Macleod: an epic crash is inevitable

Key Markets report for Tuesday, July 22, 2025

For many years now, I’ve all but stopped reading and listening to market analysts, with a few notable exceptions. One of them is Alasdair Macleod, not because his predictions are more accurate than those of other analysts but because, as a former banker, he commands a deep understanding of the way our economic and financial systems evolved and the way they operate today. In that, he offers a broad context without which it would be impossible to understand the big picture within which current events are unfolding.

On Sunday, Macleod gave a long-form interview on GoldRepublic Global podcast which I would highly recommend. The gist of the discussion could be summarized alongside Ludwig von Mises’ quote on credit expansion:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

Ultimately, credit expansion is the one force that has been blowing up today’s equities bubble which Macleod says is the greatest bubble in history, eclipsing the1636 Tulip-mania, 1720 Mississippi bubble or Wall Street’s Roaring 20s. The credit expansion that lead to today’s bubble is far larger than anything we’ve seen in history and its collapse could be a bigger event than anything we’ve seen in history.

However, forecasts may be useless, even if correct

Of course, there is no predicting when this could happen: bubbles can persist for a considerable time as history has shown. During the 1990s dotcom bubble, many market pundits warned about the overvaluation of stocks long before the bubble burst. Already in December 1996 the "maestro," Alan Greenspan himself warned investors about "irrational exuberance" in the markets. Over the next four years the Nasdaq would more than triple. In only the last five months of its seemingly unstoppable bull run, Nasdaq added fully 110% before finally peaking.

The implication of these lessons should not be understated: we can’t and shouldn’t attempt to predict either the timing or the price level at which the current bubble might peak. The best course of action is simply to stay with the prevailing trend until it reverses. Of course, that precludes selling at the top but trying to do that could set you on the wrong side of the bubble’s final phases which could resemble Nasdaq’s last hurrah in 1999/2000.

From there, real trend reversals take months to form, enabling trend followers to switch directional exposure from long to short and then benefit from the ensuing bear market, which could be on the cards once the credit bubble implodes, which is only a matter of when, not if.

Eyes on Great Britain

Good part of Macleod’s interview focuses on Great Britain and his take fully corroborates my own take, which I laid out in a series of articles published since 2021. Not only is the UK’s fiscal position utterly catastrophic, the government’s policies are making things a lot worse: Chancellor Rachel Reeves has significantly increased government spending and attempted to come up with the funding by squeezing businesses and top income earners. Today, the top 1% of earners in Britain pay as much as 30% of all income taxes, but they are also the segment that is best positioned to simply leave Britain for friendlier fiscal regimes.

Increasing fees and taxes of businesses has led to a rise in unemployment, which is only adding to government expenditures while reducing its tax revenues. With regards to financial aggregates and government’s statistics, Macleod confirms my own impression that they’re “absolute rubbish.” Great Britain today is sinking deeper and deeper into a debt trap from which there doesn’t seem to be a way out, other than an ultimate collapse of its credit and its currency. This is exactly what I had predicted back in 2021. Incidentally, that prediction is another case in point showing that market events can take a very long time to play out and that trend following is far more reliable as a market navigation guide than even correct prediction.

Macleod believes that the risk of holding British gilts is far greater than investors recognize and while the government can support their price to an extent through financial repression (coercing domestic funds and insurance companies to buy gilts), the downside risk is exacerbated by the fact that some 30%-40% of all gilts outstanding are in foreign ownership. Once foreign owners of British gilts decide they want out, a stampede could result, which could accelerate their collapse. The British pound will crater along with the gilts.

Metals prices set to soar?

Another area Macleod touched upon is the price of metals, which has been suppressed for decades. He believes that in order for base metals prices to return to historical norms, they should soar by about 400% in terms of gold and much more so in US dollar terms. Silver and copper, which are most widely used industrial metals, could lead the way of this large-scale price event. As a concrete example, Macleod believes that the silver/gold ratio should be about 50 (silver being 1/50th the price of gold). At today’s gold prices, this implies that the price of silver should be at about $68/tr.oz. - almost double what it is today.

Of course, even if these predictions are correct, there’s no predicting any asset’s price trajectory even during today’s trading session, let alone over the long term. What is certain, is that in fullness of time, Ludwig von Mises will be proven right: there’s no avoiding the final collapse of a boom brought about by credit expansion. The best course of action for investors is probably to follow trends and diversify.

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Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio: