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Posts by: Gary Mead

Soapbox: CBDCs get another ally

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Soapbox CBDC

The International Monetary Fund (IMF) says it aims to “promote financial stability and monetary cooperation”. It has “three critical missions: furthering international monetary cooperation, encouraging the expansion of trade and economic growth, and discouraging policies that would harm prosperity”. Given that it has such a broad remit, it’s perhaps inevitable that sooner or later it would turn its attention to the thorny question of Central Bank Digital Currencies (CBDCs). The Bank of International Settlements (BiS), the central bankers’ bank, has already thrown its weight behind CBDCs and now the global lender of last resort, the IMF, appears to have done the same. The technology supporting the development of CBDCs and cryptocurrencies has rapidly advanced in the past couple of years; but their thrust and motivation are completely opposed. Cryptocurrencies aim to decentralize the control of money, enable anonymity, remove control over money from governments that have lost trust; CBDCs centralize the infrastructure of a digital currency and enable greater control, inspection, and a reinforcement of state supervision. The battle lines are not just over what money will be; they are between growth in state power and the right of the individual to use money anonymously. Cryptocurrencies are regarded by central banks and governments as dangerous, uncontrollable buccaneers. They may have to live with them, but they hope to police them out of existence. No better way to do that than to steal the ocean they sail in. CBDCs have got another powerful ally in the form of the IMF; but that doesn’t mean they should be welcomed.

The spread of CBDCs

We are accelerating towards a cashless world. The development of digital forms of money and greater use of credit and debit cards have led to a decline in the use of cash, which has fallen by some 15% a year since 2017. CBDCs have come a long way since 1993, when the Bank of Finland (BoF) launched what is considered the first, the Avant smart card, an electronic form of cash. According to 2020 analysis by the BoF, Avant “didn’t gain enough traction to survive… debit cards gained wider acceptance”. Currently just two CBDCs have launched – the e-naira in Nigeria and the Bahamian Sand Dollar. China’s CBDC, the e-yuan, has been operational in selected cities. As of today there are an estimated 97 CBDCs under research or development.

A CBDC is a digital version of a country’s currency created by the central bank, and which is available for households and businesses to use for payments or storing value – to use as fiat money. CBDCs are backed by the government and pegged to the value of the national currency – unlike cryptocurrencies, which are backed by no asset or institution. Like cryptocurrencies, CBDCs use Distributed Ledger Technology (DLT) to facilitate supply of money and transaction monitoring. Also, central banks may integrate permit payment services with the ledger to facilitate easier transactions. Yet CBDCs share with cryptocurrencies and all forms of money one critical thing –trust from their users that this money will keep its value, or at least not lose much.

CBDCs have gained in popularity with central banks for several reasons: they can simplify and speed payments (and reduce costs) for individuals and businesses. In 2020, there were around $23.5 trillion cross-border transactions, costing $120 billion in fees and taking an average two to three days to complete. That would be cheaper and faster with a CBDC, so long as it was recognised and accepted across borders. They’d also promote financial inclusion by allowing unbanked individuals to conduct transactions more easily. CBDC supporters say they can also help governments implement monetary policies by, for example, allowing the destruction of currency ‘tokens’ in circulation, thus reducing money supply and tackling inflation. Increased surveillance of money flows in an economy, such as would be possible with a CBDC, could help prevent tax evasion, reduce corruption, and disrupt the funding of illicit activities, like drug trade or terrorism.

“Coined liberty”

The novelist Fyodor Dostoevsky wrote that money – cash in his day – was “coined liberty”. Cryptocurrency was invented to reinforce that claim. And all the advantages of CBDCs need to be set against the some drawbacks – which can be boiled down to giving greater power to ‘Big Brother’. Governments which can centrally monitor currency – which would be one implication of a CBDC – would mean every single payment could be subject to government oversight and possible disruption if a transaction annoyed government. While no-one wishes to facilitate illegal activities by permitting anonymous financial exchange, as a society we accept the possibility of such exchanges for the sake of mass privacy.

And while a CBDC would enable cuts to the money supply by the simple means of destroying an amount of the CBDC ‘token’, the reverse is also obviously true. Any government that felt itself strapped for cash would be able simply to issue new ‘tokens’ to any desired amount. Rather than promoting “financial stability” the IMF’s embrace of CBDCs might usher in greater instability.

Then there are other worries about CBDCs – unlike cryptocurrencies, which run on public blockchains that are decentralized, CBDCs will be fully centralized and hosted on private or permissioned blockchains; malicious hackers need only to breach a few servers and they might be able to control a nation’s whole money supply. The implication for the expanded role of Big Tech is concerning; CBDCs will probably need to expand to already existing digital payment systems such as Apple Pay, giving those systems the power to gather and potentially misuse personal data and enable hackers to steal your money.

To be fair to the IMF, in the latest edition of Finance and Development, the IMF’s magazine, the academic Eswar Prasad writes (in a personal capacity) that a CBDC “has disadvantages…Societies will struggle to check the power of governments as individual liberties face even greater risk”.

In the US, there has been much speculation about the ‘digi-Dollar’, a CBDC from the Federal Reserve. That now looks less likely to see the light of day – all the talk now is of FedNow, a “modern and reliable instant payment system” that will be launched between May and July 2023, according to Lael Brainard, the Fed’s vice chair. The Fed hopes that FedNow achieves a couple of things – making available for all its users cheap, reliable and irreversible payment settlements within seconds, and simultaneously killing off some of the attractions of cryptocurrency. FedNow promises to enable the processing and settlement of “individual payments within seconds, 24 hours a day, 7 days a week, 365 days a year”. It apparently will use a blockchain developed by a company called Cypherium. Cypherium is of course secure – until it isn’t. Both individuals and businesses will be able to use FedNow, with an initial transaction limit of $25,000, although that limit is forecast to grow. It promises to adhere to ISO 20022, which is an open global standard for electronic data exchange between financial institutions. Faster payments should make it harder for fraudsters to intercept payments.

The Fed describes FedNow as a modernization of the national payment system; if it’s widely adopted it will spell the end of the Automated Clearing House framework which currently settles interbank transactions. A modernization it may be; it’s possibly also groundwork preparation for a full-on CBDC. But even if the US decides it doesn’t need a CBDC, the movement towards CBDC adoption by the rest of the world may force its hand, especially if it wants to retain the financial hegemony of the Dollar.

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: Currency moves and gold

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The Dollar-denominated gold price has weakened recently and that demands an explanation. Surely, when inflation is soaring, gold ought to be doing well?

It all depends on what one means about ‘doing well’.

The Dollar price of gold has lost about 4.5% since the start of this year. But other asset classes have done rather worse.

The Dow Jones Industrial Index since the start of January was down by 11.8% by 29 August. The S&P 500 has dropped by more than 15%, the Nasdaq by more than 23% and Bitcoin is down by a whopping 58%.

This has combined with weakness in a number of currencies, especially those of emerging markets. The Indian Rupee has lost 7% of its Dollar value since the start of the year; the Philippines, Thailand and South Africa currencies have dropped by around 9% against the Dollar, and the Turkish Lira by 27%. Currencies of developed countries, such as the Euro, the British pound, Japan’s Yen, the Swiss franc, the Canadian Dollar, and the Swedish Krona have also lost ground to the Dollar, about 13%.

The weakening of these other currencies has seen gold rise significantly when measured in their terms. When measured in Euros gold has gained almost 7% since the start of the year; in Japanese Yen the gain so far this year is more than 13%. And in Pounds Sterling the gold price is so far this year up more than 9%.

For more than a year, the US Dollar has slowly been strengthening relative to other major currencies, and has touched a 20 year high. The Dollar is trading around par with the Euro. The Dollar tends to strengthen whenever the global economy experiences a crisis (and we have crises galore right now), as nervous investors seek out what is traditionally a safe place to park their money – which has long been the Dollar. Not only that, but America’s central bank, the Federal Reserve now appears finally to be getting serious about tackling inflation. Federal Reserve Bank of Richmond President Thomas Barkin has promised that the bank will do “what it takes” to get inflation back to its target of 2%. Jerome Powell, chairman of the Fed, said recently that it must “keep at it until the job is done”, widely seen by financial markets as indicating the Fed will continue to raise interest rates – causing the Dollar to strengthen further.

