During the past year, Bryan Mercadente and Yours Truly have been preaching the same sermon about the future of the world economy. It is in serious trouble. Western governments are bankrupt. The international monetary system is unstable. Most recently, the war against Iran has disrupted one of the principal arteries of world trade. Therefore, anyone with savings who does not want to see them confiscated by events should own gold and silver. I still agree with the conclusion of this argument. I am, however, becoming less certain about its premise

Yes, buy gold. Buy silver. If you have enough money after that, buy other things that cannot be produced by touching a keyboard at the Bank of England. But do not necessarily buy them because civilisation is about to collapse. Unless our rulers manage another achievement of quite exceptional stupidity, I suspect the more likely future is almost the reverse. We may be standing at the beginning of one of the greatest economic booms in history. The mistake – and it possible that I have made this – is to confuse the approaching collapse of the monetary order with a collapse of the productive order. They are not the same thing. Indeed, the first may accompany an extraordinary expansion of the second.

Let us begin with the war against Iran. I will not elaborate what I think of this miserable adventure. I have already given my views at length, and I see no reason to repeat them, though I might as well summarise them. The Americans and Israelis began with the usual confidence that overwhelming technological superiority would produce a quick victory over an inferior enemy. Instead, the Americans have discovered yet again that blowing things up is easier than arranging the political consequences of their destruction. Iran has not surrendered. The Strait of Hormuz has been largely closed. The world has suffered its greatest oil-supply disruption in decades. Washington has discovered that possessing the world’s most expensive armed forces does not necessarily mean possessing the ability to achieve whatever political result happens to be desired.

My expectation is that the war will end in what, stripped of diplomatic language, amounts to an American surrender. This will not be called a surrender. That is one of the few predictions about which I feel confidence. There will be an agreement containing enough decorative clauses for Donald Trump to announce that Iran has conceded everything he demanded. There may be undertakings whose meaning depends on punctuation. There may be promises to discuss other promises at some indefinite future date. The President will announce the greatest diplomatic victory since the Congress of Vienna, and his admirers will explain that everything happened exactly as he intended. “They will, I have little doubt, call it 4D Chess.” They would call it that if it meant an Iranian occupation of Washington. But the substance will be that America stops trying to compel Iran by military force, and Iran allows normal commercial traffic through the Strait.

What presently delays this outcome is partly the need of the Trump Administration for some half-credible lie that it has not presided over a miserable failure. It is partly the continuing pressure of the Israeli Government, which has reasons of its own for wanting the Americans committed indefinitely to the war. Neither difficulty is permanent. Reality is patient. Politicians eventually negotiate with it. When they do, the oil will flow again.

There has been damage. There are damaged installations, disrupted shipping patterns and depleted inventories. Insurance costs have risen. Supply arrangements that had evolved over decades have been thrown into confusion. None of this should be dismissed. Nor does reopening the Strait mean that a switch will be thrown on Monday morning and the energy economy will have returned to normal by Tuesday afternoon. But neither should temporary disruption be confused with the destruction of productive capacity. Oil still exists beneath the ground. The tankers still exist. The pipelines mostly still exist. Refineries can be repaired. Ports can be cleared. Commercial incentives for doing all these things are enormous. Human beings are most talented at repairing physical damage when governments stop preventing them. Once the oil begins moving freely again, one of the principal constraints on the world economy will disappear. It may disappear at just the moment when several other constraints are being removed.

The first of these is technological. Others have written here about artificial intelligence, and I see no reason to dispute any of this. The usual discussion of AI concentrates on employment. Accountants will disappear. Solicitors will disappear. Various people who presently earn agreeable salaries by moving information between computer screens will discover that machines can do their jobs faster and more cheaply. This is unfortunate for them. It is magnificent for everyone else. Artificial intelligence is not another consumer technology. It is a general reduction in the cost of applying intelligence to production. Combine it with robotics, increasingly autonomous manufacturing, improved materials science, biotechnology and the continuing cheapening of computation, and we have something comparable not with the arrival of the smartphone but with the cluster of innovations that produced the Industrial Revolution.

We are acquiring machines that can increasingly design other machines, diagnose faults, optimise production, organise logistics and perform physical operations with diminishing human supervision. The immediate consequence will be disruption. The eventual consequence will be a collapse in the real cost of producing an immense range of goods and services.

There is another revolution waiting beside it, and this is political rather than technological. The Green veto is dying – and here I turn to Mr Bickley’s recent article, which is the inspiration for my own. For perhaps a generation, Western governments have treated cheap and abundant energy as though it were a social evil. Electricity systems have been deliberately made expensive and unreliable. Coal stations have been demolished. Nuclear power has been obstructed. Oil and gas extraction have been surrounded with restrictions. Industrial production has been burdened with energy costs that competitors elsewhere in the world were not required to bear.

