“The evil that is in the world comes out of ignorance, and good intentions may do as much harm as malevolence, if they lack understanding. On the whole, men are more good than bad; that, however, isn’t the real point. But they are more or less ignorant, and it is this that we call vice or virtue; the most incorrigible vice being that of an ignorance that fancies it knows everything and therefore claims for itself the right to kill.”
- Albert Camus, ‘The Plague’.
Get your Free
financial review
Some of them are the size of a man, others are as big as a planet. But the Terminator was not the first. Long before Arnold Schwarzenegger’s lethal cyborg monotoned “I’ll be back,” Fred Saberhagen’s ‘Berserker’ series of short stories had already created a race of killer machines pursuing their own relentless logic: to destroy all living things.
The Berserkers, named after warriors from Norse mythology, are the ultimate doomsday weapons, intelligent machines constructed by a now long-dead race known as the Builders, to wipe out their rivals. The Builders, and their enemy, the Red Race, vanished into history eons ago. But the Berserkers ‘live’ on, obeying their ruthless programming to extinguish anything that possesses organic life. Like the Terminator, they can’t be reasoned with, or bargained with. They do not feel pity, or remorse. Their sole purpose is to destroy.
Science fiction invariably sheds new light on what already exists. ‘Berserker’, like much science fiction, is an examination of unintended consequences. We create things with one specific objective in mind, but over time that objective subtly, and then dramatically, changes. (We’ll discuss the risks posed by AI businesses to the financial markets – let alone humanity itself – in due course.)
Human institutions are like that. They may be founded with the best of intentions, but the road to hell, as we know, is paved with those intentions.
When central banks, for example, were first created, they arose out of a simple need: to raise finance for the governments they serve. The Bank of England, for example, claims that its “mission is to promote the good of the people of the United Kingdom by maintaining monetary and financial stability”. But it was not set up to “promote the good of the people” nor is that either realistically or honestly its mandate today. When it was established in 1694, the Bank of England was created explicitly to fund the government of the day, and that remains its primary role. The same holds for the Swedish National Bank, the Sveriges Riksbank, which was established in 1668 and which is the world’s oldest central bank.
Over time, each central bank has typically been given control over the management of its state’s currency, money supply and interest rates. In many cases, they have gone on to take a supervisory and regulatory role over the commercial banking system and acted, in times of crisis, as lender of last resort to troubled banks. Both the Bank of England and the Swedish National Bank have, over the passage of time, ceded primacy in international monetary affairs to the US Federal Reserve, the Fed. Yet the Fed’s conflicted origins are murkier than either of them. G. Edward Griffin, in his book ‘The Creature from Jekyll Island’, explains how the US Federal Reserve was conceived.
On a cold November night in 1910, a handful of financiers boarded a private railway car in conditions of extreme secrecy in New Jersey. The passengers included the Republican whip in the Senate and a business associate of the banker J.P. Morgan; the Assistant Secretary of the US Treasury; the president of the National City Bank of New York, the most powerful bank of the time; a senior partner of the J.P. Morgan Company; the head of J.P. Morgan’s Bankers Trust Company; and a representative of the Rothschild banking dynasty in England and France.
In other words, of the six passengers, five of them were representatives of private banks. Those financiers would go on to meet in secret at a hideaway owned by J.P. Morgan and several of his business associates, where visitors would gather in the winter to hunt ducks. The name of this remote retreat: Jekyll Island. This group met in order to tackle five pressing issues:
- How to reverse the growing influence of small commercial banking rivals and concentrate financial power amongst themselves.
- How to allow the money supply to expand so that they could retake control of the industrial loan market.
- How to consolidate the modest reserves of the country’s banks into one large reserve and standardise each bank’s loan-to-deposit ratios, thus protecting themselves from the possibility of bank runs.
- How to shift any ultimate losses incurred by the banks onto taxpayers.
- How to convince the US government that the scheme was established to protect the public – as opposed to protecting the interests of a private banking cartel.
