In response to the Great Recession a decade ago, the international community fired off the big guns to stave off the inevitable decay of the global economy that had been manipulated and distorted through the Keynesian doctrine. Despite the massive fiscal and monetary stimulus at the time, many countries failed to recover from the financial crisis – and those that survived the market meltdown are still paying for the spending and bailouts. After pulling the trigger on the Coronavirus-targeted bazookas, the world’s pockets are empty, potentially creating a scenario for a reset in the global monetary order. On the other side of the lockdown, who will stand tall and reign supreme? If history is any indicator, it will either be the country with a lifetime supply of printing press ink or the one with a vault full of gold.
A New Monetary Order
Jp Cortez, the policy director at the Sound Money Defense League, believes the global pandemic could usher in a new era of sound money in the future. However, before that happens, he thinks the immediate fallout will lean against a fundamentally stable currency structure.
“Countries have massively overleveraged their economies, leaving them with two options: print now and deal with inflation later, or collapse,” Mr. Cortez explained during an interview with Liberty Nation. “While the printing presses are already running at high speed, politicians and unelected bureaucrats will seize this opportunity to pass measures with massive price tags.”
“The inevitable inflationary consequences will show up down the road as economic demand starts to recover and money velocity picks up,” he continued. “When rising inflation begins destroying the real value of trillions of dollars in U.S. Treasurys held by central banks around the world, that could be a catalyst for a monetary reset.”
The fiat monetary experiment has failed. The Modern Monetary Theory (MMT) and helicopter money proposals are nothing more than aggressive interventionist policy tools emanating from the minds of the globalist progressive Dr. Frankensteins. They might be marketed as feel-good measures to help the common man instead of the fat cats on Wall Street, but they are toxic eyes of newt to make the economy further dependent on the Leviathan.
Following the end of the Second World War, the international monetary order established the Bretton Woods system. This framework made payments based on the U.S. dollar, which was still convertible into gold. Thirty years later, the world entirely abandoned the precious metal and commercial and financial relations were executed on faith in paper. In the aftermath of the Coronavirus, something new could be constructed.
Until the international community holds a teleconference and commits to a new standard, will there be a new crop of nations committing mutiny and steering the ship in a post-Coronavirus world? Or, will the U.S, China, and Europe continue to be the standard-bearers of the status quo?
Anatomy of a Winner – and Loser
Robert Wenzel, the publisher of Economic Policy Journal and author of The Fed Flunks, is skeptical that anybody will come out of this unscathed, pointing to the considerable global centralization push.
“I don't think anyone will come out better off. Central planning, which always makes things worse, is likely to increase across the globe,” Wenzel told Liberty Nation. “It is a race to the bottom. Everyone will be weak. It will be a fight amongst the desperate.”
Governments all over the world are spending trillions of dollars to contain the economic fallout from COVID-19. Central banks are being just as aggressive, injecting $23.4 trillion – and counting – into the financial system and extending bailouts and handouts to businesses and consumers. The United States is leading the charge, spending and printing about half that sum.
Most central banks have revealed that they are ready to intervene more than they are doing now. Federal Reserve Chair Jerome Powell told reporters after the April Federal Open Market Committee (FOMC) meeting that the Eccles Building is prepared to do whatever it takes to ensure the U.S. economy does not crumble due to the outbreak. He also encouraged lawmakers to adopt additional fiscal measures to facilitate a strong rebound in the second half.
Even countries that have seen some sort of advantages in the chaos are trying to limit their success. The Swiss National Bank (SNB), for instance, has been regularly intervening in the foreign exchange market to fight the franc’s appreciation. Investors have been pouring into the conventional safe-haven asset to shield themselves from the uncertainty in global financial markets, and the powers do not like it.
Could anybody be better positioned in the post-Coronavirus world? The nations with low debt levels and in possession of real assets might emerge the victors, according to Cortez, who said:
“Clearly, a lot of countries are in trouble. China's international reputation has taken a massive hit. The economies of oil-producing countries have been crushed. And the United States has taken on unprecedented and unsustainable new debt obligations to try to stave off another Great Depression.
The U.S. has the advantage of being home to giant technology and e-commerce companies that are finding ways of benefiting from global economic lockdowns. Once the crisis passes, however, shortages of commodities coupled with rising inflationary pressures could turn the tables. Countries with relatively low debt levels and real assets backing their economies may ultimately fare the best.”
As the globe’s attention is primarily focused on the virus, policymakers appear to have forgotten everything that had been taking place in the years before. America’s repo market madness, Europe’s anemic growth, sanctions, trade spats, skyrocketing debt, and bubblemania – these were just some of the problems that plagued economies everywhere. Since everyone is trying to resolve the Coronacrisis and mitigate the COVIDepression, yesterday’s issues have been abandoned on the side of the road like an unwanted pet.
With talks of implementing a Green New Deal, MMT, and a universal basic income, everyone is quick to forget that the U.S. still cannot even pay for the old New Deal, the current entitlements, and the $200 trillion in unfunded liabilities and expenditures.
It might require humbler monetary policy, sound money, and a seven-billion-year-old metal to save us.
As Good as Gold
In recent years, central banks have been going on a gold buying spree. Russia, India, and China are just some of the states to become metal fanatics following the 2008-2009 recession as they accumulated massive reserves. Central bank gold hoarding is at a 50-year high after these institutions collected nearly 700 tons in 2019.
This could be the one advantage that distressed markets have over their rivals, says Cortez.
“Countries that have spent the last several years stockpiling gold will certainly find themselves better positioned at the end of this than countries that didn't. China, India, and Russia, for example, have been very public about their gold purchases over the last several years,” he told LN.
Moscow owns more than 2,200 tons of gold, New Delhi possesses 625 tons, and Beijing controls just under 2,000 tons. At the same time, the ruble, the rupee, and the yuan are all under significant stress due to their troubled economies and staggering monetary expansions. While gold and silver might not be enough to ensure their survival, Robert Wenzel notes that they can be used to protect against collapsing currencies.
“I am not sure it will play a role in their survival, but given the near-global price inflation I expect, countries who have purchased gold will be in a much stronger global financial position,” the economics guru said. “Gold and silver are the best investments to own as a hedge against collapsing currencies.”
During the market mayhem in March, gold’s status as the chief safe-haven asset had come into question due to the vast selloff. This had more to do with investors’ liquidation and matching margin calls than the efficacy of the yellow metal. With a bit more stability on stock exchanges everywhere and fears over a spike in price inflation, the commodity is testing all-time highs, and it has been trading at record levels in other currencies.
Gospel of Keynes
Policymakers have fallen for the coquettish and Mephistophelean charms of John Maynard Keynes and his disciples. By unleashing a tsunami of paper money onto the world and transforming sovereign nations into dependents of the fiat system, they have sold their souls for affluence and influence. The antiquated ideas of fiscal responsibility and monetary sanity have been sacrificial lambs in the central banks’ crusade to appease the Keynesian gods. Centralization has bastardized the laws of free-market capitalism, transferring power over the economy to a select few. COVID-19 may either be a blessing in a disguise or a catalyst to something more odious. As John McAfee recently told LN’s Legal Affairs Editor Scott Cosenza, hold onto your peanut butter, raisins, and Glock 17s – it is going to be a bumpy night.
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Read more from Andrew Moran.
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