I learnt a lot recently talking to Alasdair Macleod, about a perspective that centers around a systemic failure of the system of credit.

What’s credit? Well, if Gold is money and everything else is credit, then effectively all representations of value we can trade outside of Gold is what we’re talking about.

Turns out, quit a lot of what we deem ‘wealth’, is in fact a form or derivative of credit. You can tell is something is credit if it’s price changes in response to interest rates.

This is where the conversation takes a serious twist – credit has counterparty risk. This means that if one domino falls, it can set in motion a cascade of losses. Given the current financial system is built on expanding credit, over time it’s more sensitive to smaller interest rate movements.

According to Alasdair, we are in the biggest dollar-based credit bubble in history. He believes interest rates are likely to rise significantly in 2025 due to increased risk perception. A credit crisis could lead to mass defaults cascading through the system. And this is where we need to consider what central banks are doing right now

Central banks are accumulating gold due to increased risk in paper currencies. China and Russia are preparing for a potential return to a gold standard, but the game theory gets complicated when you consider a Trump presidency and the threat of tariffs. So, China likely has far more gold than they declare, and the US may have in fact depleted its gold reserves, something’s up when this much gold starts moving at this level. Add to this the appointment of Scott Bessent , a known gold advocate, to the Federal Reserve Board. Does this signal a shift in US monetary policy towards embracing gold in some way also? Gold’s historically played a role in financial system resets during wartime (Bretton Woods Agreement, for example). Scott Bessent’s experience working with George Soros, particularly during the infamous 1992 trade that “broke the Bank of England,” provides him with invaluable insights into currency markets and potential monetary resets. Alasdair doesn’t think the US will return to a gold-centric monetary system, though. To find out why, watch the discussion.

Some time during the Trump presidency, we’ll see the acceleration of the decline in the purchasing power of credit. That’s inflation, but not of the CPI kind, but more of the debasement kind. One of the side effects of trust politicians to run the economy, are explosions of expanding government debt, especially during times of war, recession, or demographic declines. As new dollars are borrowed into existence, the purchasing power of all existing dollars, declines. The consumer price index (CPI) is ‘under reads’ reality given it measures only some of the goods and services we consume.