Is it the end of the line for mass transit systems?

Revenues have fallen victim to the pandemic. Now there are concerns about what happens if passengers don’t return

Gregory Meyer in New York

              © Bloomberg

Patrick Foye travels to work on the Long Island Rail Road, once known as the “Route of the Dashing Commuter.” He boards the 6:45am from leafy Port Washington, disembarks in the catacombs of New York Penn Station and then rides the subway to his office on the tip of Manhattan. 

As chief executive of the New York region’s public transport agency, Mr Foye’s vinyl seat provides a stark view of the effects of coronavirus. The parking lots at Port Washington are plains of empty asphalt. The LIRR’s rail cars are carrying a quarter of their normal daily load of more than 300,000 passengers. Office workers no longer dash — they Zoom.

A collapse in fare and tax revenue has opened a $12bn fiscal hole at his New York Metropolitan Transportation Authority. It has an annual budget of $17.2bn of which fares make up $6.5bn and taxes another third. Without more aid from Congress, Mr Foye may furlough 8,000 employees, eliminate billions of dollars of planned capital spending and gut service on New York subways, buses and railways, including the LIRR. 

Yet an even more ominous prospect looms in the longer term: after Covid-19, what happens if some passengers never come back? It’s a question echoing across cities around the world, from New York to London — where leaders just agreed a £1.8bn short-term transport rescue deal — to Singapore.

The pandemic is setting in motion structural changes in how employees do their jobs with profound implications for urban settlement, transport networks and energy use. 

Journeying to work five days a week now seems excessive in an age of video conferencing and cloud data. 

In future, 85 per cent of employees would prefer to work remotely at least two to three days a week, according to a survey by CBRE, the commercial real estate services company. 

Without more aid from Congress, the MTA’s chief executive Patrick Foye may furlough 8,000 employees © Frank Franklin II/AP

Such a scenario could seriously weaken the finances of public transit systems that underpin great cities. No other mode of transport can efficiently deliver millions of workers into dense central business districts. With fewer riders and fares, transit operators face an unpleasant choice: trimming service, which repels customers, or going cap in hand to the government for more subsidies. 

Mr Foye still hopes to stave off an immediate funding crisis with federal coronavirus aid. But he is also pondering how he would respond to lasting changes in commuting habits. 

“[We] would have to think about right-sizing service and taking steps to reduce the cost to get it commensurate with the long-term decline in revenue,” he says.

Driving revival

Passenger numbers collapsed when authorities declared lockdowns in the spring, keeping all but essential workers home. After partially reopening in the summer, New York City is placing more limits on social gatherings and restaurants to keep a lid on climbing coronavirus cases. 

Initial research suggested that transit seeded the disease, spreading it through city arteries. But later studies, some sponsored by transport agencies, found that buses and trains with proper safety measures were no more risky than offices and homes. Transit lines adopted aggressive cleaning routines, with the MTA shutting down New York subways overnight for the first time in history to allow daily disinfections. 

Suburban railways lost the most trade as white-collar workers and students worked remotely. Buses have regained about half the passengers they had before the first outbreaks, reflecting demand from those with fewer options. 

The “transit-dependent” tend to have lower incomes, are more often people of colour and include some of the essential workers keeping hospitals, kitchens and warehouses open during the pandemic. 

As more affluent office workers desert transit, they may be less willing to see taxes support it. “If and when we resume a semblance of normalcy, will the affinity to public transportation still remain? 

That’s a bigger question that nobody has the answers to. So far it doesn’t seem like that,” says PS Sriraj, director of the Urban Transportation Center at the University of Illinois at Chicago. 

The US Centers for Disease Control and Prevention gave cars a boost when it recommended that employers subsidise workers to drive alone. Although car traffic disappeared in the spring, reducing urban pollution, it is now back to about 80 per cent of pre-pandemic volumes in metropolitan areas including Boston, Chicago, Los Angeles and New York, according to GPS data compiled by Inrix, a transport information company. 

The return to cars was visible on Manhattan’s west side during a recent afternoon rush hour. Traffic crept for blocks towards the jammed mouth of the Lincoln Tunnel to New Jersey. A few blocks away, train announcements echoed across a nearly empty Penn Station, where new touchscreen vending machines sell masks and hand sanitiser.

Green transport advocates warn that the driving revival will lead to “carmageddon” on crowded streets. Globally, oil demand could increase by 600,000 barrels a day — about 0.6 per cent of pre-pandemic consumption — over the next couple of years as people abandon mass transit for private cars, the International Energy Agency has forecast. 

Although it also calculates that fuel saved by remote working could eventually offset about 250,000 b/d of that extra demand. 

Commuters wait for a subway train on the Pennsylvania Station platform in New York in June © Sarah Blesener/Bloomberg

US president-elect Joe Biden has featured “high-quality, zero-emissions public transportation options” as part of his plan to address climate change.

“It’s important to preserve or reinforce the priority of public transport if we want to avoid complete gridlock in cities,” says Mohamed Mezghani, secretary-general of the Brussels-based International Association of Public Transport. He adds: “We need to make sure that people will not go back to their cars.”

Rotating workers

Public transport experts hotly debate the extent to which remote working habits will stick. At a recent online forum, transit professionals were among the hundreds who heard James Hughes from Rutgers university suggest that a revolution is under way. 

“This is now a watershed moment in the world of work. The coronavirus shock may have exposed an outmoded white-collar workplace structure,” he declared. “Work is now being recognised as much more of an activity, rather than as a place.” 

Prof Hughes, a veteran urban planning pundit who witnessed New Jersey’s rise as a sprawling corporate hub, envisaged a new, decentralised office geography where workers gathered together only when they needed to. 

Kevin Corbett, NJ Transit chief executive: ‘I believe transit will come back very strong’ © Bryan Anselm/New York Times /eyevine

“I think it was probably a major market failure that work as a place remained so dominant for so long,” Prof Hughes said. Endangered, he added, was “the ritual of commuting five days per week to large centralised headquarters . . . simply to be crammed cheek by jowl in a sea of office workstations”. 

The forum’s co-sponsor was New Jersey Transit, the third largest transit network in the US by passenger numbers with services feeding New York and Philadelphia. The agency’s trains are running at 20 per cent of pre-pandemic volumes, while bus passenger numbers are down by half. 

Kevin Corbett, NJ Transit chief executive, sounded a defiant tone at the forum. “I believe transit will come back very strong,” he told the virtual audience. 

Later, in an interview with the Financial Times, Mr Corbett spoke about the years after the September 11 2001 terror attacks, when he helped manage lower Manhattan’s economic recovery. People at the time questioned the future of the skyscraper. Now super tall condominiums tower above the city, he says. Until February, New Jersey Transit was operating standing-room-only trains, delivering many of the 2m people entering Manhattan every day. 

Recent reports of local road congestion give him a perverse comfort. “When I hear now that [delays into] the Lincoln and Holland tunnels are 20 minutes or a half-hour, or there’s an accident and it’s 45 minutes, sort of like the old days, that’s a big factor in driving people back to us,” he says.

Remote working, however convenient, will not predominate, he believes. “If there’s a down cycle in the economy, people may feel a little bit more comfortable if they’re in the office [being seen] than if they’re working remotely,” he says. 

Unsurprisingly, landlords share his optimism. When Douglas Durst was named chairman of the Real Estate Board of New York in September, he said his family’s company had lasted more than 105 years, “and this is not even our first pandemic — we survived the influenza pandemic of 1918”. 

Yet video conferencing was science fiction then. Kelly Steckelberg, chief financial officer of web conferencing company Zoom Video Communications, told an online investment forum that only 4 per cent of her employees wanted to go back to the office every day, “and when I've talked to peers with other companies, that's really consistent with what they're saying”. Zoom’s share price has sextupled to more than $400 this year. 

    A cleaning crew disinfects a New York City subway train in May © Stephanie Keith/Getty

Employers are already making decisions that will have lasting impacts on commuting trips. JPMorgan Chase’s headquarters rises just north of Manhattan’s Grand Central Terminal. The financial giant’s corporate and investment bank will now be rotating its more than 60,000 employees in and out of offices across the world. 

“We are going to start implementing the model that I believe will be more or less permanent, which is this rotational model,” Daniel Pinto, the bank’s chief operating officer, told CNBC. “Depending on the type of business, you may be working one week a month from home, or two days a week from home, or two weeks a month.” 

Some companies are exiting the city completely. After the geothermal heating and cooling company Dandelion Energy was spun out of Google’s advanced research lab, chief executive Michael Sachse rented offices a block west of Grand Central station. To get to work, “everybody was taking public transit. It didn’t make any sense to drive to Midtown,” he says. 

    Traffic on Madison Avenue on June 9, a day after the city began reopening © Jeenah Moon/Bloomberg

He closed the office when coronavirus hit, leaving two equipment warehouses outside the city as the company’s only physical locations.

Kevin Krumm’s tech recruitment company Objective Paradigm recently signed a 10-year office lease adjacent to a section of the Loop, the elevated train tracks of Chicago’s central business district. But now some of his clients are seeking new recruits who can be based anywhere. “You don’t have to be within a commutable proximity. 

