works best when most reserves are held by a single, hegemonic power(think Britain before 1914 or the US before 1971) But even if the world’s gold is diffused across the vaults of many competing nations and empires, it can still provide a standard against which everyone can measure the value of their trades. Expect its price to rise now for the rest of 2025, and perhaps even more next year.

#US dollar #world trade #BRICS #reserve currency #gold

Time to Tax the Billionaires?

Imagine that every country was so prosperous that there was little need for migration. That the climate crisis was fixed, with wind turbines and electric cars in every land you visited. New drugs for every conceivable illness were not just freely available, but there were active substitutes for each of them waiting in laboratories. There were no hungry children at all, and everyone in the world had an old age pension. Would about $250 billion* a year about cover it?

That’s what could be obtained if there was a single world effort to fairly tax the planet’s 3000 or so billionaires, according to a report by Gabriel Zuchman, helpfully written up for us by Larry Elliott of the Guardian [1] At the moment this gilded class pays about 0.3% of their income in tax, which compared to most of us is nugatory indeed. But we’ll let Larry’s article cover the details-(you must read it), and instead riff on a theme of our own. The case for tax is not moral, nor Marxist nor religious, nor based on Natural Justice . It’s actually historical, and its about survival

The 18th century, or Enlightenment, or whatever, was full of learned economists who preached the gospel of lower taxes as the source of the wealth of their nations. The country that really put this in to practice was Imperial China, then the world’s largest economy. But the western barbarians-nations like England, Portugal and so on, kept their taxes high, despite all the domestic preaching. The result? Huge fleets and armies, able to dismember poor China’s attenuated defences, and open them to the enlightened benefits of trade. The chief result of which was a mass opium addiction. The moral? You need taxes if you are going to survive. remember that next time you read a bit of propaganda from a billionaire think tank or news outlet.

*in these pages billion=10⁹

[1]https://www.theguardian.com/news/article/2024/jun/25/international-scheme-to-tax-billionaires-wealth-technically-feasible-study-finds

#china #opium war #tax #billionaire #G20 #Gabriel Zuchman

Four cheers for the minimum wage

They said it couldn’t be done. It would cause mass job losses and economic melt down. It undermined the morals of the poor. So screeched a whole bevy of right wing “news”papers, magazines and think tanks when Tony Blair’s Government introduced the UK’s minimum wage policy in 1999.[1] We’ll let the excellent Philip Inman of the Guardian give you the details. Our own gloss will be a little more historic.

Scholars scrabbling over the rubble of the Great Crash of 1929 soon discovered one simple, outstanding truth. The boom of the 1920s had held a fatal weakness. Wages stayed low, while tax reforms had ignited an unstable credit and spend boom among the rich. Demand was suppressed, and as the factories filled with unsellable goods, the stocks of the companies that made them were seen to be based on sand. The resulting crash became much worse, for the poor had no reserves to build in the good times to see them through. The message was an is clear to all of us who have managed to move beyond the simple verities of first year undergraduate economics. Helping the poor makes everyone richer.

So to all the pearl-clutchers, and to those who have their own reasons to conveniently believe in free market economics, we would observe this. Study the history of things like minimum wages, working hours directives and the abolition of serfdom. You disparage them not at your own peril, but at everyone’s.

[1]https://www.theguardian.com/society/2024/mar/27/minimum-wage-is-uks-most-successful-economic-policy-in-a-generation

#demand #economics #great depression #wall street crash #jm keynes #minimum wage