Many analysts are now expecting a recession to hit the Eurozone, the UK, and the US, defined as two successive quarters of declining economic output over the course of the next year. Historically, the gold price has tended to advance in recessions, although this is by no means a guarantee.

Higher interest rates in the US mean not only a stronger Dollar and therefore a disadvantage for American exporters, but a higher cost of US borrowing. The Congressional Budget Office (CBO) this year calculated that annual interest payments on the national debt will total $399 billion this year; by 2052 the CBO estimates that interest payments on the current trajectory will take nearly 40% of all federal revenues.

The Dollar looks safe – for now.

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: Has your card been declined?

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There’s probably a very simple explanation why your card has been declined.

• It simply may be that you may not have enough funds in the e-wallet you are trying to use for payment (for example Gold, USD, GBP or EUR wallet). Glint does not provide credit so please ensure you have topped up and hold sufficient funds
• To protect you from fraud all your card transactions must get real-time authorization. If the merchant’s terminal isn’t online then it will decline your transaction
• Please refer to our terms and conditions ( to ensure you transaction is not prohibited
• If after everything your card continues to be declined, please contact our Client Support Team. They are at your service and will be happy to help:

In the UK, Europe and the Rest of the World outside of the USA:
Call +44(0) 203-915-811
between Monday to Friday from 09:00 to 18:00 BST or
email: [email protected]

In the US only call between Monday to Friday 09:00 to 18:00 MDT
on (877)258-0181 or
email: [email protected]

Soapbox: Helicopter Money Taking Off

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A former Conservative Party British Prime Minister, Theresa May, took a lot of flak in 2017 for telling a nurse who complained on TV that her salary had not risen since 2009 that “there isn’t a magic money tree that we can shake that suddenly provides for everything that people want”.

Five years later, that assertion is about to be tested like never before.

Sky-high energy bills are about to arrive for British consumers, and the clamour for the state to help out and cover some (if not all) of the 80% rise in gas and electricity prices are coming fast and furious. The repercussions of zooming energy prices are starting to make themselves felt across all parts of the British (and European) economy. Britain’s 48,000 corner shops, places to buy milk at midnight, have an association representing 70% of them, the Association of Convenience Stores or ACS. ACS has asked the Chancellor for a £575 million “assistance package” or risk losing many of these small stores. As energy prices soar, many small businesses will go under and households will struggle; with inflation yet to peak at up to 20%, a severe recession is inevitable. Government will come up with various ‘support’ packages such as a cut in VAT or direct payments, at a time when tax revenues will plunge. Helicopter money – money dropped from above – is about to return to the UK.

Britain only has a few more days before it learns who its new Prime Minister will be. The previous one, Boris Johnson, supposedly stepped down in July although he has stayed in post as a ‘caretaker. Despite promising that major policy changes should await his successor, Johnson has recently said that whoever succeeds him will announce “another huge package of financial support… to help people through the crisis”. This seems to tie his successor’s hands – or risk angering the electorate. According to one commentator, neither of the two front-runners to replace Johnson has “the first idea of what to do about the UK’s deep-seated economic problems”.

With inflation likely to be around 13% by the end of this year, and energy prices forcing half of UK households into fuel poverty , there’s no doubt that many families are finding their disposable income is shrinking. Johnson’s competitors to become his successor are promising tax cuts or more money give-aways, either of which is just a different form of helicopter money.


No free lunch

The first welfare state was Germany, where Chancellor Otto von Bismarck in the 1880s introduced social benefit schemes designed to weld together the different classes of the fledgling German state. His motives were not philanthropic but political – he wanted to pull the rug from under the Social Democrat Party, which he regarded as dangerously revolutionary.

