Friend of Fringe Finance Lawrence Lepard released his most recent investor letter a few days ago with his updated take on the seismic changes occurring in monetary policy globally as a result of the Russia/Ukraine conflict.
He takes us through history as to how this landscape has changed in the past, and what could be coming in years ahead.
Larry had joined me for several interviews last year and I believe him to truly be one of the muted voices that the investing community would be better off for considering. He’s the type of voice that gets little coverage in the mainstream media, which, in my opinion, makes him someone worth listening to twice as closely.
Larry was kind enough to allow me to share his most recent thoughts. Part 1 is below, where he lays out his case for massive upside in gold, and Part 2 will be published later this week.
Reviewing the history and structure of the world monetary system is instructive given recent political developments with the kinetic war launched by Russia in the Ukraine. It can help us as we try to determine what happens next (Many of you know this, but allow us to review).
Bretton Woods I: 1944-1960s Period
Toward the end of World War II, in July 19441, the leaders of the free world convened a monetary conference in Bretton Woods, NH to establish the rules for a post war monetary system. This is now referred to as Bretton Woods I.
At this conference, the US Dollar was made the international reserve currency for the world financial system. The dollar would be backed by gold and could be exchanged for bullion at the price of $35 per ounce. (US citizens did not have that exchange privilege due to Roosevelt’s 1933 Executive Order 6102, which made it illegal for US citizens to own gold; this was repealed in 1975).
All other foreign currencies would be pegged to the dollar at fixed exchange rates.
The exchangeability of dollars for gold was credible because the US had 650,000 ounces (20.5 metric tonnes) of gold on deposit. In the early post war period, this arrangement worked fairly well, and the dollar was further supported because the US was the leading industrial nation; Japan and Germany’s economies had been devastated by the war.
From 1946-1957, US economic growth was solid, and the US Federal government was generally fiscally responsible and ran budget surpluses in 6 of those 11 years. Deficit years contained small deficits and only the Korean conflict spiked the annual deficit in 1953. Inflation was present in the late 1940’s and 1950’s, but…(READ THIS FULL ARTICLE HERE)