A messy world will get worse

You can be forgiven if you feel the world is messy at the moment. In the days before Christmas life often feels packed, but this year the stresses spread far wider than a hasty calculation of what to buy grandma.

Wars in Europe, Africa, Asia. A struggle to maintain peace in the Middle East. The challenge to control climate change.The swift onset of Artificial Intelligence and its threats and opportunities. The mass desire to relocate to a country that seems less hostile. The economic instability within and between rival countries. The demographic shifts that look like leaving huge burdens on younger people. Above all, perhaps, the rising costs of simply living.We all face vast problems that resist easy answers. And the intensity of the problems is driving an intensity of political division.

Within all this is another problem, one that gets less attention than climate change or wars perhaps, but which will have truly seismic repercussions - what is the future of money?

The Dollar's rise

Resisting the pressures of digital currencies is by now futile. Tens of thousands of cryptocurrencies have been invented, a testimony to the strength of the digital revolution. Opposing this would be a bit like standing against the steam revolution.

Yet none of these 'currencies' have achieved the status of money, a store of value that can also be used to purchase items simply. A vital characteristic of fiat money is that it has achieved social agreement - everyone agrees that X is money and therefore everyone accepts being paid in X. Governments issue their own forms of X and insist on their citizens using X as money, a fiat authorization, or decree. That has not yet happened with digital currencies, except for a few rare cases such as El Salvador's embrace of Bitcoin.

In today's world the US Dollar, a relatively juvenile fiat instrument, was acknowledged as the world's reserve currency at the end of World War 2, at the Bretton Woods conference.

During that war many countries relied on the US to provide weapons and other necessary goods, for which the US required them to pay in gold. Inevitably the US became the biggest gold holder. As countries ran low on gold, they opted to accumulate US Dollars, which were seen as a store of value.

Another war - that in Vietnam - saw the US flood the market with Dollars. That, and the remarkable deficit spending by US governments, created material wealth in the US but also led to concerns over economic stability. That encouraged President Nixon to de-link the Dollar from gold, and to introduce floating exchange rates.

History doesn't repeat itself

In 1945 it must have felt like the world was in a mess. Yet while the defeat of totalitarianism was then a unifying factor, today's mess has no opposing leadership.

President Franklin Roosevelt tried to keep the US neutral in the early days of World War 2. He only threw America into the conflict once it became clear that the country would be impacted by it. He declared that the US would become the 'arsenal of democracy'.

President Truman today has decided that European countries are "decaying" and that their leaders are "weak". Who knows if this view will change? Who can tell what might result from this latest example of isolationism?

History may not repeat itself; if the mess today stands comparison with that of 1945, there is no indication that the current US President will take on a leadership role. His policy is 'America First'. Europeans need to tend to their own gardens.

A further difference from the Roosevelt days is that, rather than nursing a fiat currency and stable economy ready to take on a leadership role, the Dollar is looking increasingly vulnerable to threatening forces beyond American control.

In that way history does repeat itself. Messes take time to develop. This one has its roots in the 2008 financial crash. As it has developed, gold has risen in price as people need the reassurance it grants. As the current messes deteriorate, gold will continue its re-emergence as the true money.

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

For US clients: Graphic representations of value are for illustrative purposes only. The Glint debt card is issued by Sutton Bank, member FDIC. The sale, purchase and storage of precious metals are offered by Glint and not Sutton Bank. Your investment in precious metals through Glint is

·        Not insured by the FDIC.

·        Not a deposit or other obligation of, or guaranteed by, Sutton Bank.

·        Subject to investment risks, including the possible risk of loss of the principal amount invested.

All investments involve risk, including possible loss of principal. The value of precious metals is affected by many economic factors, including but not limited to the current market price, demand, perceived scarcity, and quality of the precious metal. Precious metals can increase or decrease in value. Past performance is not a guarantee of future results. As such, investing in precious metals may not be suitable for everyone.