History Repeating Itself


For anyone inside or outside of the U.S., it goes without saying that things are indeed heating up in the land of the free.

President Trump faces an unprecedented second impeachment just days before the Biden administration is scheduled to take the keys to the White House in a transition of power that has been anything but orderly, as the recent march on the U.S. Capital made graphically clear.

Those seeking financial guidance, however, don’t need political commentary from market professionals or arm-chair sociologists.

Nevertheless, there are universal economic as well as historical paradigms (as to debt, rates, inflation fiat currencies etc.) and forces at play today that are both relevant and predictive to market action.

As someone with an office in Switzerland, I will therefore do my best to stay “neutral” in the left vs. right morass and focus instead on indicators and trends upon which most of us can agree.

Politics — Cynicism Regardless of Party

Toward that end, most would agree that politicians of all stripes, generations and zip codes have had one thing in common throughout history: To get or stay elected.

Sadly, the call to alleged “public service” has more often than not been a call to private ego as politicos of every flavor chase what Nietzsche aptly described as a “Will to Power.”

There are, of course, wonderful exceptions (pick your heroes) to this cynical rule, but many of us would now contend that our leaders, left, right, or center, have rather large egos and very small economic IQ’s.

As the famous French moralist, Francois de La Rochefoucauld observed centuries ago: “The highest offices are rarely, if ever, filled by the highest minds.”

Bad Decisions, Bad Politics, Keg-Party Markets

Ever since Nixon welched on the U.S. dollar in 1971 and took away this global reserve currency’s gold backing, currencies around the world have behaved like teenagers at a keg party without a chaperone.

That is, policy makers were free to party on a national credit card, the debt of which they either extended or serviced with printed, fiat currencies.

Such subsequent partying from DC to Brussels, London to Tokyo easily explains how and why global debt went from $5T in 1971 to $280T today.

In short, take away a gold standard or chaperone, and let the debt party rage.

Debt, of course, can be fun — for a while.

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Source: Matthew Piepenburg | GoldSwitzerland

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