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Posts by: Gary Mead

Soapbox: We need the middle class

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“The middle class champions political stability and good governance. It prevents political polarization and promotes greater compromise within government”. So says a 2019 report by the Organization for Economic Cooperation and Development. So we should perhaps take more care to nurture our middle classes, and not let its members drop into the ‘precariat’.

What is the precariat?

In 2013, Guy Standing, professor of development studies at the School of Oriental and African Studies, informed the Financial Times that the ‘precariat’, is a new class which faces “chronic uncertainty” and has “grown sharply since 2008… the old Beveridge and Bismarckian variants of the welfare state have been dismantled” to be replaced by “a mish-mash of means-tested, behaviour-tested social assistance, with a growing tendency to force young unemployed into workfare schemes, which are helping to depress real wages”. The Precariat is what happens when people lose hope, a new class that needs to be re-embraced for the good of us all.

According to the Pew Research Center, the American middle class has shrunk from being 61% of the population in 1971 to 50% in 2021. As the middle-class strata shrank, the upper-and-lower income segments have steadily expanded – respectively from 14% to 21% and from 25% to 29% over the same 50 years.

It’s similar to the position in the UK. “The lifestyle that the average earner had half a century ago – reasonably sized house, dependable healthcare, a decent education for the children and a reliable pension – is becoming the reserve of the rich. Middle-class pensioners look on amazed at how their children, now into adulthood, seem to have a far harder time” wrote one British commentator in 2013.

‘Precariat’ derives from the word ‘precarious’. According to Standing, the precariat feels itself to be (and objectively is) poorer, both materially and spiritually, where hope of a materially better future has been replaced by “a combination of anxiety, anomie, alienation and anger”. Conditions of unstable labour, a loss of non-wage benefits (such as pensions or medical coverage), living on the edge of unsustainable debt and chronic economic uncertainty – all these characterise the precariat.

During those same 50 years, the US Dollar has depreciated six-fold, falling by 86%. For the Pound Sterling, the decline is even worse – 94% of its value has been lost in the last 50 years. Over the same period the gold price has moved from some $45/ounce to about $1,800/ounce currently – an increase of around 3,900%. Impossible to identify a causal connection, but the correlation is compelling. As the money supply became easier, the Precariat has formed and grown.

As fiat currency has lost purchasing power, more people have dropped out of the US middle class and turned to state welfare for support. Yet we need the middle class, to provide that social stability.

Failing State Welfare

The precariat overlaps that segment of society which depends on the state for support. One of the growing concerns of our age is that the state, overwhelmed by demands from different directions, is running out of capacity to keep up with welfare demands.

In the UK, the combined debt servicing costs and welfare payments are likely to rise by “more than” £50 billion in the next financial year. UK welfare support is at its lowest in 50 years according to the Joseph Rowntree Foundation, a charity. The bills go up, tax revenues may go down, and government is becoming more squeezed.

UK domestic energy bills could rise to above £4,000 a year in early 2023 which, given that an average annual salary is around £31,000 (before tax), will create hardship for many households and lead many people to seek some welfare support. A campaign – “Don’t Pay” – has started up, with the aim of gathering support to reduce energy bills to an “affordable level”; if not, and if the campaign gets one million pledges by 1 October, its signatories pledge to cancel their direct debit payments to energy suppliers. This kind of inchoate direct action protest is erupting alongside more conventional protests – strikes or threatened strikes by rail workers, junior barristers, mail workers, and nurses. Even a general strike has been talked of. More than five million people work in the UK’s public sector; the wage bill is almost £200 billion a year, equivalent to 25% of all UK tax receipts. For every 1% pay rise the government needs to find an extra £2 billion. So far this year public sector pay deals have been around 5% – still far below the rate of inflation, which Goldman Sachs estimates will peak at 14.4% in early 2023.

In the UK, fuel poverty is conventionally defined as when energy costs exceed 10% of a household’s income. In the financial year 2019-20, almost 20% of UK households were in that category, but the rise in costs means that will rise to 50% by the start of 2023 according to research published by the Child Poverty Action Group. Local councils around the country are now planning to offer people ‘heat banks’ for this winter, where they can gather to stay warm, rather like food banks, where people can get food parcels.