I feel like that’s a big shift,” says Mr Krumm. “I feel like this whole talent, geography, labour-cost arbitrage is under way.”

$25bn bailout

It is an arbitrage with dire implications for transit agencies rooted in their regions. The Chicago Transit Authority’s bus and rail services are running at more than 60 per cent below normal. 

The Metra rail system, which operates 242 stations on 11 rail lines that run in spokes to Chicago suburbs such as Winnetka and Naperville, has slashed its schedule in the face of a 90 per cent collapse in passengers. 

Car traffic on the Chicago-area roadways is now just 10 per cent below levels in February, according to the Chicago Metropolitan Agency for Planning. The Regional Transportation Authority, which allocates funds to local transit agencies, examined six Covid-19 recovery scenarios and found that commuting by transit decreased in each one. 

At stake are $30bn in capital investment needs over the next decade, such as new buses and fixing bridges. “Aspects of telework are here to stay,” says Leanne Redden, RTA’s executive director. “They were here pre-Covid, and it’s become much more obvious during Covid.”

US transit agencies are public bodies funded by a mix of fares and subsidies from taxes, highway tolls and other sources. Falling passenger numbers and the pandemic economy have dealt blows to both sources of revenue. The decline in fare, toll, tax and other subsidy revenue is estimated at $6.9bn this year for New York’s MTA, according to a study by New York university.

Such transport operations have been kept afloat thanks to $25bn from the federal Cares Act coronavirus bailout, but the money will run out for most agencies next year. Democrats in the House of Representatives included another $32bn in transit funding in their proposed stimulus bill, but the legislation has stalled in a stand-off with Republicans who oppose aid to state and local governments, including public transit bodies. 

“New York risks losing its place as a pre-eminent global city” without adequate transit funding as service and maintenance cuts trigger a “continuous cycle of decline”, the Regional Plan Association warned in a report published in October on the city’s future. But the public policy group, with a board made up of corporate, legal and property executives, rebutted a narrative that New York is spiralling downhill. 

Transit agencies were already contending with threats from ride-hailing services before the pandemic. Now, experts are talking about reinventions for a work-from-home world, such as ticket prices that reward less frequent travel and better service outside of traditional rush hours, even if peak service is cut.

“The transit system is going to have to adapt to the modern workforce,” says Mitchell Moss, director of the Rudin Center for Transportation at New York university.

Sadiq Khan, London mayor, travelling on the underground. Transport for London has received £1.8bn in short-term funding to deal with the fall in revenue due to the pandemic © Jack Taylor/Getty Images

The more urgent focus is surviving until a mass vaccination programme gets the go-ahead. Last week, Boston's transport authority proposed sweeping service cuts, saying that nearly empty trains, buses and ferries were a waste of money.

Prof Moss co-authored a study that warned that 450,000 jobs could be lost in the New York region if Congress fails to give the MTA another $12bn in aid.

Mr Foye, who commutes from Long Island in a blue surgical mask, says, “I’m bullish on the city and state in the intermediate and the longer term. Cities like New York and London and Rome and Bombay have over a period of centuries endured pandemics and survived.”

But he says of commuters: “I don’t think they are all going to come back.”

Russia’s Search for Strategic Depth

By: George Friedman

In 2005, in a speech delivered in front of Russia’s Federal Assembly, Russian President Vladimir Putin said that the fall of the Soviet Union was the greatest geopolitical catastrophe in Russia’s history. What he meant is that the fragmentation of the Soviet Union would cost Russia the element that had allowed it to survive foreign invasions since the 18th century: strategic depth.

For a European country to defeat Russia decisively, it would have to take Moscow. The distance to Moscow is great and would wear down any advancing army, requiring reinforcements and supplies to be moved to the front. As they would advance into Russia, the attackers’ forces would be inevitably weakened. Hitler and Napoleon reached Moscow exhausted. Both were beaten by distance and winter, and by the fact that the defenders were not at the end of their supply line.

At the height of the Cold War, St. Petersburg was about 1,000 miles from NATO forces, and Moscow about 1,300 miles. Today, St. Petersburg is about 100 miles away, and Moscow about 500 miles. NATO has neither the interest nor the capacity to engage Russia. But what Putin understood was that interest and capacity change and that the primary threat to Russia is from the west.


There is another potential entry into Russia from the south. The Russian Empire used this route as a buffer zone with Turkey, especially during the numerous Russo-Turkish wars. Russia was protected by the Caucasus, a rugged, mountainous region that discouraged any attacks to the point that NATO never considered this option. 

