I don't suppose Robert Zoellick, after spooning down his morning cornflakes, heads for the office wearing a tinfoil hat. The World Bank boss's recent musings on gold, though, were welcomed by the fringe who believe a secret, possibly alien, cabal is trying to take over the world.
He told the Financial Times recently that a new system was needed to "consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values. Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today."
Mr Zoellick's comments startled economists and brought a frenzy of excitement to men living in their mothers' basements everywhere.
Ever since the US abandoned the gold standard in 1971, conspiracy theorists have lived in fear that a New World Order is upon us. The delinking of gold from currency was the first step in creating a system that allowed financial institutions such as the World Bank, International Monetary Fund and US Federal Reserve to take over the global economy, they believe, and placed our fates in the hands of a small cabal of shady men who manipulate world events. Quite how this happened requires some explanation.
Gold has been a store of value for thousands of years, first recorded in the Middle East before civilisation spread elsewhere. It was hard to find, which meant peasants could not easily dig it up and upset the local potentates. Nor would it tarnish, or rot, so it could be passed from generation to generation. It could even be a source of pride, draped on a rich man's wife as a symbol of prosperity.
In modern times, it was used to underpin currency and support the fiction that dollars, rubles and pounds were actually worth the paper they were printed on. It provided stability and kept inflation in check.
Unfortunately, it was also a huge brake on economic growth. By the late 1960s, the US economy was growing faster than its bank balance and needed more cash if it was to avoid stagnation. But gold is a finite resource. The biggest source of bullion at the time, South Africa, could hardly keep up with demand. It was time to set the dollar free.
The US president Richard Nixon did this did and, as a result, the US economy flew unbound. But the price of gold fell and quickly became relegated to a pretty relic, coveted only by rappers and dwindling numbers of private investors.
Of course, there was a price to pay for this - inflation. When printing presses and not bullion form the basis of an economy, countries soon become tempted to make their wealth. Germany tried to outprint its war debts. More recently, Zimbabwe attempted to do the same.
And, of course, the "quantitative easing" now being employed in the US - a euphemism for mass-dollar printing - would not be possible in a gold-based economy. It's the money-from-nothing mindset of the current fiscal regime in the US that has brought the issue of the gold standard from the blogosphere blinking into the light.
"An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions," Alan Greenspan, the former Fed chairman, said a while back, in one of his less obscure pronouncements. "They seem to sense ... that gold and economic freedom are inseparable."
Ron Paul, a senior Republican, has openly questioned whether the US gold reserves at Fort Knox exist at all and has demanded an audit of the Fed's bullion stash.
Mr Paul, and many like him, suspect that eliminating gold was a method to remove power from citizens and give it to bureaucrats. He may not believe in the New World Order, but his suspicion that printing money to outspend the fiscal crisis benefits a few at the expense of many is being picked up by people of a wide variety of ideologies.
Gold has, of course, come into its own in recent years after decades of neglect. At more than US$1,400 (Dh5,141) an ounce, and predictions that it could go much higher, it seems now is the time to buy coins, trinkets, bars - anything that will help pay the bills in the coming apocalypse.
But be warned. At the end of the day, gold, like Google shares, oil and property, is not a one-way bet. Expect a day to come in the future when Messrs Paul and Greenspan will cough, pull distractedly at their ears and try to change the subject when reminded of their outbursts on gold.
Gavin du Venage is a business writer and entrepreneur based in South Africa. If you have any questions about this column, e-mail him at gavinduvenage@gmail.com
For any other queries, e-mail pf@thenational.ae
U19 World Cup in South Africa
Group A: India, Japan, New Zealand, Sri Lanka
Group B: Australia, England, Nigeria, West Indies
Group C: Bangladesh, Pakistan, Scotland, Zimbabwe
Group D: Afghanistan, Canada, South Africa, UAE
UAE fixtures
Saturday, January 18, v Canada
Wednesday, January 22, v Afghanistan
Saturday, January 25, v South Africa
UAE squad
Aryan Lakra (captain), Vriitya Aravind, Deshan Chethyia, Mohammed Farazuddin, Jonathan Figy, Osama Hassan, Karthik Meiyappan, Rishabh Mukherjee, Ali Naseer, Wasi Shah, Alishan Sharafu, Sanchit Sharma, Kai Smith, Akasha Tahir, Ansh Tandon
The Bio
Favourite vegetable: “I really like the taste of the beetroot, the potatoes and the eggplant we are producing.”
Holiday destination: “I like Paris very much, it’s a city very close to my heart.”
Book: “Das Kapital, by Karl Marx. I am not a communist, but there are a lot of lessons for the capitalist system, if you let it get out of control, and humanity.”
Musician: “I like very much Fairuz, the Lebanese singer, and the other is Umm Kulthum. Fairuz is for listening to in the morning, Umm Kulthum for the night.”
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
MATCH INFO
Uefa Champions League, last-16, second leg (first-leg scores in brackets):
PSG (2) v Manchester United (0)
Midnight (Thursday), BeIN Sports
Company Fact Box
Company name/date started: Abwaab Technologies / September 2019
Founders: Hamdi Tabbaa, co-founder and CEO. Hussein Alsarabi, co-founder and CTO
Based: Amman, Jordan
Sector: Education Technology
Size (employees/revenue): Total team size: 65. Full-time employees: 25. Revenue undisclosed
Stage: early-stage startup
Investors: Adam Tech Ventures, Endure Capital, Equitrust, the World Bank-backed Innovative Startups SMEs Fund, a London investment fund, a number of former and current executives from Uber and Netflix, among others.
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia