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Alasdair Macleod

Alasdair Macleod

Alistair MacLeod, OC FRSC (July 20, 1936 – April 20, 2014) was a Canadian novelist, short story writer and academic. His powerful and moving stories vividly evoke the beauty of Cape Breton Island's rugged landscape and the resilient character of many of its inhabitants, the descendants of Scottish immigrants, who are haunted by ancestral memories and who struggle to reconcile the past and the present. MacLeod has been praised for his verbal precision, his lyric intensity and his use of simple, direct language that seems rooted in an oral tradition.

Articles by Alasdair Macleod

The funding challenges ahead

17 days ago

Goldmoney Insights – October 7, 2021
This article looks at the Fed’s funding challenges in the US’s new fiscal year, which commenced on 1 October.
There are three categories of buyer for US Federal debt: the financial and non-financial private sector, foreigners, and the Fed. The banks in the financial sector have limited capacity to expand bank credit, and American consumers are being encouraged to spend, not save. Except for a few governments, foreigners are already reducing their proportion of outstanding federal debt. That leaves the Fed. But the Fed recently committed to taper quantitative easing, and it cannot be seen to directly monetise government debt.
That is one aspect of the problem. Another is the impending rise in interest rates, related to non-transient, runaway price

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Inflation is a monetary curse

September 2, 2021

Goldmoney Insights
Remarkably, in a speech on monetary policy given at the Jackson Hole conference last Friday, Jay Powell never mentioned money, money supply, M1 or M2. With money supply expanding at a record pace to fund both QE and intractable budget deficits the omission is extraordinary.
The FOMC (the rate setting committee) appears to no longer take the consequences of monetary expansion into account. But the fact is that rising consumer prices caused by monetary expansion have driven real rates sharply negative and are leading to pressure for higher interest rates.
This article looks at the consequences of policies which combine the maintenance of a wealth effect by juicing markets with QE, and funding enormous government deficits, which are now beyond control. A flight out of

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The extinction of gold derivatives

August 5, 2021

Goldmoney Insights
This month is the fiftieth anniversary of the Nixon shock, when the Bretton Woods agreement was suspended. And the expansion of commercial banking into credit for purely financial activities became central to the promotion of the dollar as the international replacement for gold.
With the introduction of Basel 3, commercial banking enters a new era of diminishing involvement in derivatives. The nominal value of all derivatives at the end of last year amounted to seven times world GDP. While we can obsess about the effects on precious metals markets, they are just a very small part of the big Basel 3 picture.
However, gold remains central to global money and credit and the impact on gold markets should concern us all. In this article I quantify gold forwards and futures

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Western socialism and Eastern capitalism

July 31, 2021

Goldmoney Insights – July 30, 2021
There has been a significant shift in geopolitics in recent months, with the US consciously deciding to withdraw from Asian conflicts, notably in Afghanistan. But the diplomatic war against Iran also appears to have been downgraded and the US presence in Iraq is to be wound down. Furthermore, President Biden has downplayed his objections to the Nord Stream 2 pipeline between Russia and Germany.
In this, the greatest of Great Games, America has seen the strategic advantage move to the China—Russia partnership, which probably explains why the US is backing off from Asia. Meanwhile, China’s production-based economy is strong while that of the US remains weak, a weakness only disguised by monetary inflation.
China will accelerate her policy of encouraging

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Alasdair Macleod: 2020—2022 versus 1929—1932

July 23, 2021

Current levels of equity markets are not only divorced from their underlying economic and business realities but are repeating the madness of crowds that led to the Wall Street crash of 1929—1932. The obvious difference is in the money: gold-backed dollars then compared with unbacked fiat today.
We can now begin to see how markets and monetary events are likely to develop in the coming months and this article provides a rough sketch of them. Obviously, the financial asset bubble will be burst by rising interest rates, the consequence of rising prices for consumer essentials. Fiat currencies will then embark on a path towards worthlessness because the monetary authorities around the world will redouble their efforts to prevent interest rates rising, bond yields rising with them, and equity

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Swaps can’t close their bears in gold

