In 2022, still in this parallel universe, these governments are coming under increasing pressure from voters to reduce the mountains of debt, just as they did in the 2000s and 2010s. Voters are starting to get the message across to their elected politicians that they don’t want coming generations burdened by this enormous mountain of debt.
What do the politicians do?
Still in this parallel universe, one small, un-named, government caves in to pressure from voters and opposition parties. This un-named government comes up with a novel way of reducing this mountain of debt. Sell their gold reserves. So, quietly, and unobserved by other nations, this small nation successfully reduces debt by selling their gold reserves.
In 2022, in our parallel universe, democratic governments, still burdened by debt, and under increasing pressure from voters to reduce this debt, start to fall. It starts in a small way, but gradually voters in medium sized countries are removing existing governments, and replacing them with governments pledging to reduce debt. Historians point out that this has happened before, in Australia, during the early 2000s.
For those long term governments still in power, word starts to leak out of this small, un-named country, whose government successfully hung on to power by selling their gold reserves to reduce debt. One by one, small governments world-wide follow the example of this small, un-named, country, and commence selling their gold reserves.
All goes well for a while. Technical Analysts notice that the gold price, previously threatening to take out all time highs, just can’t seem to break those highs. They see a series of lower highs, and lower lows. By the end of 2022 in this parallel universe, the more educated Technical Analysts are calling a bear market in gold. Yet, being focused completely on their charts, they can’t work out why the price of gold just can’t set new highs.
One sunny Friday evening, at a time just too late for the evening news broadcast, news leaks out of a G20 nation selling all their gold reserves, and applying these funds to reduce debt. The news spreads like a wildfire running ahead of a southerly buster.
By the time Sunday evening arrives, markets are abuzz. No one knows what the price of gold in this parallel universe will do. At 18:00 US Central Time on this warm Sunday evening, the Gold futures market opens limit down. Traders panic. Those remaining G20 governments, now aware of one of their number selling gold reserves, start to dump the metal at any price. Gold futures remain limit down for the next three weeks.
Physical gold markets have tumbled. Those high cost miners are preparing to close operations, waiting for price to settle. Berkshire Hathaway, on the other hand, rejoices as Warren and Charlie see BH’s share price go through the roof. Berkshire Hathaway considers closing its massive holding of short gold futures, but waits just a little longer.
It doesn’t take too long in this parallel universe, for nations world wide to sell down their gold reserves and pay down debt. Governments not yet voted out start to see an increase in their polling percentages.
Gold, all of a sudden in this parallel universe, has become an industrial metal. Most Economics 101 students realise see their books come to life as supply reduces to match demand. Price normalises at cost of production, and only those efficient debt-free miners survive. Gold becomes a commodity in a buyers market.
…. and, all because, this small, un-named country, caves in to voter pressure and decides to sell its gold reserves.