Economics

Gold is in the middle of what looks like an unstoppable bull run. It has already punched through $4,000 an ounce. At the rate the price is rising, it may well go to $5,000 within a few weeks, and perhaps even $6,000 as the next year unfolds. There have been lots of different explanations for this, from the looming collapse of the dollar, to secret Chinese buying, to the conspiracy theories circulating on the wilder fringes of the internet, such a secret plot to re-establish the gold standard, or attempts to replace all the metal that is meant to be stored at Fort Knox, America’s official gold reserve, which apparently went missing decades ago. But the real explanation is very simple: it is the only way to hedge against soaring government debt.

“I will make sure the US is the crypto capital of the world,” Donald Trump vowed earlier this year. In July, he signed the Guiding and Establishing National Innovation for US Stablecoins (Genius) Act. The Act creates federal guardrails for dollar-pegged stablecoins and regulates who can issue and redeem them. Concerns from law enforcement are also addressed, by making sure anti-money laundering and consumer regulation applies. But what are stablecoins? They are digital tokens built to stay at a stable price, usually one dollar. They sit on the blockchain – the computer protocol that makes crypto work – but what’s underpinning their value are real-world assets, usually cash or government bonds.

The following is a transcript of a speech delivered yesterday by the Treasury Secretary Scott Bessent. In the final months of World War Two, Western leaders convened the greatest economic minds of their generation. Their task? To build a new financial system.  At a quiet resort high up in the mountains of New Hampshire, they laid the foundation for Pax Americana.  The architects of Bretton Woods recognized that a global economy required global coordination. To encourage that coordination, they created the IMF and the World Bank.   These twin institutions were born after a period of intense geopolitical and economic volatility.

The first thing revealed by the high and wide-ranging new tariffs President Trump announced on “Liberation Day” is just how limited other recent American presidents have been in their thinking. Their ambition was to get elected and re-elected, then retire comfortably into a tranquil post-presidency. They would finish their days lending their names to charities and writing their memoirs (or rather, commissioning ghostwriters to fulfill their publishing contracts).   The idea of destroying and remaking the global economic order never crossed their minds. But Trump is thinking bigger. He doesn’t want to go to his grave as just another has-been ex-president.

The classical defense of free trade, the one found in Econ 101 textbooks and Ricardo’s comparative advantage model, goes something like this: countries should specialize in what they can produce most efficiently, export the surplus and import the rest. Trade allows global output to increase, everyone gets richer and any government interference – like tariffs or subsidies – just gums up the works. But that’s not the world we live in. David Ricardo, the early 19th-century British economist who developed the theory of comparative advantage, illustrated it with a now-famous example: even though Portugal could produce both wine and cloth more efficiently than England, both countries would benefit if Portugal specialized in wine and England in cloth, then traded.

"You can’t make an omelette without breaking eggs" is a maxim attributed to leaders on both sides of the French Revolution. "Move fast and break things" is today’s equivalent, emanating from Silicon Valley and amply demonstrated by Donald Trump and Elon Musk in their approach to government and geopolitics. "You can’t make omelettes at all if you can’t afford eggs" might be the next variant: inflation and scarcity afflicting America’s favorite breakfast have become a major political issue. In brief, a dozen US eggs used to cost $2 or less but by January this year the supermarket price was $5 and rising – in some places $9 was reported, rationing had to be introduced and Mexican suppliers were spotted smuggling truckloads across the border.

"The art of the deal" is President Trump’s much-vaunted modus operandi as well as the title of his 1987 bestseller. But how smart would he be to make an offer for Greenland to the Danish government? Leaving aside issues of military sites and future unfrozen shipping routes, would the currently still-frozen north Atlantic island be worth a rich price for its mineral deposits alone? I consulted an intrepid investor who spent six years there prospecting for tantalum, a "transition metal" used in capacitors for mobile phones. His answer was not encouraging. There’s no disputing the potential to find everything from gold and uranium to rare earth elements such as neodymium and dysprosium, in demand for advanced electronics. But the operating difficulties are truly formidable.

Throughout the West, particularly the Anglosphere, housing costs are ravaging the middle class. Homeownership, long the key to social mobility, is on the decline, particularly among younger generations and minorities. According to the Organization for Economic Cooperation and Development, house prices in high-income countries have been rising “three times faster than household median income over the last two decades,” causing the standard of living “to stagnate or decline.” Unlike previous housing crises, this one is not primarily caused by mass displacements due to wars or natural disasters or population growth.

Kamala Harris is a master shapeshifter — whether through codeswitching, pandering or just being phony. One moment she’s rolling up masala dosa with Mindy Kaling on live TV; the next she’s FaceTiming the BET Awards, declaring, “Girl, I’m out here in these streets.” Donald Trump’s bumbling attempts to highlight her cultural inconsistencies briefly shifted the election focus to Harris’s race and ethnicity — and away from far more important qualities. Perhaps it’s because her actual policy ideas have been so scant and vague that attacking them directly has proven difficult. Perhaps her chameleonic history has made anything beyond a surface-level attack difficult.

It’s not often that anyone — much less an academic — writes a book that launches a revolution, but that’s exactly what Burton Malkiel did in 1973 when the Princeton economist published a short, potent book called A Random Walk Down Wall Street. As of 2023, the book is in its thirteenth edition. Malkiel famously insisted that “a blindfolded monkey throwing darts at the stock listings could select a portfolio that would do just as well as one selected by the experts,” and then he spent his entire career doing his best to prove that hypothesis.

Artificial intelligence (AI) and its related technologies — machine learning and the metaverse — represent a watershed in the evolution of the global economy. Like other such shifts, its emergence is likely to favor certain interests, notably a handful of technology giants, the media and a small cadre of highly skilled programmers. Everyone else faces economic danger, certain to roil domestic and international politics in coming years. Eighty-two percent of millennials fear AI will reduce their earning ability — and they are right to be worried. The first group to lose will be the usual suspects: factory and warehouse workers as well as professionals with largely routinized occupations suited to automation.