July 23, 2021

Market Update. July 223, 2021
As can be seen in our headline chart, the gold price has gently climbed for a month now. Silver held its level until this week, when it sold off sharply and is yet to recover its poise. This morning, gold was at $1802, down $9 from last Friday’s close, and silver was trading at $25.20, down 40 cents on the same timescale.
Silver dipped as low as $24.75on Wednesday, the lowest since mid-April. The physical shortages have eased, with SLV’s inventory declining by 2.7 million ounces since the end of June. There is little doubt that the RobinHood ramp of a few months ago has a sting in its tail, having created stale bulls who are now selling.
Silver is of little monetary interest to central banks and sovereign wealth funds, and that is likely to explain why the

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Banking Faces Seismic Changes

July 2, 2021

The role of commercial banks in the global economy is changing, with lending to governments and their agencies now more important than lending to goods and services industries. It is a trend which is due to continue.
The new Basel 3 regulations seem set to encourage this trend, despite retail depositors being accorded a stable funding status. Central bank digital currencies are anticipated to augment and perhaps replace non-financial business credit over the next five to ten years.
But the increasing financialisation of commercial banking brings the risk of tying its future firmly to a financial bubble. And with price inflation on the increase, it is only a matter of very little time before that bubble bursts.
This article looks at some of the

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Banking faces seismic changes

July 1, 2021

Goldmoney Insights 
The role of commercial banks in the global economy is changing, with lending to governments and their agencies now more important than lending to goods and services industries. It is a trend which is due to continue.
The new Basel 3 regulations seem set to encourage this trend, despite retail depositors being accorded a stable funding status. Central bank digital currencies are anticipated to augment and perhaps replace non-financial business credit over the next five to ten years.
But the increasing financialisation of commercial banking brings the risk of tying its future firmly to a financial bubble. And with price inflation on the increase, it is only a matter of very little time before that bubble bursts.
This article looks at some of the implications for

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Inflation, Asset and Consumer Prices

June 25, 2021

“The Fed finds itself between a rock and a hard place: either it keeps inflating or the whole confidence-based valuation of financial assets collapses. Either it raises interest rates or the dollar collapses.”
There has been occasional speculation about what happens to asset values in a hyperinflationary collapse. The basis of the question has recently become suddenly relevant, because consumption in America and Britain has been stimulated with unprecedented monetary inflation aimed at consumers, and been met with limited supply, leading to strongly rising prices across the board.
In short, unless urgent action is taken, the possibility of a hyperinflationary outcome has become a possibility. The only alternative is to stop monetary inflation and

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Too Much Liquidity

June 19, 2021

Yesterday, the FOMC released its June statement which only served to remind us that its members are powerless in the face of inflationary conditions. They refuse to accept the price consequences of monetary inflation, still clinging on to an increasingly untenable hope that price rises are “transitory”.
The fact of the matter is that the world is now awash with excess money, the two greatest inflationists being the Fed and the Bank of England. In the US, the Fed’s $120bn monthly QE continues to goose financial asset values, while the US Government has spent a further trillion into circulation from its general account at the Fed. This tidal wave of money threatened money market funds totalling over $4 trillion with negative rates,

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The Geopolitics of Gold

June 4, 2021

A number of events are coming together which are set to push gold prices higher. Besides a combination of continuing inflationary policies and massive future budget deficits undermining the dollar, by closing down derivative market activities new Basel 3 regulations appear set to deflect some demand into physical metals. Furthermore, liquidity in gold markets will contract, potentially making prices more volatile
This article looks at how these developments will affect the undeclared but very real financial and propaganda war being waged by America against China.
China is moving on, enlarging its own middle class which will benefit from a stronger yuan, much as the German and Japanese economies did between 1970—2000. Having

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The end of paper gold and silver markets