Almost 150 years later, we have morphed from welfare being a piece of generosity by a grateful state to it being seen as a right. The European version of the welfare state has apparently crossed the Atlantic. In 1996, then-Senator Joe Biden said “the culture of welfare must be replaced with the culture of work”, he said on the floor of the Senate…The culture of dependence must be replaced with the culture of self-sufficiency and personal responsibility”. We have moved from a culture in which the infirm, the unemployable, the poor, the elderly, are left to struggle – and our society is all the better for that humanising change. But as our population ages, or ‘black swan’ events such as wars disrupt our economies, our ability to fund that welfare comes into question. Triage will increasingly need to be employed; can we cover the cost of this? Can we afford that? What will have to be sacrificed if we want that?

In January this year, the Institute for Fiscal Studies, which specialises in UK public policy, said that welfare payments must rise “by twice as much as planned this year if the poorest households in Britain are to be supported through the cost of living crisis”. That would have cost an extra £3 billion/year. Since then energy prices have shot up and inflation has far exceeded estimates.

In the US, the state spent an additional $1.9 trillion on social support payments, the ‘American Rescue Plan’ Act of 2021. That put total US federal, state and city spending in 2021 at almost $10 trillion, or around half of national gross domestic product. As Larry Summers, former US Treasury Secretary, warned in February 2021, “there is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability”.

The Congressional Budget Office estimated that the US federal government ran a deficit of $212 billion in July 2022, $90 billion less than July 2021. The country’s national debt is fast approaching $31 trillion and 124% of gross domestic product (GDP), against some 57% just two decades ago.

All must have prizes

The demands increasingly placed on the state sound rather like the Dodo in Alice in Wonderland, who after a race announces that “everybody has won, and all must have prizes”.

But in the context of lingering high inflation and an increasing likelihood of a global recession, it’s questionable as to whether states will be able to afford their growing welfare bills. Fewer and smaller prizes will be available in future.

At their Jackson Hole junket last weekend central bankers seemed united in a determination to stamp out inflation whatever the cost. The battle is not just to kill rising prices but to defend their own reputation. Isabel Schnabel, a board member of the European Central Bank, said “regaining and preserving trust requires us to bring inflation back to target quickly… [the] longer inflation stays high, the greater the risk that the public will lose confidence in our determination and ability to preserve purchasing power”. Another Jackson Hole guest, Agustin Carstens, head of the Bank for International Settlements (BiS) issued a grim warning: “The global economy seems to be on the cusp of a historic change as many of the aggregate supply tailwinds that have kept a lid on inflation look set to turn into headwinds”.

There has been one prize winner however – the US Dollar, which is now stronger than it has been in 20 years, thanks to rising US interest rates and the generalised sense that central banks will fight inflation to the death. The Dollar looks like a giant on clay legs. The US owes the world a net $18 trillion, or 73% of its GDP. For now, the Dollar is the cleanest shirt in a bundle of grubby washing. Since the 15th century, points out one commentator, “the last five global empires have issued the world’s reserve currency… for 94 years on average. The dollar has held reserve status for more than 100 years, so its reign is already older than most… the dollar share of foreign exchange reserves is currently at 59% – the lowest since 1995”.

The Dollar’s strength has helped depress the gold price, which in Dollar terms has slid almost 5% since the start of the year, although the weakness of the Pound Sterling means that in Pound Sterling terms the gold price has risen by 10% since the start of 2022. As the world inches closer towards stagflation, the importance of gold not just as a means of saving but, thanks to Glint, as real, everyday money, will become increasingly apparent. While fiat currency can be created galore, gold cannot. When voters feel financially squeezed, the temptation for governments is not to address long-term and difficult problems such as how to increase productivity, but to quell disquiet by creating more paper money. With inflation approaching 20%/year, fiat money in the UK is annually losing around 20% of its purchasing power.

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: Russia’s latest revolution

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Karl Marx once said “although gold and silver are not by nature money, money is by nature gold and silver…”. President Vladimir Putin seems to think the same way – Russia’s central bank has tripled its gold reserves since it annexed Crimea in 2014.

Russia’s determination to humble the West’s political hegemony was shockingly announced in February when it sent its tanks into neighbouring Ukraine. It’s also accelerating its other and no less significant ambition, that of re-drawing the current monetary, US Dollar-dominated, global hegemony.

