A French man, a German woman, and a Greek man sit down to a conference call.
It sounds like a bad joke. But this really happened yesterday. And while the punchline isn't funny, it is absurd.
They all came out, and Nicolas Sarkozy and Angela Merkel said they're "convinced" that Greece's future lies in the eurozone. George Papandreou said Greece is "absolutely committed" to meeting its austerity targets in exchange for a bit more cash.
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Everyone is lying through their teeth, and yet still the markets cheer.
There's only one thing a sane investor can do at times like this hang on to gold.
A solution to the eurozone crisis forced borrowing
The finest minds in the world are tossing off solutions to the eurozone crisis left, right and centre mainly in the pages of the FT.
Here's the problem. The eurozone can't print money to buy its own debt, like Britain and the US. The scale of austerity required to pay back the debts seems sure to cripple any economy attempting it. And writing off the debts would hurt the banks that everyone unfathomably is so keen to protect.
What can the eurozone do? A couple of those fine minds I mentioned Jean-Paul Fitoussi and Gabriele Galateri di Genola have a suggestion. "Forced borrowing."
The great thing about being a sovereign state, you see, is that it's possible to force taxpayers "to lend to their government". California did it in 2009 by "adding a premium to the income tax withheld from paycheques, to be repaid the following year".
All eurozone governments need do, is threaten to pull this weapon of mass destruction' out of the bag. That'll "remind investors that sovereigns are not private borrowers: they need never default because they can always force-feed debt issues to their own residents".
Reading that, how does that make you feel? I find it scary.
"Financial repression" where governments use any option available to keep their borrowing costs low is a fact of life. Inflation is used to rob citizens and investors on the quiet. It usually works because human beings are wired in such a way that we find dealing with nominal' returns a lot easier than real' (after inflation) returns, so we often forget we're being robbed.
But there's a line in the sand. Inflation works as a hidden tax for governments because it is silent, and those who really worry about it can usually find ways to get around it. It's sneaky.
What's worrying is when governments feel that circumstances are so extreme that they can start ripping up the rulebook, and confiscate wealth by increasingly obvious means.
Desperate governments are dangerous beasts
Merkel has described this financial crisis as a battle between governments and the markets. But that gets it wrong. It casts the government as the representative of the people, and the markets as some dark elite force trying to destroy democracy.
The fact is, this is more of a clash between the forces of change, and those who would rather maintain the status quo in banking and politics regardless of how flawed it is. The old models that gave rise to the financial crisis no longer work (including the financial models, as my colleague Tim Bennett will be discussing in this weekend's video tutorial). But no one in power wants to accept that.
The problem is, when governments start looking desperate, you don't know what they're going to do next. This is one of the main reasons why markets are so jittery. Nothing is safe.
Here's an example. As you no doubt know, we're keen on big blue chip stocks that pay decent dividend yields. I'm not about to change that view. However, as my colleague Merryn Somerset Webb is fond of pointing out, our reasons for liking big blue chips are also the very reasons why desperate governments might see them as honey pots. They throw off lots of cash. Why shouldn't governments help themselves to a bit more of that cash?
It's not far-fetched by any manner of means. Windfall taxes' on unpopular businesses such as oil production are common, even in the UK. (Note that the business has to be unpopular: I never heard anyone calling for a windfall tax on property profiteering, even although that was far less socially useful than your average North Sea oil explorer.)
In a world of ever-changing goal posts, you never know when your safe' investment might turn risky overnight. As Adrian Ash of BullionVault points out, this is all part of the reason why buying gold is perfectly rational, despite what economic theorists and the more snobbish financial journalists might argue.
Sure, even at that, gold can be confiscated. Gold can have its price fiddled with by the government. Gold could be taxed. But in extremis, in its physical form, it's a piece of portable wealth that has never, in the history of the world, gone to zero. You can't say that about shares or bonds or property.
I'm not saying you should hold all of your wealth in gold. But I certainly think that even at this price, you should have some as insurance. I read a price target for gold of $10,000 an ounce from Dylan Grice at Socit Gnrale yesterday.
Let me just emphasise that Grice wasn't saying that gold would definitely hit that price. His point was that demand for honest' money will only grow as our ability to trust in the value of other assets continues to decline.
The point is: if gold was to hit $10,000, you wouldn't be thinking "wow, look how much money I've made". You'd be thinking: "look at what a godawful mess our world is in." And as long as our leaders continue to deny that we need to make some big changes, that outcome becomes ever more possible.
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This article is taken from the free investment email Money Morning. Sign up to Money Morning here .
John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.
He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.
His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.
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