Perhaps most cynically of all, to address this fifth problem, the group decided to adopt the structure of a central bank and, furthermore, ditch the use of the word bank altogether, in favour of a coinage that would evoke the image of the federal government instead.
Three years later, after the passing of the resultant bill in Congress on 23 December, 1913, the US Federal Reserve was born.
“The Federal Reserve System,” it today proudly tells us, “is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.”
Few could deny the latter point. Rather than maintain a narrow focus on managing the money supply, the Fed is now figuratively all over the shop, its fingerprints evident everywhere across the economy. The financial historian and market analyst James Grant takes up the story:
“The Fed insists on saving us from ‘everyday low prices’ – they call it deflation. I submit that in a world of technological wonder, prices ought to be weakening: it costs less to buy things because it costs less to make them. This benign tendency the Fed resists at every turn. It wants the price level (as it defines it) to rise by two percent a year, plus or minus [As does the Bank of England and the ECB]. In so doing, it creates redundant credit that finds its way into other things. These excess dollars do mischief. On Wall Street we call this mischief a bull market and we’re generally all in favour of it. “The Fed, in substance if not in name, is [still] engaged in a massive experiment in price control. (They don’t call it that.) But they fix the Fed Funds rate, they manipulate the yield curve… they talk up the stock market. They have their fingers and their thumbs on the scale of finance. To change the metaphor, we all live to a degree in a valuation ‘hall of mirrors’. Who knows what value is when the Fed fixes the determining interest rate at zero? So I said ‘experiment in price control’ but there is no real suspense about how price control turns out. It turns out, invariably, badly.”
Price controls always ultimately fail. You cannot fool the market forever. The only question is how long it takes for that failure to occur. It can take some time. The great planned economy of the Soviet Union, for example, outlived an entire generation. Born in the chaos of the revolution of 1917, the Soviet Union persisted, despite itself, until the Berlin Wall finally came down in 1989. But price controls, and central economic planning, live on in the form of the modern central bank.
“Central bankers,” writes James Rickards in ‘The death of money: the coming collapse of the international monetary system’, “control the price of money and therefore indirectly influence every market in the world. Given this immense power, the ideal central banker would be humble, cautious and deferential to market signals. Instead, modern central bankers are both bold and arrogant in their efforts to bend markets to their will. Top-down central planning, dictating resource allocation and industrial output based on supposedly superior knowledge of needs and wants, is an impulse that has infected political players throughout history. It is both ironic and tragic that Western central banks have embraced central planning with gusto in the early twenty-first century, not long after the Soviet Union and Communist China abandoned it in the late twentieth. The Soviet Union and Communist China engaged in extreme central planning over the world’s two largest countries and one-third of the world’s population for more than one hundred years combined. The result was a conspicuous and dismal failure. Today’s central planners, especially the Federal Reserve, will encounter the same failure in time. The open issues are, when and at what cost to society?”
We are in the process of finding out.
A central bank is the last defender of a private banking system. The crowning irony of our predicament today is that in trying to save the system, the central banks are effectively doing all they can to bring about its destruction. How else can we regard the policies that central banks have recently foisted on the world – including the likes of QE, zero interest rates and even negative interest rates ?
Close to, or below, the theoretical “lower bound” of zero, strange things start to happen. QE and ZIRP (Zero Interest Rate Policy) were always promoted as a means of reflating the economy and getting people to spend. But it turns out, close to zero, many people, and companies – concerned about their financial future, and with good reason – chose to save even more. They chose to hoard money – but not necessarily within the banking system.
The Wall Street Journal during ZIRP and then NIRP (Negative Interest Rate Policy) cited the example of Heike Hofmann, a greengrocer in Korschenbroich, Germany.
“When Ms. Hofmann heard the ECB was knocking rates below zero in June 2014, she considered it “madness” and promptly cut her spending, set aside more money and bought gold. “I now need to save more than before to have enough to retire,” says Ms Hofmann..”
In December, Ms. Hofmann used her Christmas bonus to buy two small gold bars.
“She has since bought more and has put it, and every euro she can set aside, into a safe at home, saying she doesn’t trust banks. “Every time I check my savings account, it makes me want to cry.””
It turns out that a 54-year old greengrocer from Korschenbroich knows more about the banking system than any central banker.
The Wall Street Journal also quoted Lasse Bohmann, a 63-year old newsstand worker in Stockholm, who stated that the concept of negative interest rates is “weird”:
“I am just going to keep on putting money in the bank – or put it under the mattress at home.”
It turns out that a 63-year old Swedish newspaper seller also knows more about the banking system than any central banker.
Nor is this concern about the stability of the banking system limited to individuals. QE and NIRP was supposed to help companies, too. Not in the case of the German industrial gas business Messer Group, though. Their chief financial officer Hans-Gerd Wienands commented,
“This odd policy of negative interest rates hasn’t motivated us to invest more. On the contrary, it’s a signal that the economic situation isn’t improving.”
Messer Group did exactly the opposite of what the ECB wanted it to do. It paid down debt, and reduced the amount it invested from 20% of revenues in 2010 to just 12.5% in 2016.
For those of us living in the real world, as opposed to the ivory towers of central banking ideologues, we must shepherd our precious capital as best we can. Courtesy of the malinvestment triggered by prior monetary policy, the two traditional nominal assets – cash and bonds – are barely investible. Rather than leave your money vulnerable to inflation and systemic risk within the banking system, or seeking refuge in bonds that only offer a virtually guaranteed capital loss in real (after-inflation) terms, the answer is surely to embrace real assets at sensible valuations instead. By all means maintain a liquidity reserve in the form of cash, but cash as a form of investment stopped being fit for purpose quite some time ago. Although it involves inevitable price volatility, gold is, in our view, a far superior alternative to money on deposit today. We note that gold now accounts for 27% of global central bank reserves, as opposed to 22% in the form of US Treasury bonds. Dedollarisation is real, and seems set to continue in an inherently inflationist debt-clogged and fiscally libertine world.
James Grant (‘Inflation in a leveraged economy’, 8th May 2026):
“The Great Inflation, 1965–80, ruined lives, businesses, marriages, bond portfolios and central-banking reputations. What it did not threaten was the solvency of a relatively lightly leveraged nation.
“In 1981, the year when inflation gave way to disinflation, the funds rate peaked at 19.1%, the 30-year mortgage rate at 18.6% and the Moody’s Baa corporate bond index at 17.1%. Debtors groaned and creditors exulted, but the banking system, the credit markets and the Treasury lived to tell the tale.
“No matter how today’s macroeconomic tale unfolds, America will surely live to tell it. But as America is great, so are its debts.
“In 1980, total nonfinancial debt (corporate, household and all levels of government) registered at 136% of GDP. At year-end 2025, it registered at 257%.
“Today’s main monetary fact is that inflation is accelerating in a setting of high financial leverage. Since the start of the war with Iran, Brent crude oil prices have jumped by 55% and urea fertilizer prices by 63%. In 1973, the OPEC oil embargo curtailed 6% of the world’s oil supply; the closing of the Strait of Hormuz is curtailing 20% of the world’s oil supply. “The war is hitting the global economy in cumulative waves,” says Indermit Gill, chief economist of the World Bank: “first through higher energy prices, then higher food prices and, finally, higher inflation.”
Fight the berserker. Say no to high risk cash and high risk bonds and naked exposure to high risk fiat currency. Put your faith in something more tangible – real assets at fair prices. That includes high quality value stocks, and it includes the monetary metals, gold and silver, and related mining concerns, again at fair prices. Buy them now while you still can.
………….
As you may know, we also manage bespoke investment portfolios for private clients internationally. We would be delighted to help you too. Because of the current heightened market volatility we are offering a completely free financial review, with no strings attached, to see if our value-oriented approach might benefit your portfolio – with no obligation at all:
Get your Free
financial review
…………
Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. You can access a full archive of these weekly investment commentaries here. You can listen to our regular ‘State of the Markets’ podcasts, with Paul Rodriguez of ThinkTrading.com, here. Email us: info@pricevaluepartners.com.
