“Financial repression is most successful when accompanied by a steady dose of inflation and an unsuspecting public.” ~ M. Belen Sbrancia, University of Maryland, IMF, and Carmen Reinhart, Chief Economist, World Bank.

Across the developed world, long-term government bond yields are on the rise. From the U.S. to the UK, Germany, France, and even in yield-suppressing Japan, long-term borrowing costs are marching higher. Markets are beginning to reckon with a truth long avoided: government debt has reached levels that no longer square with economic fundamentals, and the consequences for capital markets — and society — will be profound.

As national debts climb and unfunded pension and government liabilities loom larger, governments find themselves trapped. They cannot default. They cannot grow their way out. They cannot slash spending meaningfully without social unrest or political suicide. And so, we move toward the inevitable: debt monetisation, aka financial repression.

Let’s first consider the current trajectory. Rising long-term yields signal a breakdown in confidence. As bond vigilantes return, demanding higher compensation for duration and inflation risk, asset prices across the board suffer. Equities, reliant on low discount rates, falter. Housing markets, built on the back of ultra-cheap mortgages, begin to crack. Private equity, venture capital, and long-duration growth trades, all teeter. For governments, this is no less than a fiscal death spiral: higher yields mean higher interest costs, worsening deficits, and feeding the very fire that ignites more rate pressure.

And this is the inevitable conundrum: the road we are on, leads to a wall of debt, fortified by bond vigilantes. At this junction, there are only two solutions.

First, austerity. But as mentioned, this road is fraught with danger. Not least, there is no incentive for any politician to choose this path.

The alternative? Financial repression — a quiet, systemic transfer of wealth from savers to sovereigns. Through tools like yield curve control, regulated captive demand, and inflation above nominal rates, governments can suppress yields artificially. This comes at a cost: distorted markets, malinvestment, the erosion of trust in fiat currencies, and the slow but certain decimation of real savings.

Gold, the ultimate barometer of distrust, is flashing bright warnings. It's not just a hedge — it's a vote of no confidence in the system.

Neither outcome is painless. Austerity brings volatility, price destruction, and inevitable social unrest. The other brings stagnation, stealth taxation, and capital controls. The only certainty is this: the rules of the last 40 years no longer apply.

To navigate what comes next, portfolios must evolve. Capital must be treated as precious and vulnerable. And we, as stewards of wealth, must prepare for a world where money itself is no longer a safe store of value.

“Inflation is the one form of taxation that can be imposed without legislation.” ~ Milton Friedman