World War I and the Looming Global Economic Reset

World War I and the Looming Global Economic Reset

I was watching a fascinating documentary on World War I the other day.  World War I was a truly pivotal moment in world history.  What really struck me about the situation in Europe just before the outbreak of war was how every nation believed it could fulfill its own ambitions without upsetting the prevailing balance of power on the continent.

For example, the tiny Balkan country of Serbia was perennially at odds with its powerful neighbor, the Austro-Hungarian Empire.  Serbia thought it could slice off the Slavic parts of its Austro-Hungarian enemy and fuse them together into a pan-Slavic Balkan state.  And Serbia thought it could do so with few to no geo-political repercussions, other than perhaps giving the hated Austro-Hungarians a bloody nose.

Serbia’s World War I ambitions clearly fall under the rubric of “be careful what you wish for.”  Even though they were one of the few World War I participants who actually achieved their primary war goal (the foundation of Yugoslavia), it came at a terrible price.

Serbia was crushed militarily and occupied by its Austro-Hungarian enemy in 1915.  In 1934, the king of Serbia’s successor state, Yugoslavia, was assassinated by a fascist dissident.  In 1941 Hitler invaded the weak Balkan country.  After World War II, the unfortunate nation and its people were subjected to almost 50 years of a repressive Communist regime.

Finally, in the early 1990s Yugoslavia broke up in an acrimonious and bloody civil war that is best remembered for its systematic ethnic cleansing.  Clearly Serbia’s leadership in 1914 never imagined that achieving their most cherished aim – a unified pan-Slavic Balkan state – would not only redraw the entire map of Europe, but also lead to 80 years of unmitigated pain.

Tiny Serbia was not alone in its conceit.  The powerful British Empire also suffered from delusions that by joining the Great War it could maintain the international status quo.  In 1914, Great Britain understood that it was dependant upon the good will of the other leading European powers, notably France and Russia, to protect its sprawling empire.  So Great Britain rather reluctantly entered the war against Germany in an attempt to assuage its continental allies in the Triple Entente alliance.

The results were predictably unpredictable.  After great sacrifice in men and money, Great Britain was victorious.  Not only did the leading colonial power preserve her existing empire, but she also expanded it substantially.  In fact, the British Empire reached its greatest geographical extent in 1921, in the immediate aftermath of World War I.

But the grand imperial power was now a paper tiger.  Great Britain’s military strength had been hollowed out by the grueling and bloody trench warfare of World War I.  In addition, the financial cost of the conflict weighed heavily on the nation’s currency.  The redoubtable British pound was forced to temporarily abandon it sacrosanct gold standard for the first time since the Napoleonic conflict a hundred years before.

Russia, one of the European powers the British had originally attempted to mollify by entering the war, fell to the Bolsheviks and became fanatically opposed to British interests.  But, in the end it almost didn’t matter.  The British Empire endured another 25 years after the end of World War I before succumbing to the unstoppable nationalist movements of its colonies.

There are frightening parallels between the national experiences of World War I participants and today’s looming global economic reset.  Every major financial player in the world right now, including central bankers, multi-national investment banks and governments, falsely believe they can achieve their own economic goals without upsetting the balance of the entire system.

China believes it can continue to pursue its mercantilist policies by exporting massive quantities of finished goods abroad in order to support employment and economic growth domestically.  It implicitly believes that no major trading partner will dare to erect tariffs or other trade barriers.  Until now, China has been correct in its estimation.  But at some point, the pain imposed on other countries by Chinese mercantilism will grow too great to ignore.

Likewise, today’s central bankers are enamored with the idea of unconventional policy tools.  Quantitative easing and negative interest rates are almost universally seen as safe, effective ways for central bankers to achieve their economic and employment goals when faced with the zero interest rate bound.  And yet, it is obvious that these policy tools have significant consequences that are both unintended and negative.

The ultimate result of these untenable policies will almost certainly be some sort of global economic reset.  This became obvious to me as I was looking at a chart of financial sectors while doing investment research.  Significant portions of the U.S. and global economy will be very different in the next 20 years, if for no other reason than that they cannot stay the way they are today.

The higher education, finance, information technology and healthcare sectors will all experience profound change during the coming economic reset.  As it stands, U.S. universities pile onerous amounts of student loan debt on the young and then we wonder why they cannot get ahead.  U.S. Hospitals charge ridiculously high fees for routine procedures and tests, placing healthcare increasingly out of the reach of average people.  A few large technology companies strive to monopolize people’s online experience, determining the news and opinions they see and hear.

And all the while corporate financial juggernauts trade paper assets back and forth to each other at ever higher prices, misleading investors into believing they are becoming extraordinarily wealthy.  But the global economic reset looms large on the horizon.  It is coming and it will be brutal.  It is merely a question of when.

This is one of the reasons that I advocate holding alternative, tangible assets like art and antiques.  When the inevitable economic reset finally happens, most paper assets, including stocks and bonds, will suffer losses that seem utterly impossible today.  Precious metals, art and antiques will be some of the few assets that avoid the worst of the destruction.

Edwardian Jewelry – A Gilded Age Investment

Edwardian Jewelry - A Gilded Age Investment
The delicacy of this 14 karat yellow gold, seed pearl and pink tourmaline brooch is typical of Edwardian jewelry.  Notice the white gold millegrain settings around the tourmaline gems.  These settings serve to emphasize the subtle pink color of the stones and are a hallmark of both Edwardian jewelry and the later Art Deco style.

In the modern age we have a certain fascination with the rich and famous.  They somehow seem to inhabit a world apart from us – a world of palatial mansions, yacht outings and opulent fashion.  And yet our current gilded age, as magnificent as it seems, is put to shame by one that preceded us.  If history is any indication, few people knew how to throw, or attend, a high-class party like the Edwardians.  And one of the ways the Downton Abbey set flaunted their substantial wealth was by wearing magnificent Edwardian jewelry.

Gossamer creations of unparalleled beauty, Edwardian jewelry is among the most prized objects on earth.  Diamonds, sapphires and natural pearls drip graciously from platinum garlands, bows and ribbons.  It possesses a refinement and elegance that elicits images of royalty and aristