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Glint Special Report: Jobs are up but so is inflation – how should central banks react?

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It’s been a busy week in the UK so far with several government announcements indicating exactly where we are in terms of our recovery from the Covid-19 pandemic.

Firstly, some positive news – the unemployment rate fell slightly to 4.8% but there were green shoots in terms of the jobs market with 657,000 vacancies, up by almost 50,000 on the previous quarter. Positive signs of recovery, at least in the jobs market. But that’s about it for good news, I’m afraid.

A closer look suggests that there is still a long way to go. We’re still far behind pre-pandemic levels with around 750,000 fewer people in employment than this time 12 months ago. In the US, the employment level is 10 million jobs below its pre-pandemic level.

Once again, the younger generation has been hit hardest with 289,000 fewer employees under the age of 25 on the payroll than 12 months ago – largely due to the higher proportions of workers from this demographic in the catastrophically hit sectors of hospitality, leisure and retail. This generation is at serious risk of being further left behind and the financial inequality that is already prevalent will only worsen.

We all knew the Covid recovery would take time so these figures, whilst still concerning, unfortunately aren’t that surprising. The biggest worry is the latest round of inflation figures as well as central banks’ acceptance of what appears to be rapidly rising inflation and their seeming reluctance to do anything about it.

In the UK, inflation more than doubled to 1.5% last month and there are signs that not only will we surpass the Bank of England’s 2% target this year, we’ll even hit 2.5%. In the US, expectations for consumer price inflation now range between 3% and 6%.

Last week, we also saw inflation figures from the world’s two largest economies. Unfortunately, these also made concerning reading – inflation rises in both the US (4.2% – discussed in more detail in last week’s newsletter) and China (0.9% although they have a target of 3% this year) meant that consumers are facing price hikes at the precise moment that they are beginning to rebuild after the pandemic. In China, there is potential for far worse to come as producer prices increased 6.8% over a year, the fastest rise since October 2017 – as the largest producer globally, there should be real concern if these increased costs are passed on to consumers.

As long as inflation continues to rise without intervention from central banks, consumers and savers will be hit. In the UK at least, the conversation around the introduction of negative interest rates won’t die down; add the £300bn borrowed to struggle through the Covid-19 pandemic and continuing quantitative easing to this climate of historically low interest rates and we have a perfect storm which devalues our cash and our savings by the day. According to the National Audit Office the UK has spent £372 billion so far on measures designed to combat the impact of Covid-19.

It’s difficult to see how central banks will rescue the situation, especially as there appears to be little to no inclination to increase interest rates. This reluctance isn’t surprising; there is fear of the markets sliding even further and interest rate rises could snuff out the embryonic economic recovery. However, the time to act is now before another generation is financially crippled for life.

US Treasury Secretary Janet Yellen might still think that there isn’t an inflationary problem, but she may soon be the only one.

With all the above factors in place, and central banks’ apparent disregard for the financial welfare of consumers, it’s no wonder that alternative currencies have flourished in recent months as consumers and savers search for value. Markets are down, ISAs offer minuscule interest; where else can we turn? Cryptocurrencies may have grabbed the headlines but, ever since Elon Musk’s hint that Tesla may sell its Bitcoin holding sent prices crashing across the crypto market, the average consumer will be understandably cautious about investing in such volatile assets. By comparison, although the value of gold can decline, it is up 11% in just six weeks and whilst still below last summer’s peak this appears to be the perfect opportunity for it to remind us all why it has been the ultimate long-term store of value for centuries.


Soapbox: Mark Mobius speaks – The asset manager who backs gold

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“At the end of the day, when you look at all these currencies around the world, they have all devalued – throughout history all currencies have devalued”. That’s how Mark Mobius, former executive chairman of the Templeton Emerging Markets Group and now a founding partner of Mobius Capital Partners, opened our conversation. The author of many books, his latest (published in 2020) has a timely title – The Inflation Myth and the Wonderful World of Deflation. I spoke to him in his Hong Kong office (via Zoom, of course) to find out what he thinks of gold today and how he sees the rise of cryptocurrencies.

“The good news is that because of technology the cost of goods and services is going down. Inflation measures don’t really tell us that because they refer to baskets of goods and services which constantly change, so you can’t really compare one period to another. I still believe a gold standard would make a lot of sense because it would prevent governments from over-printing [fiat currency] and devaluing their currencies”.

