Many in retirement are travelling comfortably, with three key factors contributing to their happiness – good physical and mental health and enough money to enjoy life.
Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
Currency superpower status for Australia?
Australia, being a major global commodity producer, has the potential to become a ‘superpower’ in the new commodity currency order. This is especially true if we consider the current geopolitical events that are taking place: Australia’s strong position should benefit from the renewed focus on gold.
Jodi Stanton, CEO of Rush Gold says, “As a major global commodity producer, Australia is in a strong position to benefit from the renewed global focus on commodities, especially if we focus on balance-sheet repair instead of further expansion of our national debt, which has doubled over the last three years.
On an individual level, we can borrow a page from Russia’s financial playbook, even if we completely disagree with that country’s military action in Ukraine. In 2014 Russia faced similar sanctions and took decisive action as a result. “These currency sanctions are unprecedented because they have never been tried before on such a major scale. Even during World War II, the US and its allies allowed the Bank of International Settlements (BIS) to continue to process transactions from the banks in Nazi Germany,” says Stanton.
The Russian government paid down its overall debt and reduced debt-based currencies, especially the US dollar. But most importantly, it loaded-up on gold, which now represents 22 per cent of Russia’s overall holdings.
Why did they do this?
Faced with the unprecedented onslaught of the latest sanctions, the Russian rouble dropped precipitously. But within weeks it had rebounded and is now above the levels at the start of the war. We can see the effect of Russia’s return to sound finances in the following chart.
What is evident is that “bank currencies with connection to commodities have strengthened over the past year. For instance, the Chinese yuan increased by 11 per cent, Mexican peso by 9.7 per cent, the Brazilian real by 21 per cent and the South African rand by 11 per cent. That even these less-prominent currencies are rising shows that resource backing for currencies is an idea whose time has come,” says Stanton.
Bank debt is simply a money substitute. Its lack of direct ties to productive economics, through things like resource extraction and industrial production, means that eventually it disconnects from the real world of goods and services, Stanton says. Once it does, people begin to question its value; and since its value is based on belief, when the belief goes, so does the value.
“Gold is money that cannot simply be cancelled,” says Stanton. “It is born of hard labour and is revered around the world for its immutability, beauty, and independence.”