May 25, 2021

Goldmoney Insights – May 20, 2021
This article looks at the likely consequences of the Bank for International Settlements’ introduction of the net stable funding requirement (NSFR) for bank balance sheets, insofar as they apply to their positions in gold, silver and other commodity markets.
If they are introduced as proposed, banks will face significant financing penalties for taking trading positions in derivatives. The problem is particularly important for the London gold market, as described in last week’s article on this subject. Therefore they are likely to withdraw from providing derivative liquidity and associated services.
This article delves into the consequences of the NSFR leading to the end of the London forward markets in gold and silver. Replacement demand for physical metal

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The end of the LBMA is nigh

May 14, 2021

Goldmoney Staff
asel 3 is on course to regulate the LBMA out of existence. And with it will go all the associated arbitrage business and position-taking on Comex, because most bullion bank trading desks will cease to exist. The only supply to buy-side speculators of gold and silver contracts will be producer hedging.
In recent months there has been some limited commentary concerning the introduction of Basel 3 regulations and the implications for precious metals trading. These new regulations are scheduled to be introduced for European banks at the end of June — only seven weeks’ time — and in the UK from 1 January next, affecting all LBMA member banks.
This article explains the new regulations and concludes that the recent joint LBMA/WGC consultation paper addressed to the British

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Why interest rate management fails

April 27, 2021

Goldmoney Staff    April 22, 2021                    By Alasdair Macleod
This article explains why attempting to achieve economic outcomes by managing interest rates fails. The basis of monetary interventionist theories ignores the discoveries of earlier free-market thinkers, particularly Say, Turgot and Böhm-Bawerk.
It also ignores Gibson’s paradox, which demolishes the theory that managing interest rates controls price inflation. And incredulously, the whole basis of banking regulation assumes that commercial banks are just intermediaries between depositors and borrowers. That model of banking fails to address the simple fact that banks create credit out of thin air and that deposits are the property of the banks, and not their customers.
The process of credit creation is described

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Say’s law and the destruction of savings

April 1, 2021

Goldmoney Staff  .  April 1, 2021  By Alasdair Macleod

This article explains the fundamental mistake behind Keynes’s General Theory, the vade mecum for all macro and mathematical economists today. It is no exaggeration to say that his casual rejection of Jean-Baptiste Say’s economic theories in his off-hand interpretation of them, that demand creates its own supply, is at the root of thew global economic and monetary crisis today.
There never could be a simple aphorism that captures the writings of Say, whose Treatise ran to six editions in his lifetime, continually expanded as his carefully reasoned analysis evolved.
There is no doubt that Keynes’s denial of the simply argued and irrefutable theories of Jean-Baptiste Say is directly responsible for today’s economic and monetary

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Biden’s last throw of geopolitical dice

March 25, 2021

Goldmoney Staff . March 25, 2021
In a continuing cold war, America is already on the back foot. We have yet to see how long it will be before the Biden administration realises its few victories will be unaffordably Pyrrhic, and by merely not responding to American provocation the Chinese/Russian partnership will emerge as the victors.
Halford Mackinder’s century-old vision of a Eurasian superstate, based between the Volga and the Yangtse, is becoming reality. Commentators usually fail to understand why; it is not due to military superiority, but down to simple economics. While the US economy suffers a post-lockdown inflationary outcome and an existential crisis for the dollar, China’s economy will boom on the back of increasing domestic consumption, which is an official government

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Inflation watch: Beware the ides of March

March 11, 2021

Goldmoney Staff . By Alasdair Macleod
President Biden has now had his $1.9 trillion stimulus package passed into law, and it will not be the last in the current fiscal year. Covid is not over and is sure to resurge with new variants next winter.
But even assuming that is not the case, we still have to contend with the aftermath of the pre-covid conditions, whereby banks had run out of balance sheet capacity combined with trade tariffs predominantly aimed at China. These conditions were a doppelganger for late-1929, and between 8 February and 20 March the S&P500 index faithfully tracked a similar course to that of October 1929.
As far as possible, this article quantifies inflationary financing of government spending from March to September last year, and already sees evidence on the CBO’s

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Money and Statistical Delusions

