Charles Gave, president of the liberal think tank Institut des Libertés, is an economist and financial analyst. He got public attention after he published his first essay in 2001 in which he denounced the Euro. His last book about state bankruptcy forecasted in 2009 the fall of Greece and Spain. He is the founder of Gavekal Securities and a member of the board of SCOR.
Fabrice Drouin Ristori: Mr Gave, thank you for accepting our invitation.
My questions are mainly about the risks that you see at this moment that may have an impact on savers and investors, as well as your recommendations for protection against those risks.
Let’s start by risk: What are the major risks that you’ve identified for European savers and investors?
Charles Gave: Let’s not hide our head in the sand, here. We are living an unprecedented historical period. If interest rates are meant to protect against the “future’s uncertainty”, negative rates would imply that the future is more “certain” than the present, which is philosophically stupid. We live in times where illogicality reigns supreme... thus it is logically impossible to predict what’s going to happen and who is in danger.
Fabrice Drouin Ristori: What do you think of the banking situation in Europe? Should we worry about the solidity of the banks and several measures taken in Europe to eventually seize the savers’ accounts? Do you think that our leaders will go to the end of this logic in case of a crisis?
Charles Gave: European banks are in a desperate situation and governments will do all they can to keep them afloat. One must keep a minimum of cash with a bank, because it will be seized. Stocks, bonds and UCITs will be much harder to seize. Also, it is better to hold one’s cash in euro with a bank in London or Geneva than in France or Italy.
Fabrice Drouin Ristori: Does life insurance look like a safe investment in this context?
Charles Gave: It all depends on the underlying assets. If the underlying assets are mainly composed of French, Italian or Spanish bonds, one may fear the worst. If the underlying assets are composed of healthy international stocks, there is nothing to fear.
Fabrice Drouin Ristori: Do you think the euro can survive for a long time in its actual form? And what would the consequences be for savers if it came to crumble?
Charles Gave: European economies, and mainly those of France and Germany, are constantly diverging. Any system that diverges always explodes at one point. When the euro disappears, Germany will go bankrupt, because its industrial base is totally oriented toward automobiles, and demand for cars will crash in the ten years to come. On the other hand, southern Europe will experience an unprecedented boom.
Fabrice Drouin Ristori: In an article published by your consulting firm, Gavekal, available on Zerohedge, you are now recommending investing in gold (amongst other things). Could you explain the logic – geopolitically speaking, notably – with regards to what China is trying to put in place?
Charles Gave: Chinese authorities are aware that the present situation is untenable and that a financial crisis is looming. Thus they are trying as fast as they can to make the Yuan more powerful as an international currency for payments. If a country, say, like Saudi Arabia had Yuan surpluses, China would offer, since the Yuan is not directly convertible, some gold in exchange, China being the world’s largest gold producer.
Should a crisis arise, the Asian countries shall be an area of stability, whereas the rest of the world will experience tremendous shocks.
This is a very smart way of re-introducing gold in the international payment system.
This is potentially great news for gold, but it is even greater news for the gold miners, who would benefit enormously from a sustainable stability in the price of the yellow metal.
Fabrice Drouin Ristori: Do you anticipate a major change in the monetary system in the 5-10 years to come?
Charles Gave: The real danger is without a doubt, that a number of countries – mainly in Europe – could resort to re-introducing exchange controls, or even pure and simple spoliation of accounts.
With that in mind, one must prioritize investing in countries where the rule of law is applied or, in other words, in countries where the Queen of England graces the banknotes (Great Britain, Australia, Canada and New-Zealand).
Only those countries are safe, legally.
Fabrice Drouin Ristori: What measures should France envisage in order to recuperate its monetary and financial independence, and to best prepare for the change of paradigm toward a multi-polar world?
Charles Gave: A currency is based on a nation. Europe is not a nation and thus, the euro is not a currency.
France, having lost its monetary sovereignty, has lost its budgetary sovereignty and its constitutional sovereignty, and cannot decide anymore on who may or may not reside in France.
No progress can be expected as long as the euro is in place.
Losing one’s monetary sovereignty means losing one’s overall sovereignty.