This was sold as environmental necessity. Whatever one thinks about the underlying climate arguments, the economic effect was obvious. Energy is not merely another item in the shopping basket. It enters into almost everything. Make energy expensive and you make steel expensive. You make fertiliser expensive. You make transport expensive. You make glass, cement and chemicals expensive. You eventually make the whole productive structure more expensive.

But the priorities of the Western ruling class are changing. Yesterday it wanted deindustrialisation. Tomorrow it wants reindustrialisation. Yesterday cheap energy was a sin. Tomorrow expensive energy will be an obstacle to national security. The slogans will change with astonishing speed. This should surprise nobody. Principles held by governments are usually descriptions of temporary convenience. Once the convenience changes, yesterday’s eternal moral imperative becomes today’s regrettable misunderstanding. We shall not be invited to notice the transition.

The Green movement will not formally be repudiated. It will simply undergo reinterpretation. Nuclear power will become green. Natural gas will become transitional. New drilling will become strategic resilience. Industrial electricity subsidies will become investments in national security. The people who spent twenty years telling us that cheap energy would destroy the planet will explain, without visible embarrassment, that cheap energy is indispensable to saving it.

There may therefore be a conjunction of circumstances unusually favourable to rapid economic growth: restored energy supplies from the Persian Gulf, the political removal of restrictions on domestic energy production, and a cluster of technologies capable of producing enormous increases in productivity.

Against this optimistic picture stands the mountain of Western public debt. Britain is effectively bankrupt. So are several other Western governments, if by bankruptcy we mean an inability to honour all promises in money of unchanged purchasing power without taxation on a scale that would become politically or economically intolerable. America has accumulated debts so enormous that the figures cease to convey useful information. Governments have promised pensions, healthcare, welfare benefits and debt service far beyond anything that can comfortably be financed from future taxation. The conventional alternatives are unpleasant. Taxes can remain permanently high. Public spending can be cut. Governments can default.

There is, however, another alternative, and it has been available to indebted rulers since the invention of debased coinage. They can cheat. A government that owes its debts in a currency it ultimately controls is in a radically different position from a household or business. An ordinary citizen cannot extinguish his mortgage by manufacturing pounds in his kitchen. The British Government can, in substance if not through precisely that mechanism. The American Government possesses the same privilege on a still grander scale. The coming boom may therefore coincide with a deliberate inflationary liquidation of Western public debt.

This need not mean wheelbarrows of banknotes. Hyperinflation is usually the product of political collapse combined with fiscal insanity. Something more controlled will do the job perfectly well. If nominal incomes and prices are allowed to rise substantially over a decade while government debts remain fixed in nominal terms, the real burden of those debts collapses.

Suppose a government owes £1 trillion. Double the general price level and, measured against real goods and incomes, half the debt has disappeared. Nothing has been formally repudiated. Every gilt can be redeemed at its stated face value. The creditors receive precisely the number of pounds they were promised. The difficulty is that they receive pounds worth much less. This is default conducted by arithmetic rather than announcement.

From an Austrian perspective, we should not imagine that this is harmless. Money is not a veil that can be stretched or shrunk without affecting the real economy. New money enters at particular points. It changes relative prices before it changes the general price level. It falsifies the signals communicated through interest rates. Entrepreneurs are encouraged into investments that appear profitable only because the monetary authorities have corrupted the calculations on which those investments depend.

The Cantillon effects will be enormous. Those nearest the source of new money will gain before prices have fully adjusted. Holders of cash and fixed-interest securities will lose. Pensioners living on inadequately indexed incomes will discover that solemn promises are worth less than expected. Capital will be directed into projects that make sense under the monetary conditions created by governments but not under the underlying conditions of voluntary saving and consumer demand.

If interest rates are held below their market level to facilitate government borrowing and industrial expansion, the distortion will be greater. The structure of production will lengthen without the real saving that would ordinarily sustain it. Some investments will eventually be exposed as malinvestments. There will be bankruptcies. There may be recessions within the larger expansion. None of this implies the end of civilisation. This distinction matters. Austrian economics does not teach that every credit expansion must end with everyone eating rats in a cellar. It teaches that monetary manipulation distorts the coordination of production through time. The severity of the correction depends on the scale of the distortion and on the underlying productive circumstances.