We stray onto the topic of Central Bank Digital Currencies, about which Mark holds strong opinions. He says: “The entire financial world is being digitised. What is this digitisation? It’s just another way of communicating the value of money from one place in the world to another. So if a central bank says now ‘we’re going to digitise US dollars’, that’s entirely different from Bitcoin for example, which is a created ‘currency’ that has no basis in a government or any foundation. People are getting confused over Blockchain. Blockchain is a very simple mechanism for ensuring safety in transactions. A lot of people think this is a solution to the problem of transferring money – no, this is not a solution because Blockchain can be hacked”.

As for gold, Mobius says that “gold goes through cycles. Sometimes it loses value against fiat currencies but going forward it will continue to rise simply because those currencies continue to be devalued. There’s a limit to the amount of gold available around the world. So I think gold will come back and surge”.

Money is power said the 7th US President Andrew Jackson. Mobius agrees and feels “that’s why these cryptocurrencies will not be available as real money, in other words as money which you could spend. You can see that already – the US government is starting to crack down on the various cryptocurrency exchanges. I think governments will increasingly crack down on these cryptocurrencies because it threatens the very power of governments, which is the ability to create money”.

Elon Musk’s decision not to allow Bitcoins to buy his Tesla cars was couched in terms of “the rapidly increasing use of fossil fuels for bitcoin mining” tweeted Musk; but his abrupt volte-face on Bitcoin – on 24 March he said people could buy a Tesla using Bitcoin – nevertheless shook the Bitcoin price and rocked its claim to currency ‘status’. In the UK, the Bank of England’s deputy governor, has just said that “it looks probable in this country that if we want to retain public money capable of general use, and available to all citizens, the state will need to issue, public digital money”. In other words, if governments want to retain control over money – if they want to keep power – they will soon need to provide digitised fiat currency.

Some countries are already rapidly rolling out their own central bank digital currencies, including China. Might the Chinese Renmimbi be about to topple the US dollar from its international reserve currency status? Mobius thinks “not yet. It will take a while. The big challenge that the Chinese have is that they still want to control the exchange rate against other currencies. The day they give up on that is when the Renmimbi could become a truly global currency. The effort to create a digitised Renmimbi makes a lot of sense for the Chinese because the big problem they have now is they have to work through the US system, in most cases to trade, the Swift system, which monitors and enables the transfer of money. The degree to which they can create a digitised currency which does not require going through this system could be an incredible boon for the Renmimbi”.

Mobius is dismissive of the latest fashion in macro-economics, the so-called Modern Monetary Theory, which argues that it doesn’t matter how much governments print and spend currency. Debt is not a problem, according to this. Balancing budgets is for the birds – just create more money. “This will just devalue currencies further, there’s no doubt about that”.



Our chat draws to an end but we can’t part without a consideration of the big question of the day – are we in an inflationary or deflationary environment? Mobius considers “we are in a deflationary environment. A lot of economists hate deflation, they think it’s very bad, because they think you have to have inflation to create growth, but in my latest book I point out that we have had growth even during this deflationary period. As for gold, I don’t have a clue what is going to happen to the gold price in the short-term, but in the long-term it’s just going up”.



Gold – according to Dominic Frisby: Kublai Khan – the first money printer

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We tend to credit ourselves here in Western Europe with the invention of the printing press, but China had been printing (using wooden rather than metal blocks) for many hundreds of years before Gutenberg brought his invention to market in 1436.

Gutenberg’s invention didn’t sell, by the way, and he died penniless, with his presses impounded by creditors.

Money develops as technology develops, and the Chinese discovered they could use their presses to print money. It began in the 7th century with promissory notes from merchants to wholesalers (with the same function as the clay tokens representing sheep or barley baked inside clay balls by the merchants of Ancient Mesopotamia thousands of years earlier).

By the 11th-century paper money known as ‘jiaozi’, a form of promissory note, was circulating alongside coins. Europeans had attempted something similar with pieces of leather or cloth, but it never really caught on. By the 12th century the Chinese government was issuing its own state-issued paper money.

In the 13th century the Venetian merchant Marco Polo, at the age of just 17, together with his father and uncle, famously made his way along the Silk Road to China, on a voyage that would end up lasting some 30 years. In China, he fell into the favour (and employment) of the Mongol emperor Kublai Khan.

On his way home, in 1295, he was captured by the Genovese, enemies of Venice, and in a prison in Genoa he met a writer by the name of Rustichello of Pisa. Together they collaborated on a manuscript recounting the story of Polo’s adventures, called “Description of the World”.

Polo marvels at the great Khan and the wonderful things he saw in China: the palaces, coal, a postal service, eyeglasses. But there is one chapter I want to talk about today, which has the most wonderful title: “How the Great Khan Causeth the Bark of Trees, Made into Something Like Paper, to Pass for Money All Over his Country”.

