CUR - A Financially Deglobalized Era
2024-03-27 08:30:00 ET
Summary
- Gold’s role as a universal is experiencing a resurgence relative to US Treasuries for global central bank reserve accumulations.
- There has never been a bull market in gold that is not accompanied by a notable re-rating of valuations among the miners.
- Given the distressed state of this industry and the likelihood of a continued historical breakout in gold prices, this might be one of the most asymmetric opportunities in today’s markets for near-term as well as long-term investment.
- There is a reason why gold recently spiked to record levels, and in our view, this move is just the beginning.
Since the early 1980s, the global economy has rejoiced in a long period of significant cooperation among nations in supporting each other’s government financing needs. However, given the growing escalation of geopolitical tensions and the unraveling of longstanding trade partnerships, we believe that the present circumstances are likely to signify the end of an era defined by financial globalization.
With few choices to maneuver amidst today’s macro imbalances, developed economies are experiencing an exponential proliferation of their debt problem, propelled by both higher global interest rates and a pressing need for ongoing fiscal spending at extreme levels. Those seeking historical parallels would find that the current surge in sovereign debt issuances is unparalleled. Even during the 1940s, a period characterized by high levels of government debt, there was a degree of stability with the US monetary system anchored to gold. Today’s environment presents a stark contrast. Despite inflationary pressures pervasive in the economy, we are witnessing what might be described as the most undisciplined monetary and fiscal environment in history.
Central banks are left with no recourse but to assume responsibility for these challenges, acting as primary liquidity providers to address their own sovereign debt and asset valuation imbalances. Consequently, gold’s role as a universal, neutral asset with millennia of history as money, is experiencing a resurgence relative to US Treasuries for global central bank reserve accumulations.
The Most Aggressive Infrastructure Spending of the Past Century
The reality is that excessive levels of debt often precipitate escalating geopolitical tensions and conflicts, and as disagreements among nations intensify, there arises a greater imperative for countries to bolster their self-reliance on domestic operations. These circumstances are poised to catalyze what could evolve into one of the most ambitious infrastructure initiatives in history, with the potential to be highly inflationary....
A Financially Deglobalized Era