At its annual meeting in Davos, the World Economic Forum announced that a new approach to the functioning of our societies is needed after the pandemic has shown the weakness of the current economic model. Consequently, it proposed to reset the global economic system by promoting a more sustainable model. A paradigm shift with geopolitical ramifications where gold will play a key role.

The Great Reset is the term the World Economic Forum (WEF) has chosen for its initiative that aims to rethink the future of global relations, the direction of national economies, the priorities of society, and the reference of business models. In short, it is the thought that many people had in mind after experiencing the sanitary crisis.

At first glance, it might seem like a utopian vision of the economy of the common good as an alternative model to capitalism, or as the WEF points out, “a major reboot of capitalism is needed”, but in practice, at least for the time being, it is nothing more than a declaration of intent, vaguely defining the way forward, but without specifying the steps to be taken.

That said, in the current economic context of an energy crisis, an inflationary crisis and a debt crisis, caused in part by the pandemic and in part by the sanctions imposed on Russia as a result of the conflict in Ukraine, it is clear that a reset of the established economic model is not only desirable but inevitable.

The loss of credibility of the international monetary system

This economic crisis defined by record levels of public debt frames a global macroeconomic scenario that will lead to a recession in several Western countries. Moreover, the danger of generalised stagflation, i.e. a scenario of high inflation, a slowing rate of economic growth, and where unemployment remains high, is an unavoidable reality that more than one economy will have to face, given that the fiscal and monetary policies that have been applied to tackle the crisis are further increasing the debt of the States.

The increase in macroeconomic volatility has meant that now more than ever, the central banks of many countries are buying gold as if the world were coming to an end in order to protect their reserves. While it is true that countries not aligned with US geopolitical interests have been buying gold on a massive scale for a decade to shield their economies from economic sanctions and the eventual disintegration of the dollar as the world’s reserve currency, it is surprising, or not, that the central banks of Western countries are also joining the ‘gold rush’.

Given this scenario, one might think that the days of the current monetary system are numbered. As the financial analyst, José Luis Cava, explains, “everything points to the fact that there is an agreement between the Central Banks of each Eurozone country and the ECB to harmonise the physical gold reserves of these Central Banks until they reach 4% of GDP”, and he continues, “debt levels have shot up to absolutely unsustainable levels. China, Russia, and India have announced new currencies backed by physical gold”.

What is clear is that whatever the final outcome of the paradigm shift in the global monetary system that is underway, it is obvious that The Great Reset has been underway for years, regardless of what is said or desired from Davos.

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