Piet Viljoen: Don't hold the bag when the fiat illusion collapses – buy gold, land, and real businesses
Piet Viljoen: Don't hold the bag when the fiat illusion collapses – buy gold, land, and real businesses
Key topics:
Year of the Fire Horse signals change and volatility
Rising inequality, inflation, and elite overproduction
History shows fiat money loses value in crises
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By Piet Viljoen*
This week marks the start of the Chinese New Year, and this year is denoted as the year of the horse. More specifically, this year is the year of the fire horse, as each of the 12 Chinese zodiac signs is associated, in turn, with one of the 5 elements – earth, wood, fire, metal and water.
The year of the Fire Horse only comes around every 60 years. The last time it happened was in 1966, at the start of the Chinese Cultural Revolution – a time of great social upheaval which left deep scars on Chinese society.
Often, the year of the Fire Horse portends change and volatility, which brings the lyrics to this great Talking Heads song to mind:
You may find yourself living in a shotgun shack
You may find yourself living in another part of the world
You may find yourself behind the wheel of a large automobile
You may find yourself in a beautiful house with a beautiful wife
And you may ask yourself,
Well…how did I get here?
And you may ask yourself, “How do I work this?”
And you may ask yourself, “Where is that large automobile?”
And you may tell yourself, “This is not my beautiful house”
And you may tell yourself, “This is not my beautiful wife”
– “Same as it ever was” by the Talking Heads.
The government wants to give you a bag. Inside this bag is money that they recently printed. The bag is supposed to make you feel richer, for which the politicians and bureaucrats want you to be grateful.
But be careful – this bag will make you unhappy.
Here’s how democracies work. The government’s overriding objective is not long-term prosperity; it’s short-term happiness. Just enough to get you to the ballot box to vote for them. Policies are designed to feel good now but inevitably have the unintended consequence of hurting you later. When the hurt arrives, the government is nowhere to be seen. Same as it ever was.
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As Amanda (ED: Piet’s wife) said one evening last week, most people should prefer a benevolent dictator over a matzah-pudding democracy. But they don’t – they have been conned into playing the democracy game.
This game is as old as the hills. Governments hand out bags of money – tax breaks, subsidies, stimulus, incentives – and then quietly take back more than they gave you through indirect taxes, inflation, regulatory costs, levies, fees, and friction. For a long time, most people still ended up with something in the bag, which produced a reasonably contented electorate.
But that balance has broken.
Increasingly, those who understand how the system works have shifted the burden to others. Their bags got bigger. Everyone else’s got smaller. By month-end, there was nothing left to put away – just enough to survive. You can’t compound capital if you’re permanently treading water.
Even worse, many were left without a bag.
So, the players who could play the game became fewer and richer. Those who couldn’t became more numerous – and poorer. Only recently has this widening gap become impossible to ignore, despite endless political lip service to “corrective” policies. Under the cover of DEI and ESG initiatives, the global elites just become wealthier. Greta Thunberg’s handlers succeeded in their mission.
But this is not new. Inequality is not a bug in the system – it’s a feature. It’s a forcing function. It’s what motivates sacrifice: parents working longer hours to earn more so their children can be educated, those children earning more, and their children doing even better. Over generations, families move up the curve, and society benefits. If everyone were perfectly equal, no one would bother.
The problem is not inequality. The problem is excessive inequality.
Instead of trying to forecast how things will play out, let’s look at history. History is very clear about what happens when the gap stretches too far.
Lesson of history #1: In the Roman Empire, rising inequality and fiscal stress were met by debasing the currency. Silver coins were diluted until confidence collapsed. The empire didn’t fall because of barbarian invasions – it fell because the money failed.
Lesson of history #2: In pre-revolutionary France, wealth concentrated at the top while the state tried to paper over deficits. When inflation and food shortages (“let them eat cake”) followed, redistribution came not through policy, but through violence.
Lesson of history #3: In Weimar Germany, inequality, debt, and political instability ended in inflation so extreme that it destroyed the middle class, the very group that had played by the rules. The only players left were those who ignored all the rules of decency.
History shows there are only two ways a surplus concentrated in the hands of the few gets redistributed. Either it is taken by force – war, revolution, confiscation – or it is taken quietly through policy. That policy is called inflation.
Peter Turchin, in his book “End Times: Elites, Counter Elites and the Path of Political Disintegration”, argues that the most dangerous combination in any society is massive wealth inequality plus elite overproduction – too many educated, ambitious people chasing too few real positions of power and status. That mix has always produced instability.
We already have record inequality. We already have elite overproduction. And now AI is accelerating both – simultaneously. So whichever path society chooses from here – and right now it could go either way – the game will change.
But the outcome is inevitable. Fiat money will be the casualty.
That’s not ideology. That is history. That is the future.
Read more:
Here are the rules of the new game. Take the bag – but don’t keep what’s in it. Exchange it for something that cannot be printed. Scarcity is the clue. If supply can’t be expanded at will, it will eventually outrun whatever’s in the bag. Gold. Land. Productive assets, like businesses, own things with pricing power. Maybe illiquid, but real. Then wait. As more bags are filled with printed money, demand rises, supply doesn’t, and prices follow.
The final rule is simple:
Don’t be the bag holder.
Because in every historical cycle like this, the bag always ends up worthless.
Piet Viljoen is the founder of Re:CM and one of SA’s most respected money managers. He is the only keynote speaker to have presented at every BizNews Conference and will do so again next month at BNC#8. To get his weekly newsletter sent directly to your inbox, click here.
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