The Trussell Trust, the UK’s largest national food bank charity, says there was a 5,146% increase in emergency food parcels distributed between 2008 and 2018. One journalist has observed that “this is a genuine national crisis…social unrest is surely a distinct possibility… The unavoidable truth is that the United Kingdom is in such a fragile, frayed state that it can no longer keep its people warm or adequately feed them”.

The Global Gig

The precariat is a contemporary version of Karl Marx’s proletariat: “a new class of alienated, insecure workers who are ripe for radicalization and mobilization…. This class is growing once again…” At the same time as demands on state welfare have increased, public confidence in the state’s funding ability is diminishing. In 2015, the Brussels-based think tank Bruegel published a survey stimulated by a report into ageing by the European Commission, which found that the European Union will move from four working-age people per person over 65 today, to about two working-age people in 2040. This means less revenue because of the shrinking working-age population, and more spending because of higher costs for pensions, health and long-term care. An average of almost 60% of those surveyed thought that by 2050 the state would be unable to cover the pension bill.

Source: Bruegel

What results from this growing disenchanted class? As home prices have soared, wages stagnated, job conditions become more insecure, the ‘freedoms’ of the gig economy have soured, and the ‘advantages’ of globalization and the deflation that has resulted from shipping jobs to countries with cheaper labour costs, have turned to ashes. Younger people – Millennials – are losing sight of and hope in the long-term. One developing trend is “quitting quietly” – doing one’s job, but no more than that. China has spawned its own version, thanks to a social media protest titled “lying flat is justice” which went viral in 2021. It was a “manifesto of renunciation… The extraordinary stresses of contemporary life were unnecessary”. Young Chinese flocked to the post, which rejected ambition and openly despised effort. Last year huge numbers of US workers quit their jobs, including 4.5 million in November alone. On the internet forum Reddit the r/antiwork movement thread, which became a very attractive forum for disenchanted employees during the Covid-19 pandemic, went from 180,000 members in October 2020 to 1.6 million in January this year, although it has since gone private.

Doreen Ford, a moderator of the r/antiwork site, told the Financial Times in January this year: “Most of us are just normal people… We have jobs that we don’t like, which is the whole point of why we’re in the movement to begin with”.

What’s true of the UK and the EU may also hold for the US. The US has one advantage – it continues to be a honeypot for immigrants and can thus able to replenish and refresh its workforce, although the overall immigrant population (new arrivals and established immigrants) is “aging rapidly”.

American society overall is getting older – fewer employed people will be paying the taxes needed to keep welfare programmes afloat. In 2022, around $1.3 trillion (about £1.1 trillion) is likely to be spent on various programmes and account for more than a fifth of the federal budget. While there were 3.7 workers per Social Security beneficiary in 1970, projections are that will fall to just 2.1 by 2040.

The inescapable conclusion is that several pinch points or ‘crunch times’ are headed this way. The Covid-19 pandemic saw the extremely rich get richer. Americans for Tax Fairness, a non-profit organisation, claims that US billionaires have increased their wealth by 57% ($1.7 trillion) since the start of the Covid-19 emergency. The wealthiest 10% now own 84% of all stocks, with the bottom 75% owning none at all. Little wonder that many Millennials used their Covid-19 state handouts to gamble with cryptocurrencies, which tempted by social media tales of people gaining swift riches.

States are facing a squeeze on their finances, which will not be helped by the looming recessions. Rather than disappoint and/or anger voters by failing to meet welfare pledges, they will be tempted to ‘create’ money. The ‘magic money tree’ will, sooner or later, come to pass and further devaluations of fiat currency will result.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

Bullion Bulletin: Commodities cool a little

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Commodity prices cooled a little in July, according to the World Bank. By mid-July the US Dollar had gained 12% since the start of this year, which played a part in depressing commodity prices.