“He hath the Secret of Alchemy in perfection”, marvels Polo, making money from the bark of mulberry trees – “trees so numerous that whole districts are full of them”. “All these pieces of paper”, he goes on, “are issued with as much solemnity and authority as if they were of pure gold or silver”. When various officials as well as Khan himself have put their seal on it, “the money is authentic. Anyone forging it would be punished with death”.

Indeed anyone who dared refuse these notes faced “pain of death” as well, no matter “how important he may think himself”. No surprise then that everyone took them “readily, for wheresoever a person may go throughout the Great Khan’s dominions he shall find these pieces of paper current, and shall be able to transact all sales and purchases of goods by means of them just as well as if they were coins of pure gold”.

We then learn that any merchant arriving into the kingdom with gold, silver or pearls was “prohibited from selling to any one but the Emperor”, who then “pays a liberal price for them in those pieces of paper”. How easy it is to be generous with printed money that has no cost of production to it!

If the paper got damaged, merchants could take it into a mint and get a replacement piece – at a cost of 3%. So Khan made good there as well.

The net result of Khan’s money system was that he pretty much sequestered all the wealth of China and the surrounding empire, while everywhere else was left with his paper. “His treasure is endless”, said Polo, “whilst all the time the money he pays away costs him nothing at all”.

Merchants accepted Khan’s money and his prices. What choice did they have? But here we also see the convenience of paper money. Fast – “They are paid without any delay” and portable – Khan’s paper was “vastly lighter to carry about on their journeys – ten bezants’ worth does not weigh one golden bezant”.

Polo may have marvelled at Khan’s enterprise, but it was one almighty racket, not so dissimilar to the process by which wealth has been leaving citizens through today’s fiat money system. No wonder Khan had “more treasure than all the kings in the world”. And no wonder the Mongol Empire soon fell into irrevocable decline.

This combination of the centralised wealth, imposed fiat money and excess government control has led to many a paper money collapse throughout history.

So, back to Europe and Johannes Gutenberg. Gutenberg’s problem was that he had no network. He could print 100 copies of a pamphlet but he had no means to disseminate them and there might only have been a handful of people local to him who could read. So what was the point of all the copies?

It was the Venetians, the great businessmen of the time, who turned Gutenberg’s invention to profit. Venice was probably the epicentre of European trade in the late 15th century, a great hub of shipping, and news spread orally via their ships. You could print, 100 copies of a pamphlet in Venice, give a handful to each ship captain, and their contents could be carried around the known world.

In the destinations where the Venetian ships arrived, local printers could then copy the manuscripts and redistribute them internally, while the illiterate, which was most people, could gather and hear the news read to them.

Thus did Venice become the printing capital of Europe. And it would not be long before Venice and the rest of Renaissance Italy discovered promissory notes, bills of exchange and paper money.

This new financial technology had come to Europe.

* Dominic Frisby, author of Daylight Robbery – How Tax Shaped The Past And Will Change The Future, out now in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

Soapbox: Inflation – Who do you believe?

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We’re far away from Weimar Germany but perhaps closer to 1989’s Argentina than we think.

In Germany in 1923 hyperinflation took off; a loaf of bread that cost some 160 Marks at the end of 1922 cost 200,000,000,000 Marks by late 1923.

In 1989 in Argentina inflation hit 2,000% a year. As you did your weekly shop on Avenida Florida you found store assistants ahead of you busily stamping higher-priced stickers over the existing price.

Annual inflation today in Argentina is officially almost 50% but few believe that official figure. At street level, it feels very different, partly because Argentines have lost confidence in their paper currency, the Peso.

Argentina is the world’s biggest exporter of soymeal – crushed soybeans largely used as animal feed. But rather than export their soymeal Argentine farmers are holding back their beans, selling just limited amounts to cover on-going costs; the beans are being held onto as a hedge against probable future declines in the value of the Peso. High inflation and a collapse in the purchasing power of a currency usually go hand-in-hand.

Officially, the annual inflation rate in the US for the 12 months ending in March 2021 was 2.6%, according to the Consumer Price Index, which is based on a market basket of consumer goods and services” according to the US Bureau of Labor Statistics. The US inflation rate from January 2000 to January 2010 was 26.63%. In the UK, the official inflation rate is also based on a basket of goods, the Consumer Prices Index; this rose we are told by 1% in the 12 months to the end of March 2021.

The relatively languid official data about the current level of inflation is disputed. The Sage of Omaha – Warren Buffett – told shareholders of his Berkshire Hathaway company at the start of May “we are seeing very substantial inflation… We’ve got nine homebuilders in addition to our manufacture housing and operation, which is the largest in the country. So we really do a lot of housing. The costs are just up, up, up. Steel costs, you know, just every day they’re going up”.

