Inflation, Control & Cashless Future: Why Gold Matters Now | with Adam Creighton

Key Concepts

• Economic Freedom: The ability of individuals and businesses to make their own economic decisions with minimal government intervention.
• Sound Money: A monetary system that maintains its value over time, typically characterized by low inflation and stability.
• Central Banking: The role and influence of central banks (like the Reserve Bank of Australia) in managing a nation's monetary policy and financial system.
• Journalism and Advocacy: The transition from reporting on economic issues to actively advocating for specific economic and political viewpoints.
• COVID-19 Pandemic Response: The critique of government lockdowns, mandates, and their impact on civil liberties and the economy.
• Fiat Currency: Government-issued currency that is not backed by a physical commodity like gold.
• Inflation: A general increase in prices and fall in the purchasing value of money.
• Monetary Systems: The structure and functioning of how money is created, distributed, and managed.
• Gold and Precious Metals: The role of gold as a store of value and a hedge against inflation and currency devaluation.
• Central Bank Digital Currencies (CBDCs): Digital forms of a country's fiat currency, issued and controlled by the central bank.
• Financial Privacy: The right of individuals to conduct financial transactions without undue surveillance or disclosure.
• Emissions Reduction Targets: Government policies aimed at reducing greenhouse gas emissions and their potential impact on individual liberties.
• Government Intervention: The extent to which governments interfere in economic and social affairs.
• Liberal Democracies: Political systems characterized by representative democracy and the protection of individual rights and freedoms.

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Adam Kraton's Career Journey and Ideological Evolution

Adam Kraton, an economist and journalist with over 20 years of experience, shared his career trajectory and the evolution of his views on economic freedom and personal liberty. His journey began at the Reserve Bank of Australia (RBA) in 2003, where he initially pursued economics. A pivotal moment occurred when Philip Lowe, then head of department at the RBA, suggested he consider journalism. Kraton initially dismissed the idea but later found it to be a fitting path.

After a stint at The Economist in London in 2009, Kraton decided to leave central banking, finding the bureaucratic environment limiting and restrictive for expressing personal views on issues like government overreach and increasing regulations. He briefly worked in politics for Tony Abbott in 2010 and then at the Centre for Independent Studies (CIS), a free-market think tank.

A junior economics writer position at The Australian in 2011 marked his entry into journalism, a career he found perfectly suited to his desire to express opinions and engage in a fast-paced environment. He became the economics editor in 2017 and later served as the US correspondent in Washington D.C. for nearly four years, covering the Trump and Biden administrations.

In 2021, Kraton transitioned to the Institute of Public Affairs (IPA) in Melbourne, the world's oldest free-market think tank, as Chief Economist and Senior Fellow. This move was partly influenced by the decline of the traditional media industry due to revenue diversion to social media. The IPA offered a platform to continue advocating for his views. He continues to contribute a weekly column to The Australian and remains active in media through appearances on Sky News and podcasts.

Kraton attributes his strong free-market and libertarian leanings to a summer internship at the Cato Institute in Washington D.C. in 2007. This experience exposed him to economic theories not taught at Oxford and fundamentally shifted his perspective, leading to a deep skepticism of government and bureaucracy. He considers the monetary system the most important and misunderstood aspect of society today, believing much of what is published in the financial press is either incorrect or irrelevant.

Critique of COVID-19 Pandemic Response and Liberal Democracies

Kraton expressed strong criticism of the global response to the COVID-19 pandemic, particularly the implementation of lockdowns and mandates. He stated that in early 2020, he was among a small group of voices stridently opposed to these measures. While initially concerned about the virus, his analysis of early data in April 2020 led him to believe it was not as dangerous as portrayed by the media and did not justify the drastic measures taken.

He argued that these lockdowns were contrary to pre-existing pandemic plans in Western countries, which warned against them due to their detrimental effects on the economy and social cohesion. Kraton believes the evidence since has vindicated his stance, calling the pandemic response a "total disaster" with a "shocking legacy" for civil liberties and economic growth. He specifically highlighted Victoria's prolonged lockdowns as a deterrent to foreign investment.