Energy prices fell 1.3%, led by a 10% drop in crude oil, but natural gas went up by more than 50%. Food prices fell by 8.5%, led by a drop in grains’ prices of more than 8% and a 13.1% drop in oils and meals. Fertilizers fell by almost 4%. The biggest fall was the almost 30% drop in palm oil prices. These price drops will help cool inflation in the coming months.

But the biggest drops, and a lead indicator of the likelihood of a global recession, came in base metals, which are in greatest demand by industry; their prices tell us much about the probable future direction of the economy. The tin price fell by almost 20%, that of iron ore by 17%, and copper and nickel by 16% each. If a global recession arrives – technically, the US is already in one – the big question will be how deep it might be. The economist Nouriel Roubini, who predicted the 2008 financial crisis, told Bloomberg TV recently that “there are many reasons why we are going to have a severe recession and a severe debt and financial crisis… The idea that this is going to be short and shallow is totally delusional”.

The bank reports that the gold price dropped by 5.65% from June to July, from $1,837/ounce to $1,733.

Some investment banks have nevertheless raised their forecasts for the gold price by the end of this year. Goldman Sachs for example at the end of June estimated the price would rise to $2,500/ounce. Mid-July Wells Fargo said that gold could still end this year above $2,000/ounce, even though a stronger Dollar helped depress the gold price. J. P. Morgan however said in early June that the price would remain around $1,800/ounce in the third quarter of this year.

Since 1971, when the gold standard finally was killed off by US President Richard Nixon, gold has generally seen improvements in its price during recessions. In the last three recessions since 2000 its performance has bettered that of the S&P 500.

At Glint, we make every effort to demonstrate balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

News Highlight: Latest US Inflation

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“Apprehensive” was the word that seemed to dominate the financial markets on Wednesday this week, ahead of the latest US Consumer Index (CPI) report, telling us the degree of inflation consumers faced in July. Most market commentators had already pencilled-in a slight drop in the inflation rate. That assessment was correct – the CPI fell in July to 8.5% compared to June’s annualized rate of 9.1%.

The dilemma for the US Federal Reserve has intensified – when it next meets should it continue to put interest rates higher? As we have said before, the risk of doing nothing is that inflation – which has its own particular dynamic – might stick around at this level, and make all US consumers poorer. But putting up interest rates aggressively could push the US into recession.

The US economy is still running red-hot – its unemployment fell to 3.5% in July, a half-century low, and back to what it was in February 2020. Job vacancies in the US dropped by 605,000 to 10.7 million by the end of June; still, there are almost two job vacancies for every available worker. Employers added 528,000 jobs that month, markedly higher than June’s 398,000.

News of the massive job hires had an immediate effect on US Treasuries – the yield on two year-Treasuries exceeded that of the 10-year; this inversion of the yield curve is widely regarded as heralding an economic contraction. And while jobs have been added, big employers (such as Ford and Walmart) have announced layoff plans.

The economist Nouriel Roubini sharply divides opinion but he warned of the Great Financial Crash two years before it happened. His view about where we are now is perhaps worth listening to. He wrote this week that the “Great Moderation” (characterized by low inflation, relatively stable economic growth and “sharply rising values of risky assets such as US and global equities”) is now over and will be followed by the “Great Stagflation” in which “long-term bonds and US and global equities will suffer, potentially incurring massive losses”.

The Biden Administration managed to squeeze the Inflation Reduction Act through the Senate last Sunday, which promises (if passed) to raise $739 billion and authorize $370 billion in spending on energy and climate change, reduce the deficit by $300 billion, will provide three years of subsidies in the Affordable Care Act, lower prices for prescription drugs, and introduce some fresh tax rises. The Act is oddly named; according to various sources it will have almost no impact on current inflation.

The major reason for the inflation drop seems to be a weakening of the price of gasoline, which rose to a national average of $5/gallon in mid-June and now average slightly more than $4/gallon. Gasoline accounts for just 4% of the overall CPI. The cost of food (almost 14% of the CPI ‘basket’) went up by almost 11%, the most since 1979 and shelter costs (almost 33% of the CPI ‘basket’) were 5.7% higher, the biggest rise since 1991.

