August is here and naturally everyone is thinking about holidays – well, if you live in the northern hemisphere that is. It’s time to relax, maybe. The last thing you want to do to pestered by boring stuff like finances, credit cards, bills, fraud…so here’s hoping you are not a Monzo cardholder; if you are one of those unfortunates you will have to spend some of your valuable holiday time checking your account for fraud, changing your pin number, and other boring stuff.
It turns out that Monzo, the UK digital bank, incorrectly stored about 480,000 customer pin numbers in files that were encrypted, but could be decrypted and accessed by any one of its engineers, roughly one hundred people. Who may or may not be honest people. Whoops! So 20% of the Monzo’s customers now have to go to a cash machine and reset their PINs. And are the other 80% confident that all is well; or might they feel a little uneasy? Monzo calls itself “the bank of the future”, but slips like this seem very much like how banking used to be.
The marketplace for new start-up digital “challenger” banks in the UK is getting very crowded and their story is all about very rapid expansion. While some may be very good, and Monzo dislodged First Direct in the Which? consumer survey late in 2018, but they all have one problem as far as we are concerned: they might be super-trendy but they all deal in paper money. Avoiding the risk of you bank’s PIN number being hacked and used fraudulently is one thing – but dealing in paper money is runs the risk of you being subject to fraud of an entirely different magnitude.
The first, most important, and perhaps the only point you need to bear in mind is – who produces the dollars, pounds, euros or whatever paper currency you use? Who controls the amount of that paper money there is in the world? The answer is obvious – governments.
We have all become accustomed to thinking that governments – our government – is basically kindly and concerned to ensure our welfare. We have lost our scepticism; we have lost our willingness to question from first principles. We believe we are living in a settled environment – even though it’s a very unsettled world indeed, and one that shows no sign of regaining its balance very soon. One simple fact ought to be enough to demonstrate what we mean: governments today across the world have collectively borrowed $10 trillion on negative interest rates. This is a highly dangerous Everest, and unlike the real mountain this metaphorical heap just keeps growing.
The US Federal Reserve, which takes a leading role in setting the world’s interest rates, believes that interest rates now will settle at 2.5% in the long run; if 2% is deducted – the Fed’s target for inflation – that means the return in invested capital will be a meagre 0.5%. In Europe and Japan the return will be even lower. So what, you say?
The ‘what’ is that monetary policy is broken. When the next recession hits, central banks will have nothing left in the locker to fight it. In order to stave off misery, demonstrations, civil unrest of all kinds, governments will be forced to step in with further mass printing of money, and to flood the market with free money. And so this mad carousel – indebtedness, low interest rates, money printing – will continue.
All this is a long way from parties and parasols, but you really should not rest easily under the sunshade. Only one form of money – gold – is beyond the control of governments. And Glint gives you the power to save, invest in, and spend gold as money. So enjoy the vacations and join this growing band of people who – intelligently – put their trust in Glint, in gold.
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