But if anyone managed to force their way through the mountains, they would be about 1,000 miles from Moscow on flat, open terrain in far better weather than attackers from the west would face.

The Caucasus consists of two mountain ranges. The northern is far more rugged. The southern is somewhat less daunting. The North Caucasus contains Chechnya and Dagestan, both of which contain Islamist separatists. Chechnya, at the center of the northern range, posed a serious challenge to Russia, and one that Putin defeated early in his presidency. 

What was most frightening to Putin was that the South Caucasus, consisting of Armenia, Georgia and Azerbaijan, had left Russia and formed independent states. 

Russia maintained an alliance with Armenia, the weakest of the three, and complex relations with Azerbaijan, a prosperous oil producer. Georgia, which faced the northern range on a broader front than the others, aligned with the United States.

If the South Caucasus states formed an anti-Russia coalition, and the United States, for example, supported a rising in the North Caucasus, the barrier might be shattered and a path northward opened. Therefore, Russia followed a strategy of imposing strong controls in the North Caucasus while engaging in a war in 2008 with Georgia, its most significant southern threat, based on geography and Georgia’s alliance with the U.S. 

The war demonstrated the limits of American power while it was engaged in wars in the Muslim world. It was a successful strategy save for the fact that the long-term threat from the south was not eliminated.

Russia needed a strategy in the west and one in the south. In the west, part of that strategy evolved in Ukraine, keeping it from being a threat without the use of major Russian force. A tacit agreement was reached with Washington: The United States would not arm Ukraine with significant offensive weapons, and Russia would not move major force into Ukraine beyond the insurgencies already in place. 

Neither Russia nor the U.S. wanted war. Each wanted a buffer zone. That is what emerged.

Another piece of the lost buffer became, so to speak, available. Belarus is about 400 miles from Moscow. Poland, to its west, is hostile to Russia and contains some American forces. This represents a significant threat to Russia, unless Belarus could be brought into the Russian fold. 

The elections in Belarus held this year created an opportunity. President Alexander Lukashenko, a long-time ruler and in many ways the last Brezhnevite, faced serious opposition. The Russians backed Lukashenko and have essentially preserved his position. 

In return, Lukashenko is locked out of any accommodation with the West that Russia disapproves of, and also must accommodate Russian military requirements. The Baltics are still a threat, but their terrain makes large-scale assaults eastward difficult. 

The Poles and Americans are blocked from increasing eastward power unless they initiate a conflict, which they won’t. If the Lukashenko regime survives, it represents a major improvement on Russia’s western border.

In the south, we have a messier situation. Azerbaijan and Armenia have long fought, at various levels of intensity, over Nagorno-Karabakh. Recently, Azerbaijan, with the support of Turkey, chose to launch a major attack on Nagorno-Karabakh. Azerbaijan has avoided a full-scale conflict there for 20 years. (The Four-Day War in 2016 does not constitute a full-scale conflict.) 

Its reasons for launching the attack now are obscure. Turkey’s desire for a successful conflict likely derives from economic problems, coupled with reversals in its Mediterranean policy and its inability to impose its will in Syria. It needed a victory somewhere, and aiding its ally in taking Nagorno-Karabakh made sense.

The matter is more complex, however. The Russians are allied with Armenia and ought not to have wanted their ally defeated. Moreover, Russia would not want Turkey to be a significant force in the Caucasus. 

It undoubtedly knew of Azerbaijan’s plans because its intelligence would have detected Azerbaijani movements, and because Azerbaijan could not afford to alienate its northern neighbor. So the idea that the Russians were unaware of the war plan borders on the impossible. Russia had to have tacitly accepted Azerbaijan’s plans.

The reason all this was possible is that, in the end, it was Russia that helped negotiate the end of the war and, far more important, agreed to send nearly 2,000 troops as peacekeepers to Nagorno-Karabakh for at least five years. Two thousand Russians in this region represent a decisive force. 

No one will engage them This means that its ally, Armenia, now has Russian troops to its east, and Azerbaijan has Russian forces to its north and also in the west. Georgia now faces a similar situation. In effect, Russia has made a significant move to reclaim, or at least have a major element of control in, the South Caucasus. 

The presence of a major Russian force, with a long-term right to remain there, eliminates what had been a potential long-term threat. The presence of U.S. troops in Georgia might be a problem, but given the lack of U.S offensive intentions, it is unlikely to be willing to invest major forces in the region. 

And a minor presence of U.S. trainers in Georgia is something Russia can live with.

Apart from Armenia, the great loser in this is Turkey, which was excluded from the peacekeeping force. Turkey saw Azerbaijan, an important ally in the region, accommodate Russia and accept its blocking of Turkish ambitions at a time when Turkey badly needed a win. 

In addition, this affair – accidentally or deliberately – coincided with the American presidential transition, a time when decision making in the U.S. is usually difficult, and this time near impossible. It is hard not to think that the Russians either took advantage of events or engineered them. 

In any case, their apparent successes in Belarus and now in the South Caucasus are major steps in Putin’s vow to reverse the strategic consequences of the fall of the Soviet Union without forging a single nation.

Strategic depth is vital in the very long term, and it’s importance is burned into Russia’s memory. But it has minimal significance now. The United States and NATO have no interest in invading Russia. 

While Russia must assume the worst, its immediate problem remains its economy and reliance on energy exports as a prime revenue source, without any control over pricing. Russia has executed a strategic coup, but it continues to experience the financial and internal political stresses on which we based our forecast. 

It has not solved its core problems by strategic maneuvers, however useful. Without a transformation of its economy, it continues to be in crisis.

Janet Yellen calls for action to prevent US economic ‘devastation’

Ex-Fed chair expresses concerns about the poor as she is introduced as next Treasury secretary

James Politi in Washington

Janet Yellen harked back to her childhood in working-class Brooklyn, New York, as she appealed for appealed for a ‘collective purpose’ © Getty Images

Janet Yellen warned of “more devastation” if the US failed to address the economic fallout from the coronavirus pandemic and its disproportionate toll on low-income families as she was introduced by Joe Biden as the next Treasury secretary.

The former Fed chair, who was chosen by the US president-elect on Monday to take the top cabinet position on the economy, said the combination of lost lives, lost jobs and shuttered small businesses amounted to an “American tragedy” that needed to be quickly tackled.

Her comments were delivered amid doubts that Mr Biden will be able to implement his sweeping economic agenda, which calls for a big boost to government spending, partially funded by higher taxes on businesses and wealthy households.

Republicans are likely to retain control of the US Senate and many have signalled their opposition to Mr Biden’s plan, which risks curtailing the incoming Democratic president’s ambitions from the start. But Ms Yellen appealed for a “collective purpose” to relieve the country’s “collective pain” from the pandemic.

“It’s essential that we move with urgency. Inaction will produce a self-reinforcing downturn causing yet more devastation,” she said. “We risk missing the obligation to redress deeper structural problems.”

One big economic question looming over the transition is whether Congress and outgoing president Donald Trump will agree on a narrow stimulus package, worth between $500bn and $1tn, as an interim measure of support for the economy while Mr Biden prepares to enter the White House on January 20.

If no deal is reached, Mr Biden has flagged his intention to press rapidly for additional spending on unemployment benefits and aid to businesses and state and local governments.

But Mr Biden’s economic agenda is even more expansive, reflecting a leftward shift in the Democratic party that followed the financial crisis and has been reinforced by the pandemic.

The US president-elect is pushing for more government spending to tackle racial and income inequalities, and to reverse under-investment in public goods such as green energy. He is also seeking an increase in the federal minimum wage and forgiveness on some student loans — two longstanding progressive policy wishes.

While implementing many of these priorities could be tough in a divided Congress, Mr Biden’s economic team is expected to look more closely at what they can accomplish by executive order in the early stages of his presidency.

In her comments, Ms Yellen, 74, harked back to her childhood in working-class Brooklyn, New York, as her economic inspiration and said Mr Biden’s “team will never give up” on the “commitment” to give Americans an “equal chance to get ahead”.

She also nodded to a new approach on the international economic stage, saying she would work with Mr Biden’s national security and foreign policy team to “help restore America’s global leadership” — a contrast with the trade wars and “America First” rhetoric of Donald Trump.

But Wally Adeyemo, Mr Biden’s pick for deputy Treasury secretary, signalled continuity with the Trump administration’s hardline approach to economic sanctions and foreign investment rules.

“We must also remain laser focused on the Treasury department’s critical role in protecting our national security,” he said. “This includes using our sanctions regime to hold bad actors accountable, dismantling the financial networks of terrorist organisations and others who seek to do us harm and ensuring our foreign investment policy protects America’s national security interest.”

Ms Yellen is not expected to face trouble clearing Senate confirmation for the Treasury job, but Neera Tanden, Mr Biden’s selection to be budget director, has already encountered a backlash from Republican senators and some activists on the leftwing of the Democratic party.

Mr Biden on Tuesday described Ms Tanden as a “brilliant policy mind” who understood the “struggle that millions of Americans are facing”, given her experiences as the child of a single mother and immigrant from India who relied for a time on government assistance.


by Egon von Greyerz

I have never seen a clearer picture for preserving and enhancing wealth than today. More on that at the end of this article.