We regard gold as a most reliable form of money, proven over time to be resistant to inflation. With Glint you are able to use gold as real, everyday money. At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline. For us, gold is security, and Glint its key.


Meet The Team: Iva – Operational Compliance Executive

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When you call Glint for assistance with your account you will always speak to a real human being – no automated bots here! We pride ourselves on giving the best possible personal – and human – service.

As humans, the Glint team is not just about gold – we all have lives outside the office.

Take Iva for example, who is one of our Operational Compliance Executives in the US. Iva (pronounced EE-VAH) originates from Bulgaria but now lives in Colorado. She and her husband settled in the US about 10 years ago. They have a two year-old German Shepherd and love to travel. Iva joined Glint in 2020 and says “I love my job as it’s exciting, I’m learning something new every day and the team is absolutely amazing!”. Her father “was very artistic person” and inspired Iva to take up photography. Now, in her leisure time, she has “an interesting niche” role as a photographer of minerals.

Photograph of native gold taken by Iva


When not helping our clients or taking amazing photos, Iva likes to read autobiographies (Matthew McConaughey’s Greenlights and Olav Thon’s Billionaire in a Parka are currently in a queue) and make beaded jewellery, unwinding from the daily stresses of life.

The mornings, Iva drinks an expresso and swaps that in the evenings for Bourbon Mules, sometimes accompanied by a “proper” Margherita pizza, ideally served in her favorite restaurant, Lino’s Trattoria and Pizzeria in Santa Fe, New Mexico.

Glint’s Helpful Hints: KYC – who are you?

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The financial world is full of acronyms but few are as important as KYC.

KYC stands for ‘Know Your Client/Customer’, a process which aims to prevent fraud and criminal activities. Verifying that clients are who they say they are is part of the important regulatory process under which Glint operates. KYC is why we ask you to prove you are who you say you are, your address, and so on.

But don’t worry – this doesn’t affect your credit score, although you may see an identity check on your credit report. This identity check is a type of soft search that is recorded on your credit report so that there is a transparent record of who has been viewing your credit history.

We need to know who you are, so that criminals stand less of a chance of getting away with it.

Soapbox: Two tribes at war

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According to Timothy Garton Ash, professor of European Studies at Oxford University, writing in The Guardian newspaper, “we are at war”. Garton Ash writes that Russia’s President Putin is embarked on a “campaign” to “defeat not only Ukraine but also the west”.

There’s now too much evidence amassed to doubt this assertion. President Putin wanted to join NATO, according to the NATO head between 1999 and 2003. But he didn’t want Russia to have to stand in line “with a lot of countries that don’t matter”. A missed opportunity.

When he was told that Russia would need to apply rather than be invited to join, President Putin saw it as a snub. Disenchantment set in and grew until it exploded in February this year. The result is that the west is now engaged in a proxy war with Russia, which is busily gathering sympathisers – not only China but even European Union leaders such as Viktor Orbán, who has said recently that “Hungary needs to make a new agreement with Russia”. Images of destroyed Ukrainian cities, credible reports of violations of civilians, the horror of the war are undeniable – but if it is a proxy war with the west, it must be somewhat uncomfortable to realise that Ukraine is scarcely less tainted a country than Russia, occupying as they do positions 122 and 136 respectively on Transparency International’s Corruption Perceptions Index of 180 countries. Criminal smuggling of weapons supplied by the west to Ukraine has become a concern.

But a bigger concern is also a more hidden one – if we are at war, does the west have the will and the money to sustain it? The real test is just a short time away; European resolve might crumble when cold weather arrives and gas prices soar or rationing spreads as a consequence of shortfalls in Russian supply. In the UK, the former Prime Minister Gordon Brown has warned that a “financial timebomb” will explode in October as fresh fuel price rises push “millions over the edge”.