Kraton contends that the pandemic revealed the fragility of human rights principles in liberal democracies, suggesting they are "a bit of a facade" and contingent on the "whims of politicians and bureaucrats." He noted the irony of Victoria, which has a Human Rights Act, implementing such stringent measures. He believes Western societies, by copying China's lockdown approach, demonstrated a greater resemblance to totalitarian regimes than previously acknowledged. He hopes for more reflection and analysis to prevent similar responses to future pandemics, which he believes are likely, potentially man-made and leaked.

The Fiat Money System, Inflation, and Financial Independence

The massive money printing and central bank interventions during the pandemic period, followed by interest rate hikes (13 in Australia, 11 in the US) and inflation levels not seen in three decades, have, according to Kraton, opened many people's eyes to the workings of the fiat money system. He notes a widespread lack of understanding about how money is created, with most people unaware that banks create money when they lend, thereby increasing the money supply.

Kraton believes the English-speaking countries (UK, Australia, US) printed the most money as a proportion of GDP, leading to significant inflation that he feels persists. This has spurred a movement towards alternative assets like gold and Bitcoin, and a general skepticism towards fiat currency. However, he acknowledges the difficulty in moving away from fiat systems due to government mandates for tax payments.

He anticipates a period of much higher inflation due to massive global fiscal deficits and debt, particularly in the US. He suggests governments are aware of this and will likely inflate away debt. This leads him to believe that investment in assets like property (citing the surge in Sydney, Perth, and Adelaide property prices) is a strategy to preserve wealth, though he notes that in gold terms, these price increases are less dramatic, implying a significant decline in the purchasing power of salaries.

Central Banks, Gold, and the Future of Monetary Systems

Kraton discussed the increasing skepticism of the US dollar-centric monetary system, particularly by China and Russia, who have been significantly increasing their gold holdings. He views this as a precautionary motive amidst growing uncertainty in the monetary system. He noted that the inflation-adjusted gold price has likely hit an all-time high, surpassing the 1980s peak, reflecting this uncertainty.

He criticized the Australian and UK central banks for selling their gold holdings in the 1990s, attributing it to "hubris" and "arrogance." He believes they have been proven wrong and should have been more cautious, given that monetary regimes change throughout history. Kraton suggests that the current monetary system, in place since 1971 when the US went off the gold standard, is likely nearing its end, with COVID-19 accelerating this process. He believes gold could play a role in a future monetary system due to its historical significance and its function as a payment system in times of crisis.

Trump Administration, Tariffs, and Economic Freedom

Kraton views Donald Trump as generally a "force for good in terms of economic freedom," citing his efforts to reduce regulations, particularly environmental ones, which he believes hinder investment. However, he identifies the imposition of tariffs as a significant intervention and a departure from recent US history. He notes that tariffs have increased substantially, from an average of 3% to around 18%.

Kraton offers a different perspective on tariffs, suggesting they are primarily a "fiscal device to try to plug some of the deficit" rather than a means to bring back jobs. He believes they are unlikely to disappear because they are a way for the White House to raise taxes without Congressional approval, especially with a $2 trillion annual deficit and debt at 130% of GDP. He sees tariffs as delaying an "inevitable financial crisis" stemming from the US's fiscal behavior. Despite this intervention, he believes Trump's domestic policies are generally beneficial for freedom, though he acknowledges that his supporters may exaggerate his transformative impact given the entrenched size of the US state.

Future Economic Crises and the Public Sector

Kraton anticipates a future economic crisis, but believes it will originate from the public sector rather than the private sector, unlike the Global Financial Crisis (GFC). He points to the significant fiscal challenges faced by large countries like the US, France, and the UK, suggesting they will eventually face a default, likely through inflation and a loss of confidence in their currencies. This, he predicts, will trigger a sudden reallocation of investment and a crisis. He emphasizes the mathematical impossibility of continuing current fiscal trajectories.

The War on Cash and Financial Privacy

Kraton expressed significant concern about the global trend towards a "war on cash" and the erosion of financial privacy. He observed a noticeable reduction in ATMs in central London, suggesting a deliberate effort to make accessing cash more difficult. He also referenced proposed Reserve Bank of Australia reforms that would reverse earlier decisions encouraging cash use, potentially making cash less attractive and further declining its usage.