Manufacturers of core commodities in the Eurozone that expect to put up prices in the next 3 months: Source, European        Commission.


That wholesale price inflation will inevitably feed into higher consumer prices. Bloomberg’s commodity index is up by 17% so far this year and has reached record highs. The futures price of crude palm oil, to take one basic agricultural commodity, used in everything from lipstick to processed foods to biodiesel, has gone up more than 100% in the past 12 months. Goldman Sachs said at the end of April that it sees commodities rising by another 13.5% over the next six months on a worldwide reversal of coronavirus curbs, lower interest rates and a weaker dollar.

Cost-push and demand-pull

Governments have a vested interest in balancing inflation; worried about voters, they try to maintain stable prices but also to inject a little ‘controllable’ inflation into the economy. If an economy is not running at full capacity a little bit of inflation in theory helps increase production – more money swirling around translates into more spending, which means more demand, which in turn triggers more production and greater employment. That’s the theory. The reality is that it is always a tightrope act.

The US explicitly adopted a 2% per year inflation target in 2012 but it has relaxed that recently. The International Monetary Fund (IMF) described inflation targeting as “a pragmatic response to the failure of other monetary policy regimes”. Prior to inflation targeting central banks set targets for money supply or exchange rates.

There are two basic causes of inflation – demand-pull and cost-push. Demand-pull works when consumer demand pulls prices up; cost-push happens when supply-side costs force prices higher. Some economists argue that there is a third cause – an expansion of the supply of fiat currencies, of paper money. Put these things together and we have a heady cocktail. And all three things are now going on at once.

There is cost-push: in the US the latest Institute for Supply Management (ISM) figures say that factories’ waiting time for production materials reached 79 days in April, the longest in records dating back to 1987. US purchasing managers last November said there were just eight materials they were struggling to obtain. Today it’s 24. According to one assessment the price of houses in 25 countries rose by an average 5% in the last 12 months, “the quickest in over a decade”.

Then there is demand-pull. In the US wages in the private sector in the first quarter of this year rose by the most in 18 years. The US National Federation of Independent Business reported in a March survey that about 28% of small businesses put up salaries – the biggest cost for businesses – and started offering signing-on bonuses just to find suitably qualified applicants. More generous welfare benefits and (in the US) the pandemic relief checks are giving workers the chance to be more selective. According to a survey published in April job vacancies were up by 22% during January-March this year in the US while the number of applicants was down by 23%, year-on-year.

And there is vast expansion of money supply. Aggregate money supply increased by $14 trillion in 2020 in the US, China, Eurozone, Japan and eight other developed economies. This exceeds the previous record increase of $8.38 trillion in 2017. “Much of the money that landed in the laps of investors [in 2020] found its way into the stock market, pushing the global value of stocks to more than $100 trillion for the first time and the average stock price for a member of the MSCI All-Country World Index to a stratospheric 31 times earnings” says Bloomberg.

How will this all end? It’s not at all clear. If inflation looks like getting out of control then central banks will have to push up interest rates, which – for now – they show no inclination towards. Not least because too much is riding on the loose money policies – financial markets would tumble and over-leveraged companies would go bust. Janet Yellen, the US Treasury Secretary, said at the start of May that she didn’t think there is going to be “an inflationary problem”. That’s a view not shared by other Americans, and it’s not borne out by the remarkable rise in the price of many basic commodities. The price of copper, for example, has doubled since its pandemic low in March 2020. The New York Fed’s monthly survey of consumer expectations – gauged by a survey of some 1,300 households – found that rental cost expectations increased for the fifth consecutive month and are now expected to rise by 9.5% over the next year.


During periods of high inflation, whether in Weimar Germany or 1989’s Argentina or today’s Venezuela people do their best to acquire physical assets. Being able to hold something real and concrete is essential when prices are spiralling – in those situations fiat currency, paper promises by government, tends to lose its meaning. Yet people still need a means of exchange to be able to buy their daily bread. At Glint we believe we offer our clients the ideal means of squaring this circle – hold a physical asset, gold, and yet be able to use that physical asset to be able to spend on the essentials. With Glint you can buy, save – and increasingly relevant perhaps – spend in gold.

Around the Campfire: Hugging is back!

