Will COVID-19 Lead to A Gold Standard?

The comments below are an edited and abridged synopsis of an article by Alasdair Macleod

Even before the coronavirus hit China, the credit cycle was tipping the world into recession. The coronavirus makes an existing situation worse, shutting down China and disrupting global supply chains to the point where large swathes of global production cease.

Will COVID-19 Lead to A Gold Standard? | BullionBuzz
Testing vials with Coronavirus label.

The crisis will be a wake-up call for investors who seem content to buy benchmark bonds issued by governments at excessive prices. A recession turned into a slump by the coronavirus will lead to an explosion of debt issuance for which there are no genuine buyers, so it can only be monetized.

The adjustment to reality will be catastrophic for governments and their currencies. This article explains why the collapse in overpriced financial assets and fiat currencies is likely to be rapid, perhaps giving people the prospect of a return to gold and silver as circulating money.

Up for discussion: changing values for government bonds; other central banks are in the same boat; sound money alternatives signal the fiat crisis; and bitcoin.

This article points to a more rapid collapse of financial asset values and currencies than generally thought by sound money theorists who have long anticipated this outcome. Doubts about the timing have been settled by the coronavirus, which has already imploded China’s economy, disrupting global supply chains and the provision of consumer goods.

To the extent that the coronavirus has had a hand in the upcoming destruction of fiat currencies and Keynesian mythology, it could be instrumental in bringing forward the reintroduction of the gold standard.

Western governments are not familiar with the arguments for gold, having spent half a century dismissing it. This favours the economies that have not discarded gold (Russia, China, other Asian nations). The collapse of western economic fallacies could lead to Asia’s economic superiority.

It will be a rough ride for the rest of us.

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