Real magic

Diet Coke lovers should speed to India, where Diet Coke parties have become very chic. This is thanks to a shortage - not of Coke but of its packaging. Which means Coke - a premium drink in India - has become even more pricey

Coke is packaged and sold in India in aluminum cans. Gulf Cooperation Council (GCC) countries - there are six - produce about 9% of global aluminum output. The war in Iran has led to tussling over the Strait of Hormuz, through which GCC's aluminum normally flows. India's aluminum shortage has caused Coke prices in India to shoot up by 25%. Aluminum futures prices in London are now more than 40% higher since a year ago.

The spread of inflation is like dropping ink into water - diluted but still exists.

In the US inflation is starting to soar. The Consumer Price Index (CPI) rose to 3.8%/year in April, largely because of higher fuel prices, which are now up by more than 28% since last year. Higher jet-fuel costs saw airfares go up by more than 20%. Wholesale inflation jumped by 6%, more than 2% higher than expected by a poll of Bloomberg economists. This will feed into the May (and subsequent months) CPI figure.

Yields on US Treasury bonds, which move higher if inflation is expected, rose; in the UK the 10-year government bond went as high as 5.12% while that of the 30-year bond hit 5.78% - a level last reached in 1998. The governments of both countries therefore have to pay more in interest on their borrowing. The US national debt went up by a trillion Dollars to $39 trillion in March. It took five months to reach that; reaching $40 trillion will take even less time. That debt costs the US $3 billion a day. That's about a third of income tax revenue.

UK shows the way

The UK is going through a major political mess. The left-wing Labour government was voted into office with a massive parliamentary majority in July 2024. But Prime Minister Keir Starmer is now facing competition for his position, following disastrous local election results in early May. The Labour government promised the electorate many things but key was that it would stimulate economic growth.

That promise has evaporated - in the first three months of this year the British economy grew by a dire 0.6%. There are additional reasons why Starmer is in difficulties but without economic growth, the prospects for the country are dim. The next general election in the UK is scheduled to be by August 2029. If Starmer is dislodged, the contenders to replace him are all more left-wing. Contenders for the top job are all thought to push for greater government borrowing and spending, which would push government bond yields higher, and raise mortgage costs too.

That could be catastrophic. In 1970 Venezuela was one of the 20 richest countries in the world. Between 2013 and 2021 its economy lost about 75% of its total output, thanks to careless spending, over-borrowing and poor management. Poor management means a country can slip from the top to ruin, quite hastily.

Currency destroyer

Since the 16th century there have been at least four international reserve currencies, the US Dollar taking that role since 1944. All currencies that have been used as a global reserve asset have lost that dominance; the US Dollar is on the slide too. From a share of more than 70% of global reserve assets in the early 2000s, it now has about a 57% share. For centuries gold was regarded as the primary reserve asset. It remains a strong reserve asset, while all leading currencies have lost purchasing power.

Inflation is a destroyer of fiat currency's purchasing power. For the rich, loss of purchasing power is much more easily tolerated than for the poor simply because they have more debased currency to use.

President Trump's view of the current inflation burst is that it is a reasonable cost of the war against Iran, his current target. He told reporters on the day the latest US inflation data emerged that "The only thing that matters when I'm talking about Iran [is that] they can't have a nuclear weapon. I don't think about Americans' financial situation, I don't think about anybody, I think about one thing: we cannot let Iran have a nuclear weapon. That's all. That's the only thing that motivates me."

That seems a very powerful motivation to get some gold via Glint. Gold remains the asset that is beyond inflation, beyond governments, beyond destruction - and, thanks to Glint, it can be used as money once more.

For UK clients: At Glint, we make every effort to demonstrate a balanced conversation between gold, silver, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

For US clients: Graphic representations of value are for illustrative purposes only. The Glint debt card is issued by Sutton Bank, member FDIC. The sale, purchase and storage of precious metals are offered by Glint and not Sutton Bank. Your investment in precious metals through Glint is

·        Not insured by the FDIC.

·        Not a deposit or other obligation of, or guaranteed by, Sutton Bank.

·        Subject to investment risks, including the possible risk of loss of the principal amount invested.

All investments involve risk, including possible loss of principal. The value of precious metals is affected by many economic factors, including but not limited to the current market price, demand, perceived scarcity, and quality of the precious metal. Precious metals can increase or decrease in value. Past performance is not a guarantee of future results. As such, investing in precious metals may not be suitable for everyone.