Astronomical costs

At the start of July this year the Kiel Institute for the World Economy’s Ukraine Support Tracker said that it had recorded total support commitments to Ukraine since the start of the war of €80.7 billion ($82.25 billion), although there is a “large gap between pledged and delivered support”, and the momentum of support is “slowing”. The cost of the war doesn’t even begin to consider how much it might cost to rebuild Ukraine (around $1 trillion has been estimated), to assist millions of refugees, and Ukraine’s plea for several billion Dollars per month in support. Where’s the money coming from?

The US last had a federal budget surplus – an excess of revenues over spending – in 2001. The US has only been debt-free in 1835-1837. In 2021, the US federal government ran a deficit of $2.8 trillion in the last full fiscal year, which always starts in October. The deficit for the first nine months of the 2022 fiscal year is running at 23% lower year-on-year – but it’s still a deficit.

US federal deficits/surpluses since 2001

Wars are not only expensive, they also stoke inflation. According to one study, US prices rose by about 120% between 1913 and 1920 during the First World War and its aftermath, and by 200% in the UK and 400% in France. The “hyperinflation which reduced the value of money in Germany to zero from 1919 to 1923 would have been inconceivable without World War I and its aftermath… Wars and revolutions without taxation to cover the cost have been the principal causes of hyperinflation in industrial countries in the last two centuries”.

The key words there are “without taxation“. In other words, if a country decides to go to war and wants to avoid inflation, it would be advised to ensure it can pay the costs from the revenue it takes in. Otherwise, it simply builds up debts for its children and their children. Currently, the US national debt is fast approaching $31 trillion (£25.6 trillion), which means the US debt to gross domestic product (the monetary measure of all goods and services produced by the US) is around 124%. As a share of the economy, the US debt was a mere 2.7% in 1916.
The huge debt is sustainable for as long as the US’s creditors continue to think the country’s economy is sound; the World Bank says that an additional percentage point of debt costs 0.017% of annual real growth when the debt-to-GDP ratio is above 77%.

It’s alarming to be told that we are “at war”. It’s twice as scary to think that we might lose it, not militarily, but financially.

Even if sustainable, the debt acts as a huge drag on the American economy. The US resembles an elderly boxer slugging it out with an opponent while tethered to a ball-and-chain, clamped on during previous wars. And it’s only round three in a ten-round bout in this one.

Russia’s ‘Rocky’

But maybe President Putin has bitten off more than he can chew. He may not be a Russian ‘Rocky’ after all.

According to a paper published by Yale School of Management towards the end of July, “business retreats and sanctions [against Russia] are catastrophically crippling the Russian economy”. Its authors state that Russia faces “economic oblivion… as long as the allied countries remain unified in maintaining and increasing sanctions pressure against Russia”.

The two main boxers in this fight are Russia and the US – without the support and encouragement of the US Ukraine would have crumbled by now, for all its soldiers’ bravado.

As the west inches closer to a recession – technically already in place in the US, with a 15-month-long one for the UK forecast by the Bank of England (BoE), and consumers in the Eurozone now the “gloomiest on record” – it’s not in a good position for a lengthy fight.

Neither is Russia, perhaps.

The future might be one in which a pair of bloodied, bruised, battered opponents, stagger around the ring, clinging to one another to avoid falling over. Meanwhile, the global economy shrivels, set back decades – restoring it, restoring trust, will be tough, and it is conceivable that we may never return to globalisation. From the ashes will slowly emerge a new political – and monetary – hegemony.

Bullion Bulletin: Zimbabwe’s gold bet

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While Honduras seems cautiously to be following a path trod by its Central American neighbour El Salvador, and accepting Bitcoin in payment in some parts of the tourist spot of Santa Lucia, a short distance from the capital of Tegucigalpa, the African country of Zimbabwe has launched gold coins as legal tender. The intention is to try to halt rampant inflation by providing a source of value that the country’s citizens can trust.

Zimbabwe has sporadically suffered from hyperinflation (technically, prices rising by 50% or more a month) and is on the verge of another taste of the same – inflation in June this year rose to 192%. The country’s central bank has put its key rate up from 80% to 200% as a consequence. In November 2008, the country’s estimated annualized inflation rate was almost 80,000,000,000%. That was a daily inflation rate of 98%, headed towards Hungary’s 1946 daily rate of 195%.