President Vladimir Putin fired his first missile in this monetary war in June this year at a summit meeting of the BRICS countries – Brazil, Russia, India, China and South Africa. He said then that the BRICS countries were developing a “new reserve currency”.

Some see this as a move “to address the perceived US-hegemony of the IMF [International Monetary Fund]” and its international reserve asset, the SDR (special drawing rights, which is based on a basket of the US dollar, the euro, the British pound, Japan’s yen, and China’s yuan).

China’s Renmimbi has already made inroads into Russia’s foreign exchange reserves, about 17% of which are now in the Chinese currency; China has not joined the sanctions imposed on Russia by the West. Russia has completely removed all US dollar holdings from its National Wealth Fund, the country’s sovereign wealth fund.

Russia’s finance ministry has now announced it is backing a new international standard for trading precious metals – the ‘Moscow World Standard’ (MWS) it calls it – which it says will become an alternative to the London Bullion Market Association (LBMA). The LBMA systematically manipulates precious metals markets to depress prices, suggests Russia’s ministry of finance. The MWS, which will also have a “price fixing committee”, is necessary for “normalizing the functioning of the precious metals sector” says the ministry.

The London OTC (over-the counter) gold market, under the auspices of the LBMA, “today comprises approximately 70% of global notional trading volume” according to the World Gold Council (WGC). Re-setting the global gold trade will be an enormous undertaking, and would have profound business and economic effects. Russia produced 314 tonnes of gold in 2021, about 10% of the global total and worth some $19 billion at current prices. That gold is mainly sold to Russian commercial banks, which sell it to the Russian central bank or export it. Since the war started, Russia’s customs service and central bank have suspended publication of import and export data and information about state gold holdings.

In one sense Russia is taking retaliation – the LBMA removed Russian gold refiners from its accredited list in March this year. On another level the MWS is a dagger aimed at the heart of the way the gold market has been managed for many years. If it succeeds, Russia will have created a precious metals marketplace that will be regulated by countries that control these metals’ production. The Eurasian Economic Union (Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia), the BRICS and Africa, Peru and Venezuela, account for around 62% of global gold supply. All are eagerly sought as members.

There are many questions about the promised ‘revolution’, not the least of which is – will it get off the ground? If the MWS does, it will certainly be disruptive to have two competitive ‘good delivery’ standards co-existing and vying for business. Will markets have the kind of confidence in the MWS that has been generated by the LBMA? Those ‘allies’ of Russia, all the countries which have not sanctioned it, will no doubt queue up to support it.

Nevertheless, questions of honesty, quality control, and storage security will inevitably crop up. Most important of all perhaps are: what will the “price fixing committee” decide the price per ounce should be; in what currency will that price be quoted; and against what will that price be benchmarked?

Glint’s Helpful Hints: Activating your Glint account

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Some clients have reported they are unable to activate their Glint card. We think we’ve identified the likely cause of this problem; curing it is a very simple matter.

To activate your card via the App you need to go to the Card tab at the bottom white banner of the home screen on your Glint app. You will be prompted to enter the last four digits of the card plus the expiration date. Please be sure that you enter the expiration date in the correct format, which is: MM/YYYY. On the card that format is shown as MM/YY, the four digits conventional to most credit and debt cards; my Glint card for example shows an expiration date of 05/23.

But in the App you need to enter six digits – MM/YYYY. So in my case I would need to enter 05/2023. Put in the six digits and you should have no problem in activating your account.

However, if you still run into difficulties with this or anything else regarding your account please contact our Client Support Team who will be glad to help resolve matters. In the UK, Europe and the Rest of the World you can email them at [email protected] while in the US only the address is [email protected]

Meet The Team: Ella – Client Support Executive

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We continue our sporadic series of introducing you to members of the Glint team and this week it’s the turn of Ella, Client Support Executive, who is based in the US.

Ella is a Colorado local, born and raised in Denver and currently living in the Rocky Mountains outside of the town of Black Hawk. Ella’s professional background was developed in the legal cannabis industry, and her draw to emerging and pioneering industries is what sparked her interest in Glint. Ella does have a long background in handling physical gold, however, as she grew up around gold leaf, learning gilding skills from her mother.

