The 1944 Bretton Woods Agreement in Bretton Woods, New Hampshire until 6 days ago, when I completed my 6th chemotherapy infusion here in Santa Rosa, CA – this is a long time, 80 years.

I am not going to die of cancer, my oncologist and doctors tell me. The price of gold has been rocketing since September 2023. This is an unprecedented rise in the price of gold. Who is buying? According to what I understand, this frenzied buying has been mostly fueled by central banks. Investors have been involved, but apparently not to a serious degree. Is this going to continue?

Yes, this is likely to continue. And why? I think the reason is the market realizes the WW2/Cold War era of “international relations” is now ending. It is ending right now.

There is no going back. My little bout with blood cancer began about 7 months ago, so the market was probably thinking, “this guy might die, then what?” But now it is clear that I am not going to die, so what that means is there will be a ceiling on the price rise of gold. I still think it could go up a lot more, to say $5,000, even higher. This however will be the limit – if I get across the message of my “policy recommendations” to the most important and influential of the world's policymakers.

And I am getting that message across. I am certain of it. So this is promising, it is exciting. We are going to leave behind a world that has served a very real purpose, but is now looking pretty decrepit and fatigued. We will have to create a new world, and as my friend and fellow economist Edmund Phelps argues, we will do just that. It might be challenging, but this is to be expected. Yet it will be not be too challenging. I think things will go just fine.

As to why the Bretton Woods financial structure is ending [WW2/Cold War], well this is summed up very easily: it is old, it is 80 years old, but we know the world has moved on, much human development has taken place, much economic development has taken place. It is not so much that a “multipolar” world is taking shape, it is that the human brain is expressing its innate and very powerful creativity.

“On 15 August 1971, the United States ended the convertibility of the US dollar to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a fiat currency. Shortly thereafter, many fixed currencies (such as the pound sterling) also became free-floating, and the subsequent era has been characterized by floating exchange rates. The end of Bretton Woods was formally ratified by the Jamaica Accords in 1976.” [“Bretton Woods system” from Wikipedia]

We did have ample warning. 53 years ago John Connally, Richard Nixon's treasury secretary, cut the gold standard off from international investors, ending an era of “fixed rate” currency exchange. Actually, in my opinion, the fixed rate for currency exchange is not desirable – it is simply not viable in the era of robust economic growth – so Nixon and Connally made the correct policy decision. What else could they do? There is however a serious downside to “floating” currencies in the market. It is called inflation – and that's what we have had since 1971. Very little central bank discipline, to put it diplomatically and politely.

So a new world is here, almost here; to be sure, the WW2/Cold War structure is hanging on as best it can. But I know it is finished. Mohamed El-Erian got himself some attention a few days ago by publishing in the Financial Times an argument similar to mine. “We got to do something about this,” he writes. Well, there is nothing anyone can do, we are not going to preserve this 80 year old global financial/economic structure. We are going to get a new world, whether anyone likes it or not.

The question is rather whether we can design a new structure that is a realistic reflection of the new situation in the world. I do think we can, but it will be a little challenging. Why wouldn't it be? So gold will be our way of knowing if we are succeeding or not. In 2010 or so I used to argue that gold could go to $100,000. And why was I making this argument? I could not foresee my own role in this, although I could see something of my role. I could be assassinated, I could die of cancer. Well, I am still here, and I will work hard.

By the way, Elon Musk has realized I am right, so he is speaking about the cost of the US debt as a ratio of federal revenue. I started talking about this in 2015/2016. Donald Trump is talking about deleting the 16th amendment -- the federal income tax -- and this is also something I started talking about more than 10 years ago. I make policy, even global policy, pretty much no one else does. Deleting the 16th amendment is a very powerful policy, but obviously it is going to be very stupid to replace federal income tax revenue with revenue from tariffs. A tariff protocol is retarded and obviously seriously antiquated. Better to reform the US government, cut spending on the insanely costly Pentagon, and propose/establish a modest tax on all consumption. 

Nevertheless, I repeat: the WW2/Cold War era of "international relations" is now ending.