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In the UK, that is. Prime Minister Boris Johnson said on Monday that from next Monday pubs and restaurants in England will be allowed to re-open for indoor services – museums, theatres, cinemas and children’s indoor play areas will also reopen. Pretty much the same relaxation of the rules will also be true for Scotland. UK deaths from Covid-19 are now at the lowest level since July last year and England’s Covid-19 alert status has gone down from four – the epidemic is in general circulation and transmission is high – to three, which means the virus is still in general circulation but transmission isn’t high. Things are starting to loosen up everywhere, including the US, where at the height of restrictions in late March and early April more than 310 million Americans were under directives ranging from “shelter in place” to “stay at home”.

I’m giving three cheers for what is starting to look like the final days of Covid-19-caused restraints – being able to hug friends and relations again will be for me, and no doubt for many others, as important as being able to dine out or have a beer inside a pub. Johnson has said England is on an “irreversible” path out of its third nationwide lockdown; but he hasn’t ruled out further restrictions if the virus spreads out of control in the future.

What will you do with this unusual freedom? Those fortunate enough to have escaped unemployment are probably flush with cash – the Bank of England said at the end of March that households put more than £17 billion into the bank in February, well above the monthly average of £15 billion since March 2020 and a monthly average of £4.6 billion in 2019.

Economists are now falling over each other to predict a massive ‘bounce-back’ from last year’s biggest economic contraction in 300 years, fuelled by an assumed consumer pent-up wish to get out and spend. I’m not so sure. The people who will spend will mostly be the ones who need to buy essentials, the have-nots or the approximately one-third of people who last year had less than £600 ($847) in savings. People have got into the habit of saving more of their income, putting aside money for a rainy day or for some big-ticket ‘treat’.

I only wish they would look at the interest rates they are getting from their bank deposits – less than 1% on average, about half what the government would like the inflation rate to be, and much less than what it actually is. In a world where inflation is returning, bank deposits daily lose value.

Get out and hug!

Until next week,


Around the Campfire: Who’s in control?

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My eye was caught this week by the Bank of England (BoE) posting vacancies for several people for jobs related to Central Bank Digital Currencies, including a ‘Stakeholder Analyst – Central Bank Digital Currency’. Not that I am looking for another job – but the relentless shift towards a cashless society and digital payments is a big part of my life.

It’s going to become a big part of your life too.

In April, the BoE and the UK Treasury created a ‘task force’ to study the establishment of a CBDC. The CBDC idea is spreading like wildfire – the National Bank of Georgia said at the start of this month it’s considering launching its own CBDC by creating a digital version of the Georgian currency, the Lari. The CBDC is no longer just a theoretical concept; it’s already been tried and tested in China. Cash – paper money – is dying on its feet. In the euro area, cash transactions account for around 10% of GDP. In the UK and US it is around 5%. In Sweden, it is less than 1%.

The Bank for International Settlements (BIS – the central bankers’ bank) put out a report last year, a collaborative study from seven central banks (including the US Federal Reserve) on the ‘foundational principles and core features’ of CBDCs. The first sentences of this report say: “central banks have been providing trusted money to the public for hundreds of years as part of their public policy objectives. Trusted money is a public good”.

The problem for central banks – which they hope to redress by developing CBDCs – is that ‘trusted money’ has become a scarce commodity. Declining confidence in fiat currencies has followed the decline in their purchasing power – that essentially explains why privately-created cryptocurrencies have been created. People have lost confidence in governments and understandably want to control their own assets; they hope to do that via cryptocurrencies.

A major fight is looming and there are more questions than answers. Who issues and controls this ‘public good’? Will CBDCs in our country be identity-based rather than token-based? As one commentator says: “the state of the discussion is so specialised and technical, new monetary systems risk being swept in without any democratic oversight at all”.

The issue of public money was on no-one’s agenda in the latest elections in the UK, where some 48 million people on Thursday this week were eligible to vote in the most extensive range of local elections in almost 50 years. In Scotland – still part of the UK – voters chose the 129 MSPs of the Scottish Parliament, with the Scottish National Party, which backs Scotland’s independence, seen as returning with a majority. The ties that have bound Scotland are bound to be tested again soon; those that link Northern Ireland to the UK feel looser, post-Brexit, than for many years.

Against the background of one of the most shattering events in recent history – the pandemic – the world feels poised on the verge of momentous changes. It’s a bit like the W.B. Yeats poem The Second Coming:

“Things fall apart; the centre cannot hold;

Mere anarchy is loosed upon the world”,

Countries divided, monetary systems changing, previous certainties tossed aside, authoritarian creep in many places – the need for control over what one has, has rarely been more important. In the midst of all this gold provides some certainty – some security. If gold is security, then Glint is its key.

Until next week,


Soapbox: Negative interest is no answer

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Governments have thrown just about everything at their economies since the terrible impact of lockdowns eliminated millions of jobs and slashed growth.