There are no real markets. Financial markets are a casino with wild players buying and selling paper assets as if they were chips. 

We just saw clear evidence of that in gold a week ago. The gold price went up $100 from $1,860 to $1,960 in 5 days and then crashed $100 in 5 hours. The alleged triggers were a Covid vaccine and a Biden victory.

A vaccine that needs -70 degrees Celsius and is not properly tested is hardly the saviour of the world at this stage. Especially since the main problem is the financial system and not the pandemic. And a Biden win is not guaranteed but seems more likely if Trump cannot pull a rabbit out of the hat.


The proof of fake markets can always be found in the underlying real market. When gold rose $100 and then fell $100, the Swiss refiners, who refine 70% of the gold in the world, reported very low physical volumes both on the buying and the selling side.

As usual, these fast moves in the precious metals take place in the paper markets where the casino players can shuffle billions of dollars of paper gold and silver. And they can execute these paper moves with out ever touching an ounce of the underlying gold or silver bars.

We normally see some movement in ETF volumes when there are major price moves in gold. But as I explained in an article a few months ago, the ETF market is primarily a paper market or at best a market which consists of gold leased from central banks. 

When there is major buying of the biggest gold ETF GLD, the Swiss refiners seldom see an increase in sales. Instead the bullion banks are lending central bank gold to the ETF.

For that reason, anyone who buys gold for wealth preservation, should never buy a gold ETF but real physical gold.

Let’s also understand that sustained moves in gold very seldom start on flimsy news.


But as I said in a previous article, it doesn’t matter who wins the election. At the end of the next four year presidential period, it is virtually guaranteed that the winning candidate wishes he would have lost. 

Because the new president inherits an economically, financially and morally bankrupt country with insoluble debt and deficit problems.

We were told back in 2009 that the problems of the Great Financial Crisis (2006-9) had been solved by central banks. If we were told the truth at that point, there would of course be no need for further stimulus or debt.


But let’s look at the facts:

In 2009 when the crisis was supposed to have ended and the world financial system rescued, the US debt was $11 trillion and the Fed’s balance sheet a mere $2 trillion. Thus there was no need to borrow or print more money to keep the US economy going and to keep the financial system solvent. After all the crisis was over!

We then must ask ourselves why the US debt is up almost 2.5x and the Fed’s balance sheet 3.5x since 2009. If the system was sound, these figures should have come down and not gone up by multiples.

We know the answer of course. The US economy needs ever growing debts to survive.

Shadow Statistics illustrates this excellently. In the 2000s real GDP (adjusted for real inflation) has been negative to the extent of 3-5% annually. So the published GDP figures are fake and only achieved by constantly printing money to grow GDP artificially and keep the US economy from collapsing.


Also, as the Fed Balance Sheet below shows, the US financial system cannot survive without the constant printing of money created out of thin air. As I have stated in many articles the current problems in the world economy were not caused by the Coronavirus but instead by a sick financial system and ever mounting debts which artificially keeps the patient alive.

The latest problems started in August – September 2019 when the ECB and the Fed reaffirmed that they would do what it takes to save the financial system. And thus they flooded the system with money, causing all central banks’ balance sheet to surge.

The Fed’s balance sheet has erupted from $3.7 trillion in September 2019 to $7.1T today. With the multiplicity of problems in the US, the new president will be presiding over an economy that will see debt and money printing explode. 

I forecasted when Trump was elected that US debt would be $40 trillion at the end of 2024 when the next presidential period starts. But the money required to save the financial system and the US economy virtually guarantees a substantially higher debt than the $40T in 4 years time.

No one should believe that this is a US problem only. We are looking at an entire world which has experienced a debt explosion long before Covid 19 was known. But it is not just a debt explosion but a global financial system which is rotten in its core.


This is why debt expansion and money printing will explode in 2021. Central banks will be forced to monetise practically all of the debt issued by governments since there will be no other buyers.

So the trends for 2021 and onwards will be very clear. The obvious victim will be the dollar. The “mighty” Greenback has been crashing for 50 years and is already down 98% since 1971. Only in this century, the dollar has lost 85% in real terms.

Anyone who measures his wealth in dollars is deluding himself. With the US currency down 85% since 2000, it is clearly a terrible store of wealth. And this is not just in regards to holding dollars. It obviously goes for any asset measured in dollars like stocks, bonds, property etc. 

For investors who want to fool themselves, why not measure your assets in Venezuelan Bolivars. Measured in a hyperinflationary currency, the increase in wealth looks superb. And remember that the dollar will go, together with most paper currencies will go the same way as the Bolivar.


Massive money printing will probably initially create a surge in stock markets. But this will be a final hurrah before stocks start a very long secular bear market and a fall of 95% measured in real terms – GOLD.

The biggest surprise for the world will be when central banks lose control of interest rates. They might manage to hold them for yet some time but they are very likely to move up in 2021 already. Interest rates is the biggest contrarian trade of any market. Virtually nobody, central banks, economists, analysts etc can see higher rates.

What they don’t realise is that as the dollar falls, stock markets crash and money printing accelerates, central banks will lose control of rates as the long end of the bond markets crash. Within the next 1-3 years, as inflation – hyperinflation is a reality, bonds will implode and interest rates will exceed the 15-20% in the 1970s to early 80s. 

As borrowers default, some rates will reach infinity.


So let’s talk about the good news. There is a secret which virtually nobody knows about. Well, around 0.5% of investors actually know it. Others have heard about it but don’t understand it.

I am obviously talking about precious metals, primarily in the form of gold and silver. Just in 2020, with stocks surging by over 50% since mid March, gold has still outperformed stocks since Covid started in February. (see graph below). Even the Swiss franc has outperformed US stocks. That’s yet more evidence that the US stock market only looks good when measured in a debasing and very weak dollar.

So in the next few years, central banks and governments will guarantee to destroy their currencies in their futile attempts to save the economy by printing worthless, dollars, euros etc.


For anyone who wants to preserve their wealth, physical gold and silver is such an obvious choice. But sadly, most investors cannot see behind an alluring stock market. 

Therefore most of them will be left behind as gold goes to $10,000 at least, in today’s money and a lot higher in inflationary money.

Silver will rise even faster and reach at least $600-650 in today’s money.

As the graph above shows, the silver price adjusted for real inflation would today be $950 to equal the 1980 price of $50.

If we take my longstanding gold target of $10,000 in today’s money and divide it by the long term historical gold/silver ratio of 15, this would give a silver price of $667.

And if Gold is adjusted for real inflation, since the 1980 high of $850, it would today be almost $20,000.


Precious metals mining stocks have even bigger potential. As the graph below shows, gold and silver stocks have declined by 95% against the Dow since 1983. In the next few years these mining stocks will easily outperform the Dow by a multiple of 20x!

So what would you rather own, ordinary stocks, property or bonds that will decline 95% in real terms or physical gold, silver and mining stocks which will outperform stocks 20x?

I am by no means a gold bug. Just someone who analyses risk. This analysis is crystal clear and shows that the best way to protect wealth in the next 5+ years is to hold physical gold, silver and precious metals mining stocks, just as it has been for the last 20 years.


I recommend that for wealth preservation purposes, hold mainly gold with less silver and mining stocks.

The reason is obvious. Physical gold is the king of the metals. Silver has massive potential but is very volatile and makes many investors nervous when it corrects viciously. Mining stocks have the greatest potential but are for most investors held within the financial system. You are therefore exposed to massive counterparty risk.

In my 50+ years as an investor, I have never seen such an obvious and attractive way to both preserve and enhance wealth as in the precious metals sector.

Egon von Greyerz

Founder and Managing Partner 

America Should Rewrite the China Trade Contract

America and other countries have no right to obstruct China’s economic rise or dictate its development model. But US President-elect Joe Biden’s incoming administration can and should revise decades-old trade arrangements with China to take account of changed realities.

Arvind Subramanian

NEW DELHI – Once US President-elect Joe Biden’s administration has made the relatively easy decisions to rejoin the Paris climate agreement, remain in the World Health Organization, and attempt to reboot the World Trade Organization, it will confront three key foreign-policy issues. In order of importance, they are China, China, and China.

Biden’s dilemma is that China has become too deviant to cooperate with fully, too big to contain or ignore, and too connected to decouple from. So, what principles should govern America’s economic engagement with it?

Two decades ago, the United States and the rest of the world bet that China, as it became richer, would open up economically and politically, while remaining benign in its international conduct. 

Under the resulting implicit contract, embodied in China’s 2001 WTO accession agreement, the world promised to guarantee market access for Chinese exports; in return, China would make its economy more open and transparent, and play by international rules.

But China has changed since then, and not only by becoming much richer and a much larger trader. Under President Xi Jinping, an authoritarian in the mold of Mao Zedong, China has repudiated Deng Xiaoping’s three guiding tenets: collective leadership in domestic politics, steady economic opening and reliance on market forces, and quiet cooperation with the world. 

