16th February 2024  - Gary Mead

The big split starts

The big split starts

In the US, inflation has confounded expectations that it would swiftly tumble to below an annualized 3%, sticking at 3.1% in January. Housing costs rose by a shocking 6% compared to a year ago, restaurant prices were up 5.1% and car insurance jumped by 20.5% - core inflation, which excludes food and energy prices, was 3.9% in January, the same as in December. Last week the Organisation for Economic Cooperation and Development (OECD) in its interim outlook speculated that a rapid fall in US in inflation could presage a cut in US interest rates, but with some many components of the inflation 'basket' being so very far from the Federal Reserve's target of 2% inflation a year, any rate cut hopes are likely to be dashed, at least until the second half of 2024.

But at least the US economy has shunted aside the threat of recession, unlike Japan and the UK, where the economies shrank in the final quarter of 2023, following similarly negative growth the previous three months. Falling gross domestic product (GDP) in two successive quarters is the technical definition of a recession. With inflation now stubbornly stuck at 4%/year in the UK, the same as in December, we cannot hope for any rapid onset of cuts to British interest rates

Britain's governing Conservative Party must face a general election by 28 January 2025. Given that the Prime Minister, Rishi Sunak, has signally failed in one of five promises he made in January 2023 to the British electorate, that he would grow the economy, he cannot realistically hope to hang onto his job. The opposition Labour Party is now convinced it will emerge the election's winner - but it too has now abandoned a pledge to spend £28 billion a year on kick-starting a "green industrial revolution", blaming the Conservative government for "maxing out on the government credit card" and doing "terrible damage" to the British economy. Liam Byrne, a former Treasury Secretary in the last Labour government, left a notorious note for his successor in 2010 which said "I'm afraid there is no money". What goes around comes around.

More please

Costs to the US and the European Union have exploded since February 2022 and the "special military operation" against Ukraine launched by Russia's President Vladimir Putin. The US Congress has directed more than $75 billion in humanitarian, financial and military support for Ukraine; another $60 billion is currently stuck in political wrangles in Congress. In Gaza the financial cost to Israel of the conflict up to now is put at almost $60 billion. Reconstruction costs will see these sums rise astronomically. Who will pay for all this? Ultimately, we all will, all of us who pay our taxes. It may not be apparent right now but whether it's through higher taxes, cuts to public services, foregone state spending on public health or education, or further erosion of the purchasing power of our fiat currencies, all of us ultimately foot the bill. It's hardly surprising that voters and politicians on both sides of the Atlantic have started questioning the vast sums being spent on war; Ukraine is coming to resemble Oliver Twist - who pleaded for "more please".

Self-defense for all

Donald Trump, the probable Republican contender in next November's Presidential election, says "No". By doing so he is tapping into the deepest pool of the American psyche - a determination not to be drawn into the problems of others. He has outraged sentiment by suggesting he would encourage President Putin to attack those NATO countries who fail to contribute the 2% of their GDP they pledged. Clearly he knew this would ruffle feathers and didn't care about offending anyone.

If it is hard to trust the work of the Russian President it is no less challenging to trust the word of the man who may well become the next US President. Today, perhaps more than for many years, we must defend ourselves from the depredations by politicians - who after all are only interested in the next vote - of all that we have worked hard for, our money. That's why we have bought gold in a very safe and competitively priced way, through Glint. We believe in gold as money; we believe in gold's ability to preserve our purchasing power. Gold is a form of self-defense, one available to all thanks to Glint.

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.