Their efforts – trillions in ‘stimulus’ spending, helicopter money, interest rate cuts, ‘furlough’ schemes, holidays on this and that tax – have had some hefty unintended consequences. The pace of developments has been remarkable. One of the macro-economic tools that’s been tried is cutting interest rates, and even making them negative – in other words you would have to pay a bank to deposit your money.

In February, the Bank of England (BoE) formally told the UK’s high street banks they had six months to prepare for negative rates. The possibility of negative interest rates should send shivers down everyone’s spine. This week we may learn if the BoE intends following through on its warning.

A shift into negative rates will however do little to get the economy moving again. It may produce its own distortions – and market distortions can last much longer than the policy changes that gave rise to them. There’s always a time lag.

For example, few people this time last year would have forecast that household wealth would have soared under the pandemic – yet it has. In March average US household income went up by more than 21%, the largest monthly rise since 1959. UK households that same month put £16.2 billion into their bank accounts, 3.4 times the monthly average for the year to February 2020, prior to the first UK lockdown.

In the UK, we have an extra twist. The UK Chancellor Rishi Sunak announced in July 2020 a temporary stamp duty holiday. Stamp duty is the tax levied by the UK government on residential property – on homes. Sunak cut the rate to zero for all properties sold for less than £500,000 ($693,000) until the end of March. He later extended this until the end of June this year. It’s not clear why the Chancellor chose this policy instrument in the anti-Covid/economic slump fight but its effect has been to create a “red hot” property market according to one UK mortgage adviser.


Governments lack dexterity

Demand for mortgages in the UK has become “red hot” and – the laws of supply and demand being what they are – average UK house prices went up by an astonishing 7.3% in April year-on-year. In the US, house prices rose by 16% in the past 12 months. The price of lumber – the main component in the typical US house – has risen by more than 230% since the start of the Covid-19 pandemic. UK household wealth has risen to record levels, the equivalent of £172,000 ($238,400) per person. In the US, personal incomes went up by 21.1% in March against the previous month – the highest jump since 1946.

US citizens – even those working and living abroad – have received their $1,400 Biden “stimulus check”. Some UK citizens have been paid by the government while their job is put on pause (“furloughed”).

But the hand of government is by definition clumsy. All state instruments are blunt; they’re not built to take account of individual cases. Thus the Legatum Institute, a think-tank in the UK, estimated last November that almost 700,000 people had been pushed into “poverty” in the UK as a result of the Covid-induced economic crisis. Human Rights Watch, the international NGO, said that eight million more US citizens were living in poverty in January this year than six months’ previously.

The gap between the “haves” and the “have nots” has just got bigger; the collective wealth of the more than 600 US billionaires has gone up by 36% during the pandemic. The richest 1% of Americans have added about $4.8 trillion of wealth from the end of March to the end of December 2020.


Continental lessons



We should be wary therefore of any attempt to stimulate growth by making interest rates negative. The money that would supposedly be teased out and put to productive use (into the “real” economy of making things people need to buy) will not necessarily end up there. Those who put their spare cash in banks would find themselves forced to pay for the privilege. Savers in cash are already punished by record low-interest rates; they would suffer even more punishment if rates went negative.

Nor is there any guarantee that the cash would flow into the economy; since the European Central Bank (ECB) introduced a negative deposit rate in 2014 physical cash holdings in Germany have trebled to €43.4 billion ($52 billion, £37 billion). People prefer to hold cash than pay banks, or to risk it by investing it. People have become even more wary of spending on anything but tangible assets in the wake of Covid. In the seven years since then the 19 countries within the Euro area have grown very sluggishly – peaking at 2.6% gross domestic product (GDP) growth in 2017 and as low as 1.3% in 2019 – the year before Covid-19 struck. Their example of negative interest rates does not seem to encourage growth.

Governments right now want to see their populations spending, injecting money into the economy and theoretically driving economic growth. Negative interest rates – which would have a knock-on effect on many financial products and institutions, from tracker funds to banks – are not the answer when economic growth already appears to be rebounding. The “reflation trade” has become a buzz phrase in recent weeks; crafting policy to ensure that inflation does not get out of hand is rapidly becoming the main concern for the US and others.

With interest rates so low, taxes bound to rise, prices soaring – lumber is only one example – protecting what one has is becoming daily more important. The gold price is having one of its periodic dips; but if history is any guide, then gold remains an important part of anyone’s portfolio.

Press Room: Glint in the news!

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Alternative currencies dominated much of the news this month. This week, Ethereum hit a new record high and broke the £2,000 barrier for the very first time. Alternatives are now firmly established amongst consumers as a viable store of value and means of exchange as we all look to take greater control over how we save and spend our money. Our commentary on the latest crypto milestone appeared in two articles in The Sun (here and here), Daily Express and Yahoo Finance.