He believes this push away from cash is driven by a desire to eliminate a form of transaction that offers complete freedom and anonymity from government oversight. Kraton views this as a threat to freedom, contrasting it with the "far-left perspective" that sees it as a negative. He highlighted the advancement of digital currencies by governments like China and the EU, and the Australian central bank's discussions on CBDCs, noting that this is a "top-down" imposition not requested by the public.

Kraton finds the prospect of CBDCs particularly alarming, as governments could not only monitor transactions but also impose time limits on money's value, make it vanish, or freeze individuals out of the financial system for perceived transgressions. He dismisses the "convenience" argument for CBDCs, stating that digital transactions already exist and are efficient. The core issue, he argues, is the desire to eliminate the option of withdrawing physical cash, thereby capturing individuals entirely within the financial system and removing their ability to conduct private transactions.

Central Bank Digital Currencies (CBDCs) and Their Risks

Kraton elaborated on the risks associated with CBDCs, citing reports that 137 countries are exploring or developing them, with many in advanced stages. He stated that governments could not only track transactions but also control the value and expiry of money, and even freeze accounts. He described this as "extremely totalitarian" and a significant threat to freedom. He believes the stated convenience is a facade to mask the underlying goal of eliminating cash and thus the ability to transact privately. He argues that the option to hold cash is a crucial check on government power, allowing citizens to conduct transactions independently.

Individual Response to Fiat Currency Risks and the Appeal of Gold

Kraton confirmed that individuals are increasingly turning to gold, silver, and Bitcoin as a means of diversifying assets away from the fiat system. He recalled writing about surging interest in gold in Australia years ago and imagines this interest has only grown. He believes this trend extends to gold ETFs and ETFs linked to miners, representing a way to move assets out of the fiat system.

The Biggest Threat to Individual Liberty: Emissions Reduction Targets

When asked about the biggest threat to individual liberty today, Kraton identified "crazy emissions reductions targets" set by governments. He believes that if governments pursue these targets rigorously, they will necessitate controlling "every aspect of our lives," including diet, travel, and imposing extensive taxes. He cited the Australian government's announced emissions targets as an example of "fearmongering" that will lead to drastic taxation and regulation. He foresees changes in the energy system, increased prices, restrictions on meat consumption, and limitations on travel, all aimed at forcing behavioral changes. He feels the public is not yet fully aware of the extent of these potential impositions.

Protecting Economic Freedom and Voting

Kraton's advice for individuals seeking to protect their economic freedom is to "change the way they vote." He expressed disappointment with the performance of libertarian and small-government parties in recent elections, attributing this to public ignorance and the media's tendency to promote government narratives of increased regulation and control, often fueled by climate change fearmongering.

Outlook on the Future: Pessimism and the Trend Towards China-like Governance

Kraton expressed a lack of hope for the future, describing the period of the 1990s and early 2000s as the best time to grow up due to greater freedom and respect for human rights. He believes these have been "radically eroded," and that precedents set during COVID-19 have led to larger governments and increased regulation, particularly driven by "climate catastrophism." He predicts this will slow economic growth.

He expressed concern that Western societies are becoming more like China, citing trends in free speech and new laws restricting public expression, mirroring China's approach. He fears that Western democracies will increasingly become a "facade." While hoping he is wrong, he finds it difficult to ignore this observed trend.

Exemplary Countries: Switzerland and Argentina

When asked about countries doing things "right," Kraton pointed to Switzerland for its significantly smaller government sector, lower taxes, and high rankings in economic freedom and wealth. He reiterated the historical link between fewer regulations, lower taxes, and high economic growth, noting that the political class often resists this conclusion due to its desire for more power.

He also highlighted Argentina under President Milei, who has been in office for two years. Milei has "radically deregulated," achieved a small budget surplus, brought down inflation, and seen economic growth increase. Kraton sees this as a valuable lesson for the world, demonstrating that such policies can simultaneously boost economic growth and freedom.

Further Information and Conclusion

Kraton directed interested individuals to the IPA website (ipa.org.au) for his publications and columns in The Australian. He is also available on Twitter under the handle @AdamKryton. The conversation concluded with an appreciation for Kraton's insights and expertise.