A Cure that Kills — A Strategy for Investing in the Fallout of COVID-19

Infections and deaths rise exponentially.

Economies are ravaged.

New regulations and laws are put in place. The populace is put under house arrest. Businesses die…and those surviving plead for lockdowns to be lifted.

Society convulses and changes radically within the course of a single year. Wealth inequality… already massive before… gets even worse inside that year.

Massive, unprecedented amounts of new money are printed to deal with all.

HOODWINKED! Why Australia’s ‘miracle’ economy is a farce

Welcome to 1630 Venice

This last year seems completely crazy.

But history repeats. And the pandemic… and our response to it… is far from unprecedented.

A bubonic plague came to Venice in September 1630.

It caused 43,088 deaths in three years. That may not sound much compared 2.4 million worldwide from COVID. Until you realise Venice at the time only had a population of 141,625.

That’s a 30% death rate.

It ended up being a big turning point for the Venetian Republic, economically and socially.

It’s surreal looking at the parallels between now and what they did there to battle their own plague 400 years ago.

Just like now, they were stuck between a rock and a hard place.

Containment. And ruining the economy (and people’s lives) with the economic costs of that containment.

This from a paper by economic policy research group VoxEU:

One textile merchant pleaded for the lockdown to be lifted, given that “an incomparable greater number of people has died purely as a result of unemployment than of typhus or any other contagious disease”.

In order to address the citizens’ pains, the Venetian Senate implemented extraordinary public policies. When city districts were put in quarantine, the inhabitants were provisioned by the state; employment and nominal wages in the sectors under its total or partial control were subsidised; and programmes of public works in order to give the unemployed people a livelihood were considered.

It was:

‘Helicopter money before helicopters’

But how could such extraordinary fiscal policy be financed? In 1630, the Republic financed its fiscal action using transfers issued by the Giro bank — its balance sheet was worth 2,071,168 ducats in April 1630, and kept rising to a peak of over 2,666,926 ducats in June 1630.

It did not end well.

There is a very good argument the fiscal cure ended up killing more than the plague itself.

At least one study has concluded it played a fundamental role in triggering a relative decline in the Italian economies of the time.

Is history going to repeat?

As you’ll see here, Jim Rickards thinks so. He lays out a pretty stark case for this in his new book, A New Great Depression: Winners and Losers in a Post-Pandemic World.

We’ve seen an absolutely massive monetary and fiscal response so far.

As Rickards writes in the book:

Behind these multitrillion-dollar deficit- and debt-monetization efforts is an ersatz economic mélange called Modern Monetary Theory (MMT), which purports to alleviate concerns about debt sustainability.

Until recently, MMT was a fringe view with some support on the far left. Today it is de facto the economic law of the land even if most of the legislators who enshrined MMT have never heard of it. We examine MMT, monetary policy, and fiscal policy as crisis responses in the sections below.

None of these policies accomplishes the goals of ending the depression, recovering lost jobs, and regaining real growth.

There are empirically and behaviorally valid reasons why these policies will fail…

Jim explains at length why this is the case in The New Great Depression. And a strategy for investing in the coming fallout.

Our own Nick Hubble has contributed an exclusive Australian chapter, which forecasts what might happen here on the ground.

The book is already a best-seller in the States and is going for a second print run, according to Jim who emailed us late last week with the news.

Dr Randy Tobler, who has been named one of the ‘Best Doctors in America’, hosts the popular Randy Tobler Show. He correctly says of the book:

It’s rare we have such a compact, accurate, concise and chock-full of information history written so proximate to great world-changing events.

The Financial Times calls it a “bracing collection of salvos and boutades — also one with many genuine insights, which make it an enjoyable book to argue with. Let’s just hope that the next 30 years are less bleak than Mr Rickards expects.”

The New Great Depression is part history, part prophecy.

It offers insights into the strange years ahead…a Long COVID Decade.

Most importantly, you’ll find it’s a compendium of advice for investors who want to make their way through the COVID-damaged landscape ahead.

There’s nothing out there remotely like it right now.

If you’ve not dug into it yet, click here.


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Greg Canavan,
Editor, The Rum Rebellion

Greg Canavan approaches the investment world with an ‘ignorance is bliss’ philosophy. In a world where all the information is just a click away at all times, Greg believes we ingest too much of it. As a result, we forget how to think for ourselves, and let other people’s thoughts cloud our own.

Or worse, we only seek out the voices who are confirming our biases and narrowminded views of the truth. Either situation is not ideal. With regards to investing, this makes us follow the masses rather than our own gut instincts.

At The Rum Rebellion, fake news and unethical political persuasion are not in the least bit tolerated. It denounces the heavy amount of government influence which the public accommodates.

Greg will help The Rum Rebellion readers block out all the nonsense and encourage personal responsibility…both in the financial and political world.

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