Has the crackdown on crypto begun? One of the biggest stories this month was the creation of Central Bank Digital Currency (CBDC) taskforce by the Bank of England and HM Treasury. This is the strongest sign yet that the UK is looking to launch a CBDC and has potentially huge implications for our savings, purchasing power and privacy. Jason’s commentary appeared in some of the UK’s most influential newspapers including The TimesDaily Mail and Evening Standard as well as key financial websites including MSN, This is Money, MoneyWeek, Yahoo Finance, CryptoNews and UK Investor Magazine.

Earlier this month, the UK announced inflation continued to rise and is on track to meet the 2% target set by the Bank of England. The cash in our accounts already loses value by the day due to inflation outstripping the current miniscule interest rates – the potential introduction of negative interest rates would be catastrophic. Read our full commentary in the Daily Express.

Ever wondered how your savings have performed vs gold? We crunched the numbers and the value of gold holdings increased 41% over the last decade, whilst Cash ISAs have lost 2% in value over the same period. Our research and explanation behind cash’s fall in value appeared in Yahoo Finance and Fintech Zoom.

In last month’s Press Room we welcomed Emmanuel Ide to the leadership team, this key new hire appeared in Mondo VisioneFintech Insight and Fintech Inshorts over the last couple of weeks.

Soapbox: It’s payback time

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US President Joe Biden has given away trillions of dollars to American citizens, is preparing to give trillions more – and then to claw back some of that ‘free’ money.

A President who comes from Delaware, the state which is a kind of US onshore tax haven – companies that are incorporated in Delaware can pay a corporate tax rate of 0% – risks looking like a hypocrite if he clobbers people too much.

The US Congress listened on Wednesday evening this week as the President outlined his ideas as to how to fund his American Families Plan. This plan is the third big economic package since he took office, following his $1.9 trillion fiscal stimulus plan in March and a proposed $2 trillion infrastructure bill, still fighting its way through Congress.

This third plan, called the American Families Plan (who would be so churlish as to oppose a plan for families?) proposes more generous child support until 2025, extra funds for universal pre-kindergarten schooling and community colleges, and other social welfare ideas; to pay for it the total capital gains tax for the richest Americans would go up to almost 44 %. The top rate of income tax would rise from 37% to almost 40%. Americans earning more than $1m a year would face the application of ordinary income tax rates to capital gains and dividend payments.

These ‘reforms’ would also hit private equity and hedge fund managers – easy targets one might think – by effectively eliminating the preferential tax treatment of their profits, or ‘carried interest’. At the moment, carried interest is taxed at the lower capital gains rate rather than ordinary income, but Biden would equalise their tax treatment. The president is also considering taxing unrealised capital gains passed on to heirs at death. Taxes on capital gains and dividends are currently 20%; under Biden’s plans they would be treated as ordinary income, at a 39.6% rate.

The mere whisper of some of this on 22 April invoked an immediate response. The S&P 500 index fell 1%. Next day, Bitcoin fell below $50,000, leaving it almost $14,000 lower in value since it hit a record high the previous week. People were nervous that capital gains tax rises would hit their pockets, so they got out of some assets while the going was good. The gold price also dropped, from $1,793 per ounce at midday on 23 April to $1,774 by 3pm that day. US corporations are well-accustomed to finding tax loopholes – 60 years ago corporations paid around a third of federal tax revenues but today its just 10%. No wonder the US Treasury Secretary is keen to gain support for a global minimum corporate tax rate. Without that, much of the intended corporate tax take will still elude the Treasury.

The ‘wannabe’ FDR

In May 2020, New York magazine ran a feature on Biden under the title “Biden is planning an FDR-size presidency” – the FDR being Franklin Delano Roosevelt, the former Democrat President who in the 1930s faced the Great Depression and started many state-funded programmes to get America working again. FDR is either a US 20th century hero or a bogeyman, depending on whether you believe it’s the state’s duty to rescue a society or that such a rescue should be left to the free market.

Biden sees himself following in the footsteps of FDR; he told CNN in April 2020 that the challenge being faced by a Covid-wracked US economic collapse “may not dwarf but eclipse what FDR faced”. The financial sums are certainly much bigger – under Roosevelt’s New Deal US debts grew from $22 billion in 1933 to $33 billion by 1936. In those days, the word ‘trillion’ was hardly ever used. The devaluation of the US dollar can be felt in the ease with which we have moved from talking about ‘billions’ to ‘trillions’; a US Dollar today buys less than 5% of what it would in 1933.

