Baby Boomers Make Gold a Tier 1 Asset Again
George Orwell said, “every generation imagines itself to be more intelligent than the one that went before it, and wiser than the one that comes after it”. If so, what’s the scorecard of my US generation – the Baby Boomers – those born between 1946 and 1964. We have been effectively handing the generational baton over in the last 10 years to Generation X (1965 to 1976) and less so to the Millennials (1977 to 1995). So what did we accomplish and what exactly are we handing over?
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Before trying to answer that question, let’s look at what the ones before us – the Silent Generation – accomplished. They weathered the Great Depression, fought a massive two front war in WW2 and emerged not only victorious but with an intact infrastructure that gave them the leverage to secure the US as a Superpower. They built a solid global empire and tried to police the world. Putting aside a bad closing act in Vietnam, history should treat the Silent Generation for what they were…a success.
So what did the Baby Boomers do? Well…first off…for those in management, we contrived to pay ourselves more. The 1965 CEO-to-worker compensation ratio was about 20-to-1. Currently, it’s well over 200-to-1. So was Orwell right? Were Baby Boomers 10 times more intelligent than their parents? Or were they just “riding the wave” their parents created and falsely validating their increased compensation as a sign of their success? Leaving that question aside, let’s consider the historical implication of gross income inequality – namely – it never ends well. It destabilises society and eventually undermines the economy.
Next in line is our eagerness to use debt to fuel our “better than are parents” storyline. From 1980 to today, we have ramped up the US public debt to GDP ratio from below 40 to above 100…approaching the mark we peaked at during the massive costs of WW2. However, we’re not fighting a world war, we’re financing an image of success. Again, the historical implication of excessive debt – governmental, municipal, corporate and private – never ends well. It destabilizes society and eventually undermines the economy.
Lastly, let’s name the country that is truly the most socialist…which would be the Unites States of America. No, not in the tradition definition where government controls the means of production, distribution and exchange but rather in something that could be coined as “monetary socialism”, i.e., the gargantuan foundation of “out-of-thin-air” money supplied by the Federal Reserve. Like the opiate crisis that has hooked a declining middle class in America, the US economy, like that of Japan and most of Europe, is addicted to “made-up” money. Once more, the historical implications of excessively printing money never ends well. It destabilises society and eventually undermines the economy.
It’s because of this debt to GDP ratio that individuals need to secure part of their savings outside of the US dollar. In investments, it very difficult to just walk away from the table. But it’s much less difficult to spread your bets. Gold. Gold is still the go-to-money and on March 29th, Basel III rules go into effect. Gold will now be treated as a Tier 1 asset. The Bank of International Settlement (BIS) will recognise central banks holdings of physical gold as a reserve asset equal to cash. If you can believe it, currently gold is counted as a Tier 3 asset which is marked off 50%. Tier 1 = risk free, Tier 3 = more risk. Central Banks have been purchasing a lot of gold the last few years getting ready for the new requirements. The debt in the system is so sick and grotesque that a rising gold price could alleviate that pain. With the new rules in place the central banks’ balance sheets are set to be remedied. As an individual it is imperative that you do as the central banks of the world and secure parts of your savings in Gold. Glint is here to help you do that with an easy to use app and a Mastercard that allows you to spend your gold whenever you wish.
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