March 5, 2021

I can prove anything with statistics, except the truth
— Lord Canning, c. 1819
Does Canning’s aphorism still hold true, given that data collection and statistical analysis have progressed beyond all recognition in the last two hundred years? This article tests that proposition.
It is still true, because of the interests for which statistics are deployed. We know, or should know, that CPI indexation of prices fails to reflect the true rate of decline in the purchasing power of fiat currencies. That is at least a simple case of governments saving money on indexation. But being economical with the statistical truth is a far wider practice encompassing input suppression, misleading deployment, and their use to support beliefs and

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Monetary Inflation: the Next Step

February 26, 2021

Earlier this month the US Treasury released its plan to flood the financial system with cash by reducing its balance on its general account at the Fed by $1.229 trillion by not renewing an equivalent amount of T-Bills.
Separately, the Fed will continue with its QE at the rate of $120bn every month, which combined with the Treasury’s plans means an inflation of the money supply totalling $1.829 trillion [(120×5 months)+929+300] is in progress from the beginning of this month until end-June. This does not include the planned stimulus of $1.9 trillion.
The banks do not have the balance sheet capacity to take this expansion on board, and if they are forced to turn new depositors away it will almost certainly be by charging for

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Monetary inflation: the next step

February 25, 2021

Goldmoney Staff February 25, 2021
Earlier this month the US Treasury released its plan to flood the financial system with cash by reducing its balance on its general account at the Fed by $1.229 trillion by not renewing an equivalent amount of T-Bills.
Separately, the Fed will continue with its QE at the rate of $120bn every month, which combined with the Treasury’s plans means an inflation of the money supply totalling $1.829 trillion [(120×5 months)+929+300] is in progress from the beginning of this month until end-June. This does not include the planned stimulus of $1.9 trillion.
The banks do not have the balance sheet capacity to take this expansion on board, and if they are forced to turn new depositors away it will almost certainly be by charging for deposits (imposing negative

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The Future of Money Is Gold

February 19, 2021

This article explains why the successor money to failing fiat is gold, not cryptocurrencies. Cryptos can only act as stores of value so long as fiat exists. I describe how a world transacting with monetary gold and properly constituted gold substitutes works. It explains how and why unbacked bank credit expansion, which in natural Roman law was ruled to be fraudulent 1,800 years ago, can and should be eliminated in a post-fiat world, thereby ending destructive credit cycles.
Gold exchange standards, which are comprised of gold-backed money administered by the state, worked extremely well when properly implemented, and it is the siren songs of inflationism that are at the root of the current crisis. If the transition from

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Crazy Days for Money

February 13, 2021

This article anticipates the end of the fiat currency regime and argues why its replacement can only be gold and silver, most likely in the form of fiat money turned into gold substitutes.
It explains why the current fashion for cryptocurrencies, led by bitcoin, are unsuited as future mediums of exchange, and why unsuppressed bitcoin has responded more immediately to the current situation than gold. Furthermore, the US authorities are likely to suppress the bitcoin movement because it is a threat to the dollar and monetary policy.
This article explains why growth in GDP represents growth in the quantity of money and is not representative of activity in the underlying economy. The authorities’ monetary response to the current

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The Rapidly Failing EU

February 6, 2021

It is not widely realised that the EU concept is on its last legs. The bureaucratic inefficiencies and bad leadership were fully exposed last week over the inability of the EU to distribute vaccines and the attempts to blame everyone else. But a larger problem is hidden in the euro structure, comprised of banking and TARGET2 settlement systems.
This article discusses the precarious financial position of the commercial banks and the gaming of the TARGET2 system by national regulators to hide bad debts. The bad debt situation is now set to deteriorate at a faster pace thanks to the economic consequences of coronavirus lockdowns and is not helped by lack of vaccines, which defers the return to economic normality.
It is no

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The destructive force and failure of QE

January 18, 2021

This article concludes that quantitative easing as a means of stimulating economies and financing government deficits will fail. The underlying assumption is that the transmission of additional money to non-banks in order to inflate financial assets, and to banks to cover government finances, will become too great in 2021 for it to succeed without undermining fiat currencies and financial markets. Admittedly, this opinion stands in stark contrast to the common Keynesian view, that once covid is over economies will start to grow again.
To help readers to understand why QE will fail, this article describes how its objectives have changed from stimulating the economy by raising asset prices, to financing rapidly increasing government budget deficits. It walks the reader through the