Zimbabwe’s inflation sickness owes nothing to the spike in prices of imported essential commodities. The Ukraine war may be contributing to higher prices, but this is a long-standing problem entirely related to high indebtedness and the printing of more money to finance it.

Hyperinflation meant that people could no longer afford basic goods, banking activity became paralyzed, a barter economy arose, savings were wiped out, and output collapsed. Eventually the government stopped printing Zimbabwean Dollars and normalized the use of the US Dollar. The Zimbabwean Dollar was formally demonetized in 2015, only to reappear in 2019 as the Real Time Gross Settlement (RTGS) Dollar, which has now lost almost all its value against the US Dollar.

John Mangudya, head of Zimbabwe’s central bank has now introduced the Mosi-oa-Tunya gold coins, which is Sotho (and means the smoke which thunders), otherwise known as Victoria Falls, a tourist attraction on the Zambezi River. 2,000 of the Mosi-oa-Tunya gold coins, each weighing one troy ounce, went on sale on 25 July with an opening price of $1,823 or Zimbabwean Dollars 805,000. This is out of reach of most Zimbabweans, where the average annual salary is around $230. The coins have “liquid asset” status, so can be converted to cash, used for transactions, and traded locally or internationally – 180 days after they have been purchased. Each coin is priced at the international market rate for an ounce of gold plus 5% for production costs.

The aim of the gold coin is to cut Zimbabweans’ appetite for foreign currency. Mangudya was explicit that he hopes the coins will be seen as a store of value. He has said that we “are now providing that store of value to ensure that people do not run to the parallel market in search for foreign currency to store value… And there is no other better product that can be used to store value other than gold…We know what you have been going through in terms of the fear factor of losing value and therefore we are providing this gold coin”.

Will it work? According to a local finance analyst: “not on their own and the market has to be pliable and play ball. Confidence has to return especially to big players sitting on those large amounts of Z$. Likely, overtures to them have been made behind the scenes already, which explains why the central bank is not going all out on a campaign blitz… if the ‘big players’ are agreeable and believe in the vision then the gold coin will prevail. Otherwise the mathematics is screaming a different story”.

News Highlight: Interest rates rise (feebly) amid escalating inflation

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Inflation is now a global problem. As the chart below shows, inflation across most parts of the world has now more than doubled what many thought it would be just a few months ago.

In the UK, the consumer price index (CPI) hit a fresh 40-year high in June of 9.4% on an annualised basis, up from 9.1% the previous month. In the Eurozone, inflation is now almost 9% annually, and in the US it’s slightly more.

Inflation is going to get worse before it gets better. The Bank of England forecast in May this year that it would reach 10%. That forecast is now looking seriously wrong. According to the Resolution Foundation, a respected and independent British think-tank, “inflation could plausibly hit 15%”.

Inflation is bad! From President Ronald Reagan – “inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man” – to Vladimir Lenin – “the way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation” – all political ideologies are united by one thing: inflation is a monetary demon.

The conventional definition of inflation is that it’s ‘too much money chasing too few goods’. The conventional method of trying to combat inflation – which ruthlessly erodes the purchasing power of fiat currencies, slashes savings, pushes people closer to the brink of financial collapse – is for governments and central banks to put up the cost of borrowing by raising base interest rates. Interest rates in the UK, US and Eurozone have been pallid for years; consumers, investors, bankers – all of us – have become accustomed to cheap borrowing costs and easy money. Those three regions have started, slowly, to raise interest rates; but they are still in negative territory, i.e. far below inflation.

Today, Thursday 4 August, the Bank of England launched another missile in its fight against rampant inflation. It put up its base rate from 1.25%/year to 1.75%. Financial media went wild – the “biggest increase in UK interest rates in 27 years” was one headline.