Ella enjoys spending her free time with her partner, Max, and two dogs, Mo and Penny, and spending time exploring the national forest near her home. Ella’s favourite creative outlet is in the kitchen, exploring new culinary creations as well as honouring classic family recipes; she is best known for her cheesecake, various pies, and pasta dishes.

Ella’s homemade winter berry pie


Ella’s plant collection


To enhance her culinary adventures, Ella has an ever-growing plant collection, where she loves to pick fresh herbs to season her dishes. To get an idea for Ella’s favourite TV shows and movies you only need to read the nametags for her plants, such as Larry David, Peter Parker, and Shrek. Ella is looking forward to celebrating her future milestones with Glint with gold-leaf decorated cheesecakes and other sweets, made by herself, of course.

Soapbox: Moving on – maybe

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Soapbox US Inflation

On Friday this week, the chairman of the US Federal Reserve, Jerome Powell, will address his peers and would-be peers at this year’s economic symposium at Jackson Hole in Wyoming. Rarely have a central banker’s words been more eagerly awaited; rarely will they prove to be more disappointing. Powell needs to decide whether high inflation is ebbing away of its own accord, whether it needs ‘taming’ by higher interest rates – or whether it is now being caused by factors far beyond his or anyone’s control.

If Powell says US interest rates must go higher to combat inflation, now at an annualized 8.5%, the risk is that this makes a recession more odds-on. It is unthinkable that he will act with the determination of a predecessor, Paul Volcker, who got double-digit inflation in the 1980s “under control through the economic equivalent of chemotherapy: he engineered two massive, but brief, recessions, to slash spending and force inflation down. By the end of the 1980s, inflation was ebbing and the economy was booming”. Powell will be hyper-aware that the man who re-affirmed him in his job, President Biden, does not need a recession.

If Powell speaks mildly about inflation then the risk is that everyone relaxes and that wages and prices begin to chase each other, rather like a snake swallowing its tail, and inflation becomes firmly embedded.

At the back of Powell’s mind – of everyone’s mind – is the rapidly approaching date of the US mid-term elections. On Tuesday 8 November, all 435 seats in the House of Representatives and 35 of the 100 seats in the Senate are up for grabs. President Biden currently is disapproved of by more than 54% of the electorate. If Biden and his Democratic Party are to avoid becoming ‘lame ducks’ they need Powell to come up with some good news for the electorate – and fast.

Biden/the Democrats will not face a fresh Presidential election until the end of 2024, but if the Democrats lose their slim Congressional majority in November they will be unable to pass legislation – and Biden’s dream of being a second F.D. Roosevelt will burst.

In the UK, around 160,000 people – all the members of the governing Conservative Party – are about to choose the country’s next Prime Minister, following the resignation of Boris Johnson in early July. Whoever that person might be, they will lead the country for perhaps more than two years – the next general election is scheduled to be hold no later than 24 February 2025. These two years could be the most testing in decades, as a horrible level of inflation stimulates public sector worker pay demands that the government won’t be able to finance out of revenues.

Surging prices, and the success or failure to control them, will likely determine voter choices in both countries within two years. With inflation in both countries at a 40-year high, political leaders and their central bankers face huge difficulties. They desperately want to move on – if circumstances allow.

Adjusting the inflation target?

At Jackson Hole last year, Powell said that inflation was “likely to prove temporary”. At the time some of us gasped in shock – how could the policy of quantitative easing (which saw the central banks of the Eurozone, Japan, the UK and the US collectively expand their balance sheets by more than $11 trillion since the start of 2020) and the massive cash give-aways to keep economies on the road during Covid-19 translate into transitory price rises? “The stimulus payments which helped employers keep staff on also allowed consumers to shore up their savings”. US households on average have twice as much cash ready to hand as they did at the end of 2019; that’s playing its part in the inflation gallop. Powell and his peers either ignored or forgot Milton Freidman’s dictum that “inflation is always and everywhere a monetary phenomenon”, the result of governments expanding the money supply too enthusiastically.