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The Destructive Force and Failure of QE

January 16, 2021

This article concludes that quantitative easing as a means of stimulating economies and financing government deficits will fail. The underlying assumption is that the transmission of additional money to non-banks in order to inflate financial assets, and to banks to cover government finances, will become too great in 2021 for it to succeed without undermining fiat currencies and financial markets. Admittedly, this opinion stands in stark contrast to the common Keynesian view, that once covid is over economies will start to grow again.
To help readers to understand why QE will fail, this article describes how its objectives have changed from stimulating the economy by raising asset prices, to financing rapidly increasing

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Economic and monetary outlook for 2021

January 3, 2021

Goldmoney                      December 30,2020          By Alasdair Macleod
The most important event in the new year is likely to be the Fed losing control of its iron grip on markets. The dollar’s declining trend is already well established against other currencies and commodities, leading to this outcome.
Events in 2021 will be the consequence of a developing hyperinflation of the dollar. Foreign holders of dollars and dollar assets — currently totalling $27.7 trillion — are sure to increase the pace of reducing their exposure. This is a primal threat to the Fed’s policy of using QE to continually inflate assets in the name of promoting a wealth effect and continuing to finance a rapidly increasing federal government deficit by supressing interest rates.
Bubbles will then pop, leaving

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Alasdair Macleod’s Inflation Roadmap

December 14, 2020

It is beginning to be obvious that global economic woes extend beyond covid lockdowns and that monetary inflation for the dollar, as the common foundation for other fiat currencies whose issuers face similar problems, will continue to accelerate.
Fiat currencies have only survived this long due to increased financialisation of the dollar and the US economy. Since the 1980s Wall Street has gradually dominated the US economy at the expense of Main Street. It has done so through monetary inflation, creating the conditions for the ultimate monetary collapse.
This article describes how the dollar’s collapse is likely to progress. There are two distinct aspects. The first is foreign selling, which is already becoming apparent in the weakening trade weighted index. The second is the realisation

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Global Inflation Watch

November 28, 2020

This article posits that fiat currencies are on the path to hyperinflation and looks at the evidence in the prices of financial assets and commodities. So far, gold has notably underperformed, which indicates that the early signals of hyperinflation are confined to the cryptocurrencies, whose participants broadly understand fiat debasement, to equities reflecting the desire not to maintain cash and deposit balances, and in international trade, where commodity prices of all stripes have risen in price.
Given that the early warnings of hyperinflation of money supply are here, the article then looks at the qualities required of a sound money to replace fiat currencies.
Introduction
Figure 1 shows how prices have moved from the

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The Monetary Logic for Gold and Silver

November 13, 2020

A considered reflection of current events leads to only one conclusion, and that is accelerating inflation of the dollar’s money supply is firmly on the path to destroying the dollar’s purchasing power — completely.
This article looks at the theoretical and empirical evidence from previous fiat money collapses in order to impart the knowledge necessary for individuals to seek early protection from an annihilation of fiat currencies. It assesses the likely speed of the collapse of fiat money and debates the future of money in a post-fiat world, in which the likely successors are metallic money — gold and silver— and some would say cryptocurrencies.
Early action to lessen the impact of a failure of the fiat regime requires an

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The emerging evidence of hyperinflation

October 1, 2020

Goldmoney Insights by Alasdair Macleod
Note: all references to inflation are of the quantity of money and not to the effect on prices unless otherwise indicated.
In last week’s article I showed why empirical evidence of fiat money collapses are relevant to monetary conditions today. In this article I explain why the purchasing power of the dollar is hostage to foreign sellers, and that if the Fed continues with current monetary policies the dollar will follow the same fate as John Law’s livre in 1720. As always in these situations, there is little public understanding of money and the realisation that monetary policy is designed to tax people for the benefit of their government will come as an unpleasant shock. The speed at which state money then collapses in its utility will be swift.

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