Life Out of Balance

The key problem

A large part of today’s financial, political and social imbalances can be traced to our monetary system and the fact that we have been under a fiat money regime for over 50 years now. This year we have seen, that currencies like the Euro the Yen or the British Pound have suffered greatly towards the Dollar, while commodity-based currencies those of Brazil and Australia have fared much better. We can also see imbalance in bond markets, with the worst performance since 1865. Finally, the so called “balanced portfolio” has also experienced its worst year since 1928. Live out of balance…

The three pillars

The world we live in was based on cheap labour and goods from China, cheap gas from Russia powering Europe and immigration, which kept wages low. Most of these factors are now gone and inflation has returned to the west. Central banks missed their moment to start interest rate hikes and are now fighting a steep uphill battle. This battle involves the so-called reverse wealth effect, in order to try to bring down inflation. This is a dangerous game to play, since a black swan event could crash the market much more easily now. In the coming months, the focus will shift from inflation to the recession.

Miners and gold

While gold disappointed many in US-Dollar terms, in many other currencies it held up nicely. While sentiment remains low, the coming recession could force the FED and other central banks to make policy changes, which could quickly reinvigorate the gold market. Right now, miners have adapted to inflation and are making good profit. They have also been extremely oversold. With the favourable season of the year upon us, this creates many opportunities.

Here you find the Video: