Tue | Aug 4, 2020

Letter of the Day | The future holds confrontation, conflict and competition

Published:Wednesday | July 29, 2020 | 12:15 AM


It is an erratic epoch. The COVID-19 pandemic along with the global economic emergency is emblematic of a perilous time. Global debt to GDP in the first quarter of 2020 is 331 per cent of GDP (258 T). Canada, France and Norway saw the biggest increase. Debt in mature markets reached 392 per cent of GDP from 380 in 2019, according to the Institute of International Finance.

Gold on July 27, 2020 was at US$1,949 per ounce. On January 2, it was at US$1,527.10, which is a 27.6 per cent increase from the beginning of the year. For the 21st century, it increased from US$279. 29, which is a 597.8 per cent increase. Every fiat currency has lost value when compared to gold. The world reserve currency, the US dollar, has lost 98 per cent of its value from 1971 when it left the gold standard. On March 31, 2019, the Bank of International Settlement (the central bank for all central banks) reclassified gold as a tier 1 asset equal to cash with zero risk. This is a major move to reset the global monetary system like what happened in Bretton Wood agreement in 1944.

Silver is also on an upward trajectory. The large increase in gold price is indicative of hard economic times ahead. Look out for the US dollar becoming weaker and its future as the world reserve currency will be seriously questioned.

The struggle between the US and China will continue indefinitely because China will never open its economy and let US corporations dominate. We must adjust strategically to this global reality. US interest is usually guided by business and China socialist ideology is nationalistic.

The future holds confrontation, conflict and competition.