Megatrend 3 – Broken Government


Like it or not, the world really has shrunk in the last fifty years. The internet and cheap air travel have made us all global citizens. I’ve visited more countries this year than my father did in his lifetime. Me, a kid from Whitley Bay, running a business that has clients in fifteen countries across five continents. How would I explain that to my grandmothers who never left North East England?

Regional governments can’t cope with the new business model. Companies move profits around to minimise their tax bill. Clever businesses focused on a niche can find new clients across the globe more easily than across the street. And we consumers buy stuff not just because a shop is local but because we buy into their values, their purpose, their philosophy.

I’m far from alone in living a two-centre lifestyle in Britain and France. Impossible without internet technology and cheap air travel. I face the future with confidence as a self-sufficient entrepreneur with a glass half full attitude. But that doesn’t make me blind to reality. Most governments of major western democracies are broke. In the financial sense and in the way they are trying to function.

No politician, other than perhaps Ron Paul in America, has been brave enough to tell the electorate how truly terrible things are. It has nothing to do with Brexit, just in case you’re bonkers enough to believe what you read in the media. These are structural issues that have been unfolding for decades. Ask me to name the point at which the post war boom unravelled and I’d probably point to Richard Nixon’s nineteen seventy-one decision to disconnect the dollar from gold. Since every other major currency was linked to the dollar that let politicians and central bankers the world over off the fiduciary hook.

What economists call sound money was cast aside in the interests of short term expediency. The money printing genie was out of the bottle. And an empire of wealth and productivity started morphing into an empire of debt and dependency. In another episode in this series I’ll talk about the full financial implications of this fatal decision. Never mind Watergate, I’d have had Nixon impeached for this crime against humanity for which we’ve yet to see the scary end game. For now I want to focus on the political change that’s in the air.

The Brexit vote certainly caught the political elite napping in the UK and Europe. It’s empowered parties in at least eight other EU countries to discuss the possibility of their own exit. EU leaders are giving Britain serious verbal abuse as they try to talk up all the challenges we are facing – they are scared of what the French call La Contagion, ie other countries leaving the moribund union. So we’ve got a trend towards dis-integration at a political level, almost with a tribal zeitgeist. You sense that if the Remainers could live in a separate part of Britain and stay in the EU they’d be happy to move there. Ditto Scotland calling for another independence referendum.

Will we see a move back to the model of Italy in the nineteenth century with a series of City States? I quite like the Swiss model of Cantons where everything is decided locally unless it absolutely must go to a national level, for example issues around defence and national security. I think we’ll also see increasing tensions between young and old. If we’re honest, we’ve really screwed the next generation. They are loaded down with debt, they can’t afford to buy a house and they’re going to pay a fortune in tax to cover our pensions and medical bills. H

ow long before they banish us all to Oldistan and reclaim the country for those under thirty five? What does it all mean for investors? It’s too early to tell. All I can say with certainty is that you need to be tuned in to what’s happening at a macro level and have some flexibility designed into your long term financial plan. Read Harry Dent’s work on the countries and currencies likely to be ‘the best in a bad neighbourhood’. In other words, the least-worst options in a world where growth is hard to find and those with wealth and assets are taxed within an inch of their lives to fund the dependents and the entitled cronies of the political elite.

Here at Elite Investor Club we’ll do our best to interpret what’s happening in time for you to take action. If you haven’t already joined us, this might be a good time to head over to eliteinvestorclub.com/apply and do so now. Thanks for watching