From Peter Reagan at Birch Gold Group
First it was the COVID economic panic that started in March of 2020.
Then it was Biden’s disastrous mishandling of the military withdrawal from Afghanistan in 2021.
Almost immediately following that disaster, the Biden administration went on a multi-trillion-dollar deficit spending spree that dramatically worsened inflation.
Not long after, Biden led NATO in financial sanctions against Russia, but that also blew up in his face (and left us footing the bill).
The Israel-Hamas conflict threatens to ratchet up global tensions even higher…
There’s a lot more to the global picture of course, but these successive disasters all affect the global economy. They have a price.
We’re already disaster-weary – I know I am – and it’s tempting to tune out and just hope for the best.
We can’t. Because, even if you ignore the crisis, you’ll end up paying the price. Sooner than you think.
Which exactly why America’s corporate leaders are collectively freaking out…
CEOs sounding the economic crisis alarm
Frederick Kempe, a senior business consultant, issued a stern warning recently:
Every CEO, all the banks I am talking to, are factoring in geopolitics in their thinking in a way they didn’t five years ago.
JPMorgan CEO Jamie Dimon issued a warning of his own, stating: “This may be the most dangerous time the world has seen in decades.”
What’s got them alarmed? The same things I listed above – in the context of a rapidly-deteriorating geopolitical climate.
But perhaps the biggest warning came from Ray Dalio…
While Israel, Hamas, Ukraine, and Russia are in hot wars, thankfully the major powers (the U.S. and China) are not, though they remain at the brink of one.
it appears to me that the odds of transitioning from the contained conflicts to a more uncontained hot world war that includes the major powers have risen from about 35% to about 50% over the last two years…
Fortunately, the progression toward a world war between the biggest powers (the U.S. and China) has not yet crossed the irreversible line from being containable (which it is now) to becoming a brutal war between the biggest powers and their allies. If these major powers do have direct fighting with each other, in which one side kills a significant number of people on the other side, we will see the transition from contained pre-hot-war conflicts to a brutal World War III.
Well, if World War III were to break out, there’s really not much you or I could do about it. So let’s hope for the best on that front.
The more important question is: What do all of these CEO warnings following on the heels of so many recent global disasters potentially mean for all of us?
History doesn’t quite repeat itself
Historically, when major geopolitical disasters have happened, the economic consequences have been insanely bad.
For example, an Investopedia article described how the impacts of World War One actually “primed the pump” for World War Two.
This set the stage for both the American and German economies to suffer dramatically. During the decades between 1918 and the late 1930s, both spiraled into catastrophe:
Following the death and destruction from World War I, leaders of some of the world’s major powers held a conference in Paris to sign the Treaty of Versailles. Unfortunately, the combination of a poorly designed peace treaty and a global economic crisis in the modern world culminated in conditions ripe for World War II.
[In Germany] the hyperinflation wiped out much of the life savings of the middle class. The political consequences were devastating, with many distrustful of the Weimar government, founded on liberal-democratic principles.
[In the U.S.] The onset of the Great Depression undermined any attempts at creating a more open, cooperative, and peaceful post-war world. The American stock market crash of 1929 caused a cessation of loans to Germany under the Dawes Plans and a complete recall of previous loans.
The tightening of money and credit eventually led to the failure of Austria’s largest bank in 1931, the Creditanstalt, launching a wave of bank failures throughout Central Europe. This included the complete disintegration of Germany’s banking system.
War is bad – everyone knows that. What’s less appreciated is just how much economic crisis can lead to political crisis – which, all too often, leads to war.
For greater context, PBS also offered a little more of the economic history that surrounded America’s involvement in World War II:
The United States was still recovering from the impact of the Great Depression and the unemployment rate was hovering around 25%. Our involvement in the war soon changed that rate. American factories were retooled to produce goods to support the war effort and almost overnight the unemployment rate dropped to around 10%.
Fast forward to the present, and the United States has already suffered a “mini-wave” of bank failures earlier this year, and could suffer another one soon. These bank failures occurred before any of the CEOs’ warnings – in other words, they were just the beginning.
Globally, the situation is pretty bad. We can see from history that the conflicts currently underway have a tendency to spiral out of control. But not like they used to…
Keep in mind that things could get worse even faster today than in decades past, because the economy is more global, capital markets are more interconnected and information spreads much faster than ever before.
When something goes wrong, we all find out about it at the same time. (Which means it’s too late to do anything about it.)
That means one thing is certain in the near-term, no matter how all of this geopolitical drama plays out…
Time to mitigate risk and build resilience
Kempe, the consultant we met at the beginning of the article, advises CEOs how to navigate these troubling times. Here’s what he advises:
…rely less on China in their supply chains, mitigate against risk, and build up resilience, “because you may not be able to redirect the next risk. You have to understand risk first and be humble about it.”
Two of those things, “mitigate against risk” and “build up resilience,” are lessons we can heed.
Just look at global central banks. They’re already getting their ducks in a row, which has led to their very recent historic hoarding of gold.
The World Gold Council summarized the central bank gold-buying frenzy:
Central bank demand for gold saw no let-up in Q3, building on the record-breaking first half of the year… On a year-to-date basis, central banks have bought an astonishing net 800t, 14% higher than the same period last year.
Taking stock and looking ahead, it now seems all but certain that central banks are on course for another colossal year of buying. The strength of buying has, to some degree, exceeded our expectations. While we were confident that central banks would remain net purchasers in 2022, we thought it unlikely that it would match last year’s record buying volume. Should buying continue to be strong in Q4, the full year total could get closer than we anticipated.
Like CEOs, central bankers know exactly how interconnected and fragile the global economy can be. Gold is, after all, the traditional way to both “mitigate risk” and “build resilience” at the same time. Gold is a contrarian asset (meaning its price tends to rise when economically-sensitive assets decline or plunge).
So maybe now it’s time you seriously consider following their lead?
Diversifying your retirement savings with assets like gold and silver could help you retain buying power if the world plunges into a period of prolonged chaos. Whether it’s World War III or Great Depression 2.0, is there any asset you’d rather own during such turbulent times?
Physical precious metals like gold and silver historically acted as reliable safe havens throughout both World War-era economic catastrophes. Gold and silver have also outperformed inflation, and are more liquid than you might think (which can be helpful if things go south in the near-term).
Don’t wait until it’s too late, take back control of your financial future while there is still time. You can get the information you need to consider precious metals in our free kit.