The Gilded Age

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Gilded Age

All eyes on Italy where inheritance flows have leapt to 20% of GDP.  Good for the beneficiaries perhaps but the overall picture is a bleak one. The population is ageing fast. More than that, it also shows a very low level of growth. 

A very wealthy society would ordinarily experience large inheritance transfers by nature. A high wealth, high growth society would not. The rate of economic growth in a fast growing society means younger people generate the majority of the wealth since they are in the work force. They are the entrepreneurs. Modern technological gain simply swamps inherited wealth if it is allowed to. 

We see that in the still relatively low American inheritance number. There are of course dynastically wealthy American families, but they compete for top spot with more recently minted billionaires.  

The Italian billionaire list (note where they live in brackets) is dominated by inherited wealth but Tether made the list. CFO Giancarla Devasini (Roquebrune-Cap-Martin, France) is listed below as being with $9.4 billion, Forbes thinks it more like $22 billion.

Fashion designer Giorgio Armani (various US & Italy) is 90, he has no direct heirs, so his share is likely to be split many ways. Expect that group to drop out. Ferrari (Italy: Modena - still in his father Enzo’s house) has one son so will probably remain in the list. Pignatoro (St Moritz) keeps his head down, not much is known but he is only 50 so should be around for a while. 

All told then, I expect Tether to battle it out with Ferrero (Berchem-Sainte-Agathe, Brussels) and the Ion Group for top spot. Given Tether is only ten years old, that is really saying something. 

I note that only one of them permanently resides in Italy. Ferrari.

ZIRP

The Swiss Rate is back at zero. The SNB reported that they would take the rate negative if they felt they had to. 

More broadly, opinions on interest rates are mixed. A lot of people think much higher for much longer is needed. Good examples would be the sheer amount of American debt that now swamps that nation. Who will lend to them for anything but a higher rate? 

In the end, all things come back to people. The issue the world has is we are no longer making enough people. The real international disaster is not the ones we read about, it is the birth rate. Everything we do makes it lower. Technology makes it lower, wealth makes it lower. Personal empowerment……makes it lower. 

Falling birth rates, mean falling interest rates because demand is lower. While there are still lots of people, once they hit 70 their consumption collapses. It halves. They can’t do the things they could before and neither do they want to. You can have a static population and collapsing demand. Allied to that we have massive technological progress at the moment meaning that absolutely everything is going to get cheaper (in terms of real assets, not money). 

It’s not even a new trend. Younger people will all have received the lecture from their parents about how they paid “19% on our first mortgage, your father and I……” etc. . That’s because interest rates have been falling for a very long time and will probably keep falling.

If the people trend is the trend (there is no other trend), then rates go lower over the medium and long term. Here’s the Japanese interest rate, a country with a debt to gdp ratio in excess of 200%. Expect short bursts of higher and then panic before the trend resumes. 

In most places, babies are sadly fewer in number. Where birth rates go, interest rates follow.  

Jacqui

I hadn’t heard of Jacqui but she popped up in The Australian this week.

Apparently nobody wants or is interested in bitcoin. Advisers won't go near it. 

“Advisers, certainly in the Sydney and Melbourne markets, who look after wealth are not going near bitcoin,” Clarke says.

She went on to say that investors should not invest in things they do not understand and recommended gold.  

“Gold is a genuine investment class.” 

On gold, let’s apply the investment heuristic of not investing in things you don’t understand (which I agree with). If we asked investors what it was about gold they understood; I think (I don’t know) that their answer would be “it's scarce”. They wouldn't be able to answer anything about assay, or supply responding to price (as it is now doing) or the storage issue, or the custody issue. 

The elevator pitch for bitcoin is this: it’s digital and it’s scarce. I’ve spent ten years learning all sorts of other things about it, but that's basically it. I wonder why people struggle with it or claim they ‘don’t understand it’ and then recommend gold?

SB21

The Lonestar State signed its Bitcoin Reserve Bill into law last week. The State Treasurer can now invest state funds in any digital asset with a market capitalization of $0.5 billion and higher. Currently that means only bitcoin. We covered New Hampshire’s similar legalisation a few weeks ago. 

They are beginning with $10m, a trivially small amount compared to their investable asset base. Still, it's something. Worth remembering also that Texan GDP exceeds that of Canada and is home to more people than live in Australia (some 31 million Texans).  

Once laws make their way onto the statute book they have a habit of staying there for hundreds of years.

Euro-Trash

Christine was summoned by the boss this week. The European Parliament. Their questions were derived from the concerns of European constituents. So, we had inflation, growth (lack of it) and cryptocurrency. 

Fascinating that if you actually talk to people, digital assets are on their mind. The ECB has spent years seeking to diminish them. They deny and decline to speak about it. Publish profoundly misleading notes about it. As recently as 2024 we had this from the ECB.

Subsequently the ETFs went on to be the most successful ETF launches ever. The ECB were profoundly wrong and denied their own financial institutions the opportunity to participate. 

Christine took her slides to Parliament:

Very strong emphasis on “unbacked”. It means Bitcoin because the market cap of $2.7tn is 70% bitcoin. I would emphasise here that there is enormous cost to the production of bitcoin. You can prove that energy cost if you wish. You can prove it was expensive to produce and scarce. The Euro on the other hand is the unbacked asset. It costs nothing to produce and has no limit on its production. 

Next, “stablecoins are 99% denominated in USD”, because Europe choked them! A EURt (tether coin) would have been massively useful a long time ago but European banks were forbidden from banking any crypto company. The ECB has missed the boat again, they had a huge opportunity to globally export the Euro and Euro debt instruments across the globe. They missed it. It was the generational opportunity to embed the Euro and steal a march on the USD. There was no acknowledgement at all of these total failures. They repeated the trick with AI too before it got off the ground in Europe.

The sign off from Laggers was quite something: 

“Lagarde: Eurosystem staff expect the euro area economy to grow by 0.9% in 2025. A strong labour market, rising real incomes, robust private sector balance sheets, easier financing conditions and defence and infrastructure spending should bolster growth.”

Really? If those things are actually true, why is growth only 0.9%?  

Further Information

Our May 2025 report to investors can be found here.