We should remind ourselves of something that today looks absurd – the UK, the US, and the European Central Bank all aim to get inflation of around 2% a year. The Bank of England (BoE) now forecasts that inflation will peak above 13% in the final quarter of 2022, and still be above 9% in the third quarter of 2023. Little wonder that UK workers in all kinds of fields are now taking sporadic strike action. They watch their declining real (inflation-adjusted) wages rapidly decline while simultaneously noting that the likely cost of bailing-out the (failed) energy retailer Bulb may cost them more than £4 billion ($4.71 billion).

Independent analysts are forecasting still higher inflation for the UK – Citi has this week projected inflation will hit 18.6% in January 2023, the highest in almost 50 years. This could be worse – in Argentina expectations are that inflation will be higher than 90% over the course of this year, while in Turkey it is already 80%/year.

Powell is no Volcker: he will not raise US interest rates above the inflation level, there is too much at stake to risk a deeper recession. Rather he may well move the goalposts: instead of trying to pin annual inflation to around 2% we may have to get used to a fresh ‘target’, around 4%. Hitting that higher target would be easier.

Powell also must struggle to make sense of apparently contradictory information about US consumer behaviour. On one hand Americans are clearly anxious about the economy; “consumers are more gloomy now than they were during the worst of the Covid-19 pandemic, the global financial crisis or any other moment since…1952”. Yet while they are getting less for their Dollars “they are still spending them”. Halting high inflation will become more painful the longer it endures – and it’s going to last through 2023 for Brits.

Shocks ahead

Larry Summers, a former US Treasury Secretary, has said that “we need five years of unemployment above 5% to contain inflation… or one year of 10% unemployment”. Wages have recovered in the US since their calamitous Covid-19 drop. Unemployment levels are the lowest since 1969 in the US.

US real hourly wages by industry: % change since January 2020


Summers’ prescription to get inflation under control is harsh, but perhaps inflation’s appearance of slowing in the US (if not the UK or the European Union) is deceptive.

Europe is particularly vulnerable, with 40% of its natural gas and 25% of its crude oil coming from Russia last year. The International Energy Agency (IEA) said in July that the squeeze on energy supplies may have only just started and this is “affecting the entire world”. Russia has just ruled out any possibility of a diplomatic solution in its war with Ukraine; “the world has changed” Gennady Gatilov, Russia’s permanent representative to the United Nations in Geneva, told the Financial Times.

The management consultants McKinsey called their latest research into US consumer behaviour “The Great Uncertainty”. Powell faces his own ‘great uncertainty’ at Jackson Hole; British consumers are shortly going to face a great certainty, the certainty of energy bills rising even more. The US Dollar and Pound Sterling have lost around 80% of their purchasing power in the years since the last energy crisis, brought about by the oil export embargo of 1973, when gold then fetched around $106/ounce. Since then gold has risen by more than 1,500%. Gold is security; Glint its key.

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: China springs a surprise

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China’s central bank surprised markets last week by cutting its key interest rate, lowering the medium-term lending rate from 2.85% to 2.75%, the first cut since January this year. This at a time when most central banks around the world are raising interest rates to try to stifle inflation. Inflation is creeping up in China, the consumer price index (CPI) annualised rate rising to 2.7% in July, the highest in two years but still far below the inflation figures for the US (8.5%) and the UK (9.4% in June).

China’s inflation is likely to remain subdued, largely because domestic demand remains weak thanks to the country’s zero-Covid policy, closing down cities where outbreaks occur. On the day the interest rate cut was announced the gold price dropped 1.3% on speculation that the interest rate cut was aimed at batting away indications of a recession, an economic downturn that would hit Chinese gold buying. Reports are that Chinese consumers are “more pessimistic about future income growth than they’ve ever been – even at the pandemic’s start in 2020 or after the [2008] global financial crisis”, which is encouraging them to cut debt and increase savings.