Price Value Partners manage investment portfolios for private clients. We also manage the VT Price Value Portfolio, an unconstrained global fund investing in Benjamin Graham-style value stocks and real assets, and also in systematic trend-following funds.
“The evil that is in the world comes out of ignorance, and good intentions may do as much harm as malevolence, if they lack understanding. On the whole, men are more good than bad; that, however, isn’t the real point. But they are more or less ignorant, and it is this that we call vice or virtue; the most incorrigible vice being that of an ignorance that fancies it knows everything and therefore claims for itself the right to kill.”
Get your Free
financial review
Some of them are the size of a man, others are as big as a planet. But the Terminator was not the first. Long before Arnold Schwarzenegger’s lethal cyborg monotoned “I’ll be back,” Fred Saberhagen’s ‘Berserker’ series of short stories had already created a race of killer machines pursuing their own relentless logic: to destroy all living things.
The Berserkers, named after warriors from Norse mythology, are the ultimate doomsday weapons, intelligent machines constructed by a now long-dead race known as the Builders, to wipe out their rivals. The Builders, and their enemy, the Red Race, vanished into history eons ago. But the Berserkers ‘live’ on, obeying their ruthless programming to extinguish anything that possesses organic life. Like the Terminator, they can’t be reasoned with, or bargained with. They do not feel pity, or remorse. Their sole purpose is to destroy.
Science fiction invariably sheds new light on what already exists. ‘Berserker’, like much science fiction, is an examination of unintended consequences. We create things with one specific objective in mind, but over time that objective subtly, and then dramatically, changes. (We’ll discuss the risks posed by AI businesses to the financial markets – let alone humanity itself – in due course.)
Human institutions are like that. They may be founded with the best of intentions, but the road to hell, as we know, is paved with those intentions.
When central banks, for example, were first created, they arose out of a simple need: to raise finance for the governments they serve. The Bank of England, for example, claims that its “mission is to promote the good of the people of the United Kingdom by maintaining monetary and financial stability”. But it was not set up to “promote the good of the people” nor is that either realistically or honestly its mandate today. When it was established in 1694, the Bank of England was created explicitly to fund the government of the day, and that remains its primary role. The same holds for the Swedish National Bank, the Sveriges Riksbank, which was established in 1668 and which is the world’s oldest central bank.
Over time, each central bank has typically been given control over the management of its state’s currency, money supply and interest rates. In many cases, they have gone on to take a supervisory and regulatory role over the commercial banking system and acted, in times of crisis, as lender of last resort to troubled banks. Both the Bank of England and the Swedish National Bank have, over the passage of time, ceded primacy in international monetary affairs to the US Federal Reserve, the Fed. Yet the Fed’s conflicted origins are murkier than either of them. G. Edward Griffin, in his book ‘The Creature from Jekyll Island’, explains how the US Federal Reserve was conceived.
On a cold November night in 1910, a handful of financiers boarded a private railway car in conditions of extreme secrecy in New Jersey. The passengers included the Republican whip in the Senate and a business associate of the banker J.P. Morgan; the Assistant Secretary of the US Treasury; the president of the National City Bank of New York, the most powerful bank of the time; a senior partner of the J.P. Morgan Company; the head of J.P. Morgan’s Bankers Trust Company; and a representative of the Rothschild banking dynasty in England and France.
In other words, of the six passengers, five of them were representatives of private banks. Those financiers would go on to meet in secret at a hideaway owned by J.P. Morgan and several of his business associates, where visitors would gather in the winter to hunt ducks. The name of this remote retreat: Jekyll Island. This group met in order to tackle five pressing issues:
Perhaps most cynically of all, to address this fifth problem, the group decided to adopt the structure of a central bank and, furthermore, ditch the use of the word bank altogether, in favour of a coinage that would evoke the image of the federal government instead.
Three years later, after the passing of the resultant bill in Congress on 23 December, 1913, the US Federal Reserve was born.