Those underlying circumstances may shortly be most favourable. Imagine an economy in which artificial intelligence is reducing administrative and design costs, robots are reducing manufacturing costs, cheap electricity is returning, and vast sums are being directed into mines, factories, power stations and transport infrastructure. Now superimpose monetary inflation on this. There will be waste. There will be absurd projects. There will be fortunes made by fools who mistake monetary inflation for personal genius. There will eventually be spectacular bankruptcies. There may nevertheless be enormous real growth. The railway mania of the nineteenth century destroyed fortunes. It also left Britain covered with railways. The dot-com bubble destroyed fortunes. It also left behind fibre-optic networks, data centres and a generation of engineers. A boom can be financially irrational while being technologically transformative.

Indeed, this may be the central economic fact of the coming decade. The monetary system may become less sound while the real economy becomes more productive. Those who look only at government balance sheets will predict collapse. Those who look only at technological progress will predict effortless prosperity. Both will be wrong. We may instead get inflationary prosperity: rapidly increasing productive capacity accompanied by a rapid decline in the purchasing power of the monetary units in which that capacity is measured. The Far East has long been familiar with this combination.

This brings me back to gold and silver. If I expected the collapse of civilisation, I would certainly want gold. I might also want canned food, antibiotics and a house with thick walls somewhere in the countryside. But none of these follows from what I am predicting. I want gold because governments cannot print it. Its attraction is not that factories will close. Its attraction is that factories may be opening everywhere while the currency in which their output is priced is being deliberately degraded.

Silver presents a more interesting case. It is both a monetary metal and an industrial material. In a world of monetary debasement, its monetary demand may increase. In a world of electrification, electronics and industrial expansion, its physical demand may increase at the same time.

And why stop there? A serious reindustrialisation of the West will require copper in quantities that may astonish those who think of it merely as something used in old water pipes. Electricity grids require copper. Motors require copper. Transformers require copper. Data centres require copper. Electric machinery requires copper. If we are moving towards a world in which vastly more economic activity is mediated through electricity, copper becomes one of the physical foundations of the new economy.

Then there is uranium. If the Green veto really is ending, the case for nuclear power becomes almost unavoidable. A modern industrial economy requires reliable electricity in enormous quantities. Windmills and solar panels can have their uses, but they cannot by themselves provide the stable energy base required by an economy filled with data centres, automated factories and electrically intensive industrial processes. Nuclear power can. A nuclear renaissance means uranium.

There are other materials. Nickel, tin and aluminium will have their places. So will rare earths, though the economics of these are complicated by the fact that scarcity often reflects processing bottlenecks rather than geological rarity. There will be opportunities in energy infrastructure, mining equipment and industrial machinery.

I am not offering investment advice. Anyone who takes financial advice from political essays deserves whatever happens to him. Nor am I suggesting that every metal must rise continuously in price. Commodity markets are notoriously cyclical. New mines open. Substitution occurs. Technologies change. A man who buys something merely because its price has risen will eventually discover the difference between investing and volunteering to be robbed. My argument is more general. We have spent years discussing how to preserve wealth through an approaching economic collapse. Perhaps we have been asking the wrong question. The more useful question may be how to preserve wealth through an approaching economic boom conducted in currencies whose issuers have decided to destroy their value.

The answer begins in the same place. Own real things. Own gold because it is outside the credit system. Own silver because it stands with one foot in the monetary world and another in the industrial world. Look seriously at the materials without which reindustrialisation cannot happen. Do not assume that a government bond promising four per cent is a safe investment merely because the government will certainly repay it. Ask what the money will buy when it does.

Our rulers have accumulated debts they cannot honestly repay. They will therefore repay them dishonestly. At the same time, they have discovered that the deindustrialised societies they created are strategically useless. They will therefore attempt to rebuild them. Artificial intelligence and automation may make this rebuilding faster and more productive than they presently understand. Cheap energy may return. The Iranian war will end. The oil will flow. Factories will rise where windmills were supposed to stand. The result need not be the collapse of the West. It may be its greatest productive expansion since the nineteenth century.

But do not confuse an expanding economy with sound money. The factories may flourish while the pound dies. The mines may roar while the dollar shrivels. The more real wealth the new technologies create, the easier it may become for governments to conceal the confiscation represented by monetary inflation. There is the paradox. We should buy precious metals not because the future is necessarily dark, but because it may be dazzlingly bright. Gold is insurance against catastrophe. It is equally insurance against prosperity administered by bankrupt governments.

So, yes: buy gold. Buy silver. But then look beyond them. Look at copper. Look at uranium. Look at the physical materials without which the machines cannot be built and the electricity cannot flow.

The last generation was taught to put its faith in paper claims on a declining civilisation. The next may discover that civilisation has no intention of declining, but that the paper claims are worthless. The boom is coming. Make sure you own something it cannot do without.