But today’s missile is a damp squib. As Jason Cozens, Glint’s CEO says: “This rate increase will do nothing to bring inflation under control. The major cause of this inflation is the wild money-creation spree that the world’s central banks embarked on under the Covid-19 pandemic. That laid the basis. The Ukraine war, and the threat that Russia might deprive Europe of sufficient fossil fuels, has of course pushed up energy costs to astonishing levels, and this will keep inflation going at a high level as manufacturers struggle – energy rationing is already happening in Germany. In the UK, producer prices are now their highest in 45 years. We should all be worrying about the prospects of a serious economic slowdown – for which governments and central banks seem to be unprepared”.

According to some reports, the Bank of England “risks falling behind the curve” but others take a more relaxed view. Paul Donovan, chief economist of UBS, thinks governments “really can’t change the oil price, central bankers can’t suddenly change the price of wheat and other commodities… in the short term, there is a limit to what governments can do to offset price increases”.

Inflation is now its highest since 1982. Over those same 40 years, the Pound Sterling has lost 75% of its purchasing power, the US Dollar 67%. Over the exact same period the gold price has of course moved up and down but overall it has gained 427.18% in US Dollar terms and 642.34% in Pound Sterling. It’s easy to safely buy gold with Glint, to get started just pop over to your favourite App store and download the Glint App.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

Glint’s Helpful Hints: How to buy gold in gold buying season

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Last week, we brought you a special report on the best time to buy gold – this week we have some suggestions about how to buy gold.

There are lots of different ways, all of them shouting for your attention, all of them claiming their own advantages.

But, unlike Glint, they also have their own particular drawbacks.

Gold-backed exchange traded funds (ETFs) are one popular way of getting exposure to gold. But one of the biggest reasons for buying gold is that it’s the only financial asset that is not simultaneously someone else’s liability. With gold ETFs there’s a lot of counterparty risk – the risk that the other party in a transaction (generally a bullion bank used by the ETF Trustee to buy/sell/hold the underlying asset, i.e. gold) may default on its contractual obligations. On top of that, buying a gold ETF doesn’t really give you ownership of gold but only ownership of shares in the Trustee who runs the ETF.

You could buy a derivative on an exchange which trades gold; but once again this is a paper asset, not gold itself.

You could buy bullion coins, and pay a whopping premium over the current price of gold.

What about physical gold – a real piece of metal? That has clear advantages – you can see it, touch it, it’s not some paper representation of gold. But there are also disadvantages. You’ll need to buy insurance against possible theft; it’s cumbersome to lug about; and you can’t use it as money.

That’s why Jason, our CEO, founded Glint.

With Glint you can buy, sell, send or spend real, allocated gold, stored safely in a non-government Brink’s vault in Zurich. That ‘allocated’ is crucial – it means the gold is fully purchased and owned by you, the buyer, before being stored by Brink’s. Moreover, we want to restore gold to its rightful place as everyday money, so we have created a simple debit Mastercard® & App to enable Glint clients to buy almost anything, from a coffee to something much more substantial, in gold.

Gold is security – Glint its key.

Soapbox: Beware the bear

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The final week of July saw the US stock markets notch up their best results in more than two years – the S&P 500 rose by almost 9% in July, the Nasdaq 12% and the Dow Jones Industrial Average 6%, its biggest monthly gain since March 2021. Investors seem to be accustoming themselves to the war in Ukraine, 40-year-high inflation combined with central bank dithering, signs that economic growth is faltering, and taking comfort from a better than expected earnings’ season by big US companies. The broad market, as assessed by the Morningstar US Market Index, ended July almost 12% higher than its 52-week low on 16 June.

It seems to be a case of ‘happy days are here again!’ so fill your boots with shares.

But maybe this is a classic bear market ‘trap’? Do we think that recession/stagflation fears are over?

A bear market is one where there are prolonged price declines, generally in the order of 20%; the S&P 500 index dropped into bear market conditions towards the end of May this year. Bear market rallies can suck in the gullible and punish them mightily.