“The Federal Reserve System,” it today proudly tells us, “is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.”
Few could deny the latter point. Rather than maintain a narrow focus on managing the money supply, the Fed is now figuratively all over the shop, its fingerprints evident everywhere across the economy. The financial historian and market analyst James Grant takes up the story:
“The Fed insists on saving us from ‘everyday low prices’ – they call it deflation. I submit that in a world of technological wonder, prices ought to be weakening: it costs less to buy things because it costs less to make them. This benign tendency the Fed resists at every turn. It wants the price level (as it defines it) to rise by two percent a year, plus or minus [As does the Bank of England and the ECB]. In so doing, it creates redundant credit that finds its way into other things. These excess dollars do mischief. On Wall Street we call this mischief a bull market and we’re generally all in favour of it. “The Fed, in substance if not in name, is [still] engaged in a massive experiment in price control. (They don’t call it that.) But they fix the Fed Funds rate, they manipulate the yield curve… they talk up the stock market. They have their fingers and their thumbs on the scale of finance. To change the metaphor, we all live to a degree in a valuation ‘hall of mirrors’. Who knows what value is when the Fed fixes the determining interest rate at zero? So I said ‘experiment in price control’ but there is no real suspense about how price control turns out. It turns out, invariably, badly.”
Price controls always ultimately fail. You cannot fool the market forever. The only question is how long it takes for that failure to occur. It can take some time. The great planned economy of the Soviet Union, for example, outlived an entire generation. Born in the chaos of the revolution of 1917, the Soviet Union persisted, despite itself, until the Berlin Wall finally came down in 1989. But price controls, and central economic planning, live on in the form of the modern central bank.
“Central bankers,” writes James Rickards in ‘The death of money: the coming collapse of the international monetary system’, “control the price of money and therefore indirectly influence every market in the world. Given this immense power, the ideal central banker would be humble, cautious and deferential to market signals. Instead, modern central bankers are both bold and arrogant in their efforts to bend markets to their will. Top-down central planning, dictating resource allocation and industrial output based on supposedly superior knowledge of needs and wants, is an impulse that has infected political players throughout history. It is both ironic and tragic that Western central banks have embraced central planning with gusto in the early twenty-first century, not long after the Soviet Union and Communist China abandoned it in the late twentieth. The Soviet Union and Communist China engaged in extreme central planning over the world’s two largest countries and one-third of the world’s population for more than one hundred years combined. The result was a conspicuous and dismal failure. Today’s central planners, especially the Federal Reserve, will encounter the same failure in time. The open issues are, when and at what cost to society?”
We are in the process of finding out.
A central bank is the last defender of a private banking system. The crowning irony of our predicament today is that in trying to save the system, the central banks are effectively doing all they can to bring about its destruction. How else can we regard the policies that central banks have recently foisted on the world – including the likes of QE, zero interest rates and even negative interest rates ?
Close to, or below, the theoretical “lower bound” of zero, strange things start to happen. QE and ZIRP (Zero Interest Rate Policy) were always promoted as a means of reflating the economy and getting people to spend. But it turns out, close to zero, many people, and companies – concerned about their financial future, and with good reason – chose to save even more. They chose to hoard money – but not necessarily within the banking system.
The Wall Street Journal during ZIRP and then NIRP (Negative Interest Rate Policy) cited the example of Heike Hofmann, a greengrocer in Korschenbroich, Germany.
“When Ms. Hofmann heard the ECB was knocking rates below zero in June 2014, she considered it “madness” and promptly cut her spending, set aside more money and bought gold. “I now need to save more than before to have enough to retire,” says Ms Hofmann..”
In December, Ms. Hofmann used her Christmas bonus to buy two small gold bars.
“She has since bought more and has put it, and every euro she can set aside, into a safe at home, saying she doesn’t trust banks. “Every time I check my savings account, it makes me want to cry.””
It turns out that a 54-year old greengrocer from Korschenbroich knows more about the banking system than any central banker.