Figures for industrial production and retail sales in July showed sharply slowing year-on-year growth respectively of 3.8% and 2.7%, against expectations of 4.6% and 5%. This follows a modest 0.4% year-on-year expansion of the economy in the second quarter of 2022, and against the 4.8% in the first quarter. Beijing has set a target of real growth in gross domestic product (GDP) of 5%-plus for this year, but it’s unlikely to achieve that.

The Caixin Purchasing Managers’ Index, a closely watched indicator of the underlying state of China’s economy, dropped to a low of 36.2 in April this year; anything below 50 indicates contraction, while anything above 50 shows expansion. In June, it rose to a 13-month high of 51.7, a fragile return to expansionist mode; by July, the index had fallen again, to 50.4. Fears of a recession are widely discussed; according to the head of a major steel group almost a third of the country’s steel mills could go into bankruptcy, partly as a result of a slump in the property sector; the 100 leading property developers saw their sales drop by almost 40% in July. Youth unemployment (the ages of 16 to 24) has reached more than 19%. For an economy so dependent on sales of accommodation and for a government that needs to infuse its young people with optimism, these are worrying facts.

As for China’s gold demand, it’s currently stuck between Scylla and Charybdis, rather like the economy as a whole. Last year China’s demand for gold coins and bars rose by 44% year-on-year to 285 tonnes, according to the World Gold Council’s (WGC) latest annual report. Gold jewellery purchases reached 675 tonnes, a year-on-year increase of 63%. The WGC says China imported 107 tonnes of gold in June, “the highest in five months and significantly above the 2019 pre-pandemic level”. Chinese consumers, as price sensitive as any, have not lost their taste for gold or luxury objects; they might be finding it a little more difficult to afford the cost. Popular brands of luxury watches and bags have lost up to 50% of their value on the secondary market since Shanghai, China’s financial and commercial capital, imposed a strict lockdown in March. The WGC said recently that the outlook for gold in 2022 will be heavily dependent on the world’s two biggest consumers – India and China – to counter weaker investment demand. China’s demand in the second quarter of this year dropped by 31% said the WGC, partly as a result of the economic slowdown.

Glint’s Helpful Hints: Counterparty risk

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Since 2008, we have all become more sensitised to the threats from Counterparty Risk, the risk that the other party in an investment, credit or trading transaction might default or otherwise renege on its contractual obligations. It emerged that banks were highly exposed to collateralized debt obligations (CDOs). When mortgage borrowers began to default, the banks were left on the hook for the losses. As banks toppled like dominoes, issues of counterparty risk swiftly emerged – who was defaulting on what, to whom, and by how much? This led to a severe collapse of the overall economy.

We live in a world surrounded by contracts, which is a model of transactions based on trust (but enforceable by law). When we buy goods at a supermarket, or when we use a utility to buy electricity; we depend on people entering into and fulfilling their contracts with us.

For any type of paper-based investment, where no direct assets are involved, e.g. shares, bonds, traded funds, etc. there is always a degree of counterparty risk. This is true of ‘gold-backed’ exchange traded funds (ETFs) – the counterparty risk is that the trust (which actually owns the gold) could default. Bitcoin solves counterparty risk but other parts of cryptocurrency business – such as exchanges – carry their own counterparty risk. There have been many examples of Bitcoin exchange collapses over the years.

Physical gold and silver have no counterparty risk. The ownership of physical precious metals involves no ‘other party’ who might default on payments or go bankrupt; no boards of directors are involved; and they are not subject to the many manipulations potentially affecting other investment assets.

But possessing physical gold/silver can be a drag – literally, because they are heavy. And there are insurance costs, storage headaches, theft worries on top of that. And it is extremely difficult to use the gold as money – getting a sliver from your physical bar to pay for a coffee is challenging.

That’s why we promote Glint. With Glint, the gold in your account is allocated to you, there’s no counterparty risk; even if the vault it is stored at in Switzerland goes into default, you are still legally entitled to the gold you own. Moreover, you can spend gold on your account as you would any fiat currency (you can hold Dollars, Euros and Pounds Sterling as well as gold), in any amount, no matter how small, you like. So not only no massive weight tearing at your pocket, nor any storage or security concerns, and there’s no counterparty risk.