Under the Biden American Families Plan, the tax rates on individual incomes below $400,000 would not increase. New and expanded tax benefits, including provisions for child care, first-time homebuyers, educational debt relief, retirement savings, health insurance, and long-term care insurance, could reduce taxes for average families. Those who will suffer will be corporations and those taxpayers with incomes of $400,000 or more. Individuals with incomes of more than $1 million would pay the same rate on investment income as on wages.

Will it work?

Raising taxes, especially on the ‘rich’, and spreading money and welfare on the ‘poor’ is a classically populist measure. Whether social engineering will make America ‘more equal’ (whatever that means) is an open question. FDR’s New Deal hired Americans to work on the improvement of their own country; as they worked for the government, so the government worked for them. Legacies of the New Deal can be seen all across the country, from bridges, tunnels, roads, schools and libraries to monuments, murals and sculptures. What the New Deal called for was a greater sense of rights and duties – the state funnelled money into work-creation schemes and the citizenry were called on the step up to the plate and reciprocate and work on behalf for the state’s projects. American society is very different today from 1933; will citizens today step up to the plate or just be happy to take the money?

Imposing more taxes on the ‘rich’ is no doubt politically popular but without addressing loopholes such as the Delaware get-out it will seem unbalanced. Biden has scarcely been in office more than 100 days; his intentions remain a work in progress, and will no doubt face stiff Congressional opposition. The dramatic loss of purchasing power of the Dollar since FDR’s time, however, shows no sign of halting.

Around the campfire: Timing the market

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When’s a good time to buy gold? It’s a question on many minds at the moment, with the price languishing about $258 an ounce (£274) from its peak of over $2000 per oz last August.

There’s no simple answer. The obvious response is “buy it when it’s cheap and use it when it’s expensive”. But that’s not useful; none of us has a crystal ball to peer into the future. Quite obviously no-one who may have bought their gold at last year’s peak wants to spend it now, and crystallise those ‘losses’.

Maybe ‘experts’ know something you or I don’t? According to the latest Reuters poll of 42 gold analysts and traders, the consensus is for a median (i.e. mid-point) gold price of $1,784 an ounce for 2021 and $1,743 for 2022. But just three months ago the same analysts were forecasting $1,925 and $1,908 an ounce for 2021 and 2022 respectively. What has changed so fundamentally in the past three months? “Most of the drivers (of the rally) are fading”, said one of those polled.

Really? Analysts are like sheep – they don’t like deviating from the herd. They also like to hedge their bets. So Reuters also reported that “interest in gold could be rekindled by events such as a weakening of the US dollar, an inflation surge, falling stock markets or a wave of coronavirus infections big enough to derail economic growth”.

These analysts don’t seem to be taking much notice of the inflation that’s already here, in everything from the price of beach huts in Essex, England (being snapped up at an 80% higher price than this time last year, according to one renter) to basic foodstuffs. The international price of soybeans – China is the world’s biggest soybean buyer, mostly for animal feed; it bought 100 million tonnes of soybeans in 2020 – has gone up by more than 70% since this time last year. Other basic commodities have also increased in cost astronomically.

If you believe, as I do, that the supply of fiat currency – paper money – in the financial system correlates to inflation, then we could be in for a strong inflationary shock later this year. Money supply – M2 in the jargon – is growing at around 27%, the fastest rate ever. The latest US consumer price index (CPI) data from the US showed prices rising by an annualised 2.6% in March – the highest since August 2018. But house prices are not captured by the CPI – and they rose by 17% in March; almost half of homes are getting sold within a week of listing. Officially everything is under control; unofficially I have my doubts. Official inflation figures do not reflect what’s really happening.

Does this give you a clue as to when it is a good time to buy gold? Trust the ‘experts'(who can evidently turn on a dime) or trust your own experience? However you play it, gold remains an inflationary defence par excellence.

Getting the timing right is virtually impossible – it’s probably wiser to follow the trend. Let’s suppose that you bought gold months before that July/August 2020 peak. Had you bought gold on 9 March 2020 for example – when a major dip happened – then you would now be sitting on a ‘gain’ of $281 an ounce. If you had bought gold when Glint was still an infant, say towards the end of November 2016, your ‘gain’ would by now have been more than $1,600.

For me, and all of us at Glint, gold is money, and it should and can, be used as money – it’s your gold and it can be spent or saved as you wish. As the financial system in the US and elsewhere is flooded with paper money and cryptocurrencies remain incredibly volatile, for me any time is a good time to buy gold.

Until next week,

Jason Cozens, CEO and Founder