The Wall Street Journal also quoted Lasse Bohmann, a 63-year old newsstand worker in Stockholm, who stated that the concept of negative interest rates is “weird”:
“I am just going to keep on putting money in the bank – or put it under the mattress at home.”
It turns out that a 63-year old Swedish newspaper seller also knows more about the banking system than any central banker.
Nor is this concern about the stability of the banking system limited to individuals. QE and NIRP was supposed to help companies, too. Not in the case of the German industrial gas business Messer Group, though. Their chief financial officer Hans-Gerd Wienands commented,
“This odd policy of negative interest rates hasn’t motivated us to invest more. On the contrary, it’s a signal that the economic situation isn’t improving.”
Messer Group did exactly the opposite of what the ECB wanted it to do. It paid down debt, and reduced the amount it invested from 20% of revenues in 2010 to just 12.5% in 2016.
For those of us living in the real world, as opposed to the ivory towers of central banking ideologues, we must shepherd our precious capital as best we can. Courtesy of the malinvestment triggered by prior monetary policy, the two traditional nominal assets – cash and bonds – are barely investible. Rather than leave your money vulnerable to inflation and systemic risk within the banking system, or seeking refuge in bonds that only offer a virtually guaranteed capital loss in real (after-inflation) terms, the answer is surely to embrace real assets at sensible valuations instead. By all means maintain a liquidity reserve in the form of cash, but cash as a form of investment stopped being fit for purpose quite some time ago. Although it involves inevitable price volatility, gold is, in our view, a far superior alternative to money on deposit today. We note that gold now accounts for 27% of global central bank reserves, as opposed to 22% in the form of US Treasury bonds. Dedollarisation is real, and seems set to continue in an inherently inflationist debt-clogged and fiscally libertine world.
James Grant (‘Inflation in a leveraged economy’, 8th May 2026):
“The Great Inflation, 1965–80, ruined lives, businesses, marriages, bond portfolios and central-banking reputations. What it did not threaten was the solvency of a relatively lightly leveraged nation.
“In 1981, the year when inflation gave way to disinflation, the funds rate peaked at 19.1%, the 30-year mortgage rate at 18.6% and the Moody’s Baa corporate bond index at 17.1%. Debtors groaned and creditors exulted, but the banking system, the credit markets and the Treasury lived to tell the tale.
“No matter how today’s macroeconomic tale unfolds, America will surely live to tell it. But as America is great, so are its debts.
“In 1980, total nonfinancial debt (corporate, household and all levels of government) registered at 136% of GDP. At year-end 2025, it registered at 257%.
“Today’s main monetary fact is that inflation is accelerating in a setting of high financial leverage. Since the start of the war with Iran, Brent crude oil prices have jumped by 55% and urea fertilizer prices by 63%. In 1973, the OPEC oil embargo curtailed 6% of the world’s oil supply; the closing of the Strait of Hormuz is curtailing 20% of the world’s oil supply. “The war is hitting the global economy in cumulative waves,” says Indermit Gill, chief economist of the World Bank: “first through higher energy prices, then higher food prices and, finally, higher inflation.”
Fight the berserker. Say no to high risk cash and high risk bonds and naked exposure to high risk fiat currency. Put your faith in something more tangible – real assets at fair prices. That includes high quality value stocks, and it includes the monetary metals, gold and silver, and related mining concerns, again at fair prices. Buy them now while you still can.
………….
As you may know, we also manage bespoke investment portfolios for private clients internationally. We would be delighted to help you too. Because of the current heightened market volatility we are offering a completely free financial review, with no strings attached, to see if our value-oriented approach might benefit your portfolio – with no obligation at all:
Get your Free
financial review
…………
Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. You can access a full archive of these weekly investment commentaries here. You can listen to our regular ‘State of the Markets’ podcasts, with Paul Rodriguez of ThinkTrading.com, here. Email us: info@pricevaluepartners.com.
Price Value Partners manage investment portfolios for private clients. We also manage the VT Price Value Portfolio, an unconstrained global fund investing in Benjamin Graham-style value stocks and real assets, and also in systematic trend-following funds.
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