Bear markets are fairly regular – since the Second World war there have been nine declines of 20%-40%, and three of more than 40% in the S&P 500, with the last bear market being in February and March 2020, when the S&P fell 34%, only to rebound by mid-August.

What happens to gold in a bear market? Historically when stocks overall are falling, the gold price tends to move higher. It’s probably too soon to be sure which way we are headed – but all the circumstances that typically accompany a bear market seem to be in place.

Is this going to be 2008 all over again?

Few of those who were alive and aware at the time will forget the real fear that gripped the world during the Great Financial Crash of 2008. The catalysts for that were a collapse in US house prices and a concomitant rise in the numbers of mortgage holders unable to repay their loans.

Opinions are sharply divided as to whether conditions this year resemble those of 2008. Some have dubbed this as the ‘New Great Recession’; the chief investment officer of Morgan Stanley has said the “chances of a recession ticked higher last week, driven by the Federal Reserve’s latest rate hike and hawkish forward guidance” although added that the 2008 crash was fundamentally brought on by unsustainable debt rather than the problem today, which is “excess liquidity” – “extreme levels of COVID-related fiscal and monetary stimulus pumped money into households and investment markets, contributing to inflation and driving speculation in financial assets”.

Elon Musk, Tesla’s CEO, said at the start of June he had a “super bad feeling” about the economy and wanted to cut around 10% of salaried staff. Mind you, Musk evidently makes mistakes – in February last year, he said Tesla had bought $1.5 billion of Bitcoin, when the month’s closing Bitcoin price was $45,068.05, 36.5% up for the month. He said at the time that “Tesla will not be selling any Bitcoin”, only to sell 75% of Tesla’s Bitcoin holdings in July this year , when the price was close to $23,000.

According to the US Commerce Department, US gross domestic product (GDP) fell by an annualized rate of 0.9% in the second quarter of this year. That means the US is technically already in a recession as the first quarter saw GDP slump by 1.6%.

How do you feel?

Chat about bear markets is far removed from many peoples’ concerns. It’s how far money stretches that worries people at the moment – and that stretch is much less than this time last year.

The chart above shows that people living in the majority of US states feel pretty miserable, thanks to record-busting inflation of more than 9%, and above 10% in eight cities. US President Joe Biden urged Americans to ‘stay calm’ and said that his team was tackling the problem, by passing an ‘Inflation Reduction Act’, which will probably not “have any impact on inflation” according to an academic study. As the certainty grows that the slowdown will turn into a recession President Biden is running out of time to turn the economy around before November’s critical mid-term elections; according to the National Bureau of Economic Research (NBER) since 1945 the average recession has lasted about 10 months.

Misery is getting a grip on households both sides of the Atlantic. Across the 19 countries within the Eurozone inflation rose to 8.9% in July; in the UK it hit 9.4% in June. By October the UK will have a new Conservative Prime Minister, with the two candidates vying to outdo one another on unfounded promises to their party’s electorate, who will choose the winner. The European summer will soon be over and colder days are ahead. The Russo-Ukraine war drags on, with Russia’s gas supply to Europe now a useful weapon for the Kremlin. Energy bills for an average consumer in the UK could reach almost £4,000 by next January and some sources suggest that gas storage facilities across the European Union could run out entirely by March 2023 unless savings of 11% (compared with previous years) are made; 22% in Germany.

The Ukraine war has already seen some unexpected consequences. Uniper, which supplies around 60% of Germany’s natural gas, has been bailed out by the government (at a cost of €15 billion or $15.40 billion) to save it from bankruptcy – German customers of Uniper will have to pay an extra €1,000 a year for the period October-April. As David Frum has said in The Atlantic magazine, one of the “world’s largest energy producers is using its oil and gas as a weapon against its formerly best customers. World markets are disrupted as a result”.

Since 1980, the US Dollar has lost 72% of its value, the Pound Sterling 79%. This year’s record inflation rates exacerbate those declines in fiat currency values. Until the war in Ukraine ends – preferably amicably – the world can only hope for no more inflationary shocks. Central banks have not just lost control of inflation; even monetary policy may no longer be in their hands.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.