Instead, Xi’s repressive regime is fashioning a new brand of inward-oriented, state-dominated capitalism. And it poses a threat to many of its neighbors, including Taiwan, Australia, India, the Philippines, Vietnam, and Japan.

In other words, the world has lost its China wager. Even where China has adhered to the letter of the contract – concerning currency and intellectual-property, for example – it has violated the spirit. The Biden administration and the rest of the world are thus entitled to renegotiate the deal.

America and others have no right to obstruct China’s economic rise, because its 1.4 billion citizens are entitled to pursue prosperity and security. Likewise, China is entitled to choose its development model, with its own balance between the state and the market.

Subject to these caveats, however, America can – and should – revise the decades-old contract to account for changed realities. The more China plays by the rules, the more such a revision would benefit developing countries that can trade with it.

For starters, China is no longer a poor country, but its status as a developing country entitles it to favorable treatment under global trade rules. This status must be revoked.

Second, China departed from the spirit of the original contract through beggar-thy-neighbor exchange-rate policies (especially from 2004 to 2010) that artificially preserved its economic competitiveness. That problem went away for a while, but is beginning to resurface.

The world must respond by codifying and enforcing rules on exchange-rate manipulation. And where the line between state and commercial entities is blurred – as it is in China – the definition of “excessive” intervention should be widened to include foreign-exchange purchases by state-owned banks as well as those by the central bank.

Third, the 2001 WTO accession agreement imposed obligations on China concerning its state-owned enterprises (SOEs). But, with the Chinese state playing a much larger direct and indirect economic role under Xi, these rules have to be adapted, tightened, and made more justiciable. 

Regarding Chinese investment abroad, for example, the world should treat skeptically China’s claim that the government is distinct from SOEs because the latter are run on commercial principles. The burden of proof should be on China to prove this.

As for inward foreign investment, the basic aim should be to ensure a far more level playing field. The new rules should therefore cover not only explicit state policies but also the actions of SOEs, as well as more of China’s government procurement policies and practices.

But Biden must first persuade China to agree to renegotiate the contract. Immediately removing all of President Donald Trump’s unilateral tariffs on Chinese imports could help. The Biden administration could also lend quick support to the WTO, by approving the choice of the body’s new director-general and restoring its Appellate Body. 

And the US could signal its willingness to join China-led international financial institutions such as the Asian Infrastructure Investment Bank, and to end the West’s monopoly of the leadership of the World Bank and International Monetary Fund.

Beyond improving the atmospherics, Biden must consider his tactical options: unilateral, multilateral, and regional. In theory, he could go even further down the unilateral road than Trump by threatening China with a return to the pre-WTO arrangement under which its market access would be reviewed annually by a fickle, more protectionist Congress.

But, as Chad Bown of the Peterson Institute for International Economics has demonstrated, even the more limited Trump strategy has failed, because the world has become too dependent on China to embrace restrictive trade actions against it. Moreover, success would be enormously costly: the global trading system’s integrity would be decimated, wrecking a half-century of international efforts.

Biden also has the multilateral option of renegotiating with China as part of an effort to revive the WTO, which has been languishing largely because of Trump’s hostility to it. The problem is that China – as a WTO member with significant clout – would have to agree to any changes.

The Biden administration must therefore consider the regional route that Trump abandoned when he withdrew the US from the Trans-Pacific Partnership (TPP) in 2017. Rejoining its successor, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), would enable the US to integrate more deeply with the rest of Asia and possibly also with Europe, thereby reducing its dependence on China while inflicting de facto exclusion costs on it.

This strategy has major advantages. It would create a trading area that would complement, rather than undermine, the international trading system. And such a move would not be subject to a Chinese veto; in fact, it would likely force China to the negotiating table, because it would not want to be kept out of such a large market. But joining the CPTPP would not be painless: it would require the US to countenance more trade opening, which the current domestic mood might not allow.

The recent signing of the Regional Comprehensive Economic Partnership, a pan-Asian free-trade agreement including China, might seem to signal a different approach than that proposed here. 

But Asian countries have fewer options relative to China: They are more dependent on and integrated with it, and Trump’s 2017 rejection of the TPP left them without an anchor for managing economic relations with China. 

After Trump, and considering China’s increasing assertiveness, Asian countries might go along with or even secretly hope the US and Europe reset relations with China.

In any event, Biden should have no illusions: China is too important to ignore, but the challenge it presents defies easy solutions. America and the world should brace themselves for the long haul.

Arvind Subramanian, a former chief economic adviser to the government of India, is Professor of Economics at Ashoka University. He is the author of Eclipse: Living in the Shadow of China’s Economic Dominance.