A Time for Strategic Patience

Posted on July 19, 2025

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These are my personal views, shared as-is. Please verify the data and form your own conclusions before acting. References are included at the end of this missive for the curious.

With a tax-heavy Labour government evoking echoes of 1970s stagnation, the UK appears headed for a new era of fiscal drag and structural weakness in the Great British Pound (GBP). Combine that with fragile growth, persistent inflation and a stretched consumer base and the stage is set for a slow but steady GBP devaluation in real terms.

A simple look at currency fundamentals amid the UK’s worsening economic outlook reveals a stark disconnect. While official Consumer Price Index (CPI) inflation sits at 3.6%, real household inflation is running closer to 5% and rising. Even official forecasts now point to an uptick. This fits the classic financial repression playbook, governments suppress interest rates, inflate away debt and restrict capital movement, all under the guise of policy.

In truth, it is a form of state-sanctioned wealth erosion. Savers are punished, the value of money is quietly drained and poor fiscal management is hidden behind inflation and artificial rate control. It is not just bad economics, it is a betrayal of those who act prudently.

This is not strategic policy; it is the result of fiscal ineptitude, monetary arrogance and reckless spending dressed up as investment. Yet, those now steering the UK economy, none of whom have run a business or have real frontline commercial experience, seem oblivious to the commercial realities their policies are undermining. A pity they do not have the foresight to apply hindsight to draw on the lessons of the past they are blindly echoing.

If only people would see it for what it is. Imagine you are walking down the street and some total stranger strolls up, smiles politely and reaches into your back pocket or purse to help themselves to your hard earned cash. You’d should ‘thief’ and call the police, right? (… OK, the police bit is perhaps wistful thinking) … But dress that same theft up in a suit, call it a policy, slap the word ‘norm’ on it and suddenly it’s perfectly acceptable.

Welcome to the ‘Reality Distortion Field‘, where systemic pickpocketing is legitimised for government use only, rebranded as civic duty and if you dare to question it, you are the problem.

Wake up. It is not contribution, not fairness, not even clever. See it and call it out for what it is = THEFT, with better PR.

Even if this were acceptable and just part of a typical fiscal / monetary cyclical balancing act, how can this still be tolerable? Here in the UK (and the USA and most of the EU!) we are being driven by debt-blind policymakers who do not seem to care, into structurally dangerous territory, afterall it is not their money! The UK’s debt servicing costs have now overtaken government revenues and are set to continue rising, leading to the inevitable increases in taxation, effectively fueling an already raging fire. Borrowing is growing not only to fund an overstretched public sector with wage demands out of step with productivity, but increasingly just to service the mounting debt itself. As if that was not enough, the bond markets are already signaling unease and with Donald Trump’s ‘One Big Beautiful Bill’ set to flood global markets with US bonds, the UK will face even greater pressure to attract buyers for its government debt, likely forcing the Bank of England to intervene and cancel its quantitative tightening (QT) to prop up demand.

This has all the hallmarks of heading toward a classic debt spiral. Growth has been stalled, business confidence is collapsing and the Bank of England has limited tools left. With interest rate cuts offering diminishing returns, the next step will be debt monetisation (buying Government debt) and quantitative easing (QE) as the country enters a monetary ‘death zone’. This has only one ending. Once the Bank of England exhausts reserves in the forlorn hope of propping up the GBP, reality sobers everyone up as the inevitable currency devaluation re-sets the landscape. History repeats itself, as it always does with modern politicians memories that would struggle to challenge a gold fish on recall. The rhyme is old and painfully familiar.

Shifting away from the doom and gloom, there will be opportunities when any economy unravels in this way. Periods of disruption often spark innovation, asset repricing and new openings for switched on investors. However, being caught in a collapsing GBP would erase any potential advantage. With that in mind, it’s worth asking, why hold substantial cash reserves in GBP at all? The smarter question is, where can cash be held more securely and strategically to preserve value and seize the upside when it comes?

The canny opportunist knows better than to sit on large reserves of GBP in times of volatility. Instead, they seek out safer harbours, ‘hard’ currencies with a track record of stability and resilience. One of the most favoured alternatives is the Swiss Franc (CHF), long regarded as a financial fortress with low inflation, a strong central bank and a deep-rooted culture of monetary prudence.

Other strong contenders should not be discounted, the Singapore Dollar (SGD), backed by a highly disciplined fiscal regime and a government with a firm grip on financial stability and do not forget the Norwegian Krone (NOK), buoyed by Norway’s sovereign wealth fund and resource-rich economy. While NOK is sensitive to fluctuations in global energy prices, that same linkage can be an asset during periods of rising energy demand, often a time when USD and GBP show relative weakness. In an era where the rules are being rewritten, the smart money flows to where stability still matters and is less exposed to political turmoil and fiscal overstretch.

Which brings me back to the CHF. The Swiss central bank continues to act conservatively, maintaining low inflation (almost deflationary) and a reputation for currency resilience. CHF isn’t offering high yields (in fact may dip into negative interest), but it doesn’t need to. What it offers is stability, integrity and purchasing power preservation, even through market downturns and political cycles.

The real opportunity arises in what comes next. As GBP weakens, whether from policy missteps, capital flight or international sentiment, assets in the UK will become cheaper for anyone holding stronger foreign currencies. That includes property, equities, distressed businesses and even gilts. For those with cash parked in CHF, this becomes a golden buying window.

The  chart below show the performance of the CHF against GBP over the past 40 years, even when adjusted for inflation and then both inflation and interest (even when CHF goes interest negative).

CHF has consistently preserved purchasing power, making it a serious consideration for anyone looking to protect capital real value ahead of a potential GBP correction. Holding CHF has not only preserved real purchasing power, but quietly outperformed the GBP even when UK interest rates were higher and the CHF interest is at 0%. So when overlaying today’s political and economic backdrop onto that long-term trend, the case for holding GBP becomes increasingly tenuous.

For you guys and gels across the pond there is a similar correlation with the USD.  CHF still appreciates against USD in real terms, but the gain is less steep than against GBP. This is because US monetary policy has historically maintained a tighter grip on inflation and USD has offered better real returns over time than GBP, its reserve currency status being the most significant factor. Please do your own due diligence.

Think of it as strategic patience, step out of the storm with your capitals ‘real value’ intact and return when the downpour clears and assets are on sale.

The formula is simple but potent, hold cash in CHF (or your preferred alternative), wait for GBP weakness, then re-enter the market with more real value purchasing power than you had when you left. It’s not currency speculation, it’s long-range capital positioning. In a world where governments are increasingly the biggest risk to wealth, that kind of positioning may be the only rational play left.

For the Gold bugs reading this, yes Gold has a place too, outperforming CHF in cumulative real terms over the long run, especially during global uncertainty or monetary excess as the chart below shows:

CHF, however, provides lower volatility and higher liquidity as a ‘hard’ currency haven with real yield preservation, even without the speculative upside of gold.

Together, they offer complementary roles and both have a place in a well balanced portfolio. Gold for long-term value anchoring, CHF offers a fiat-based alternative to preserve wealth for capital stability and optionality.

In times like these, cash is not just king, it’s a geopolitical consideration. Make it count.

I reiterate for those who have persisted this far … these views are my own and I share as is, so please check the data yourself and formulate your own opinions. I would welcome any feedback if you identify anomalies so I can correct them and perhaps buy you a beverage of your choice if you save me from a fools errand!

Some of the sources I used included:

Inflation Data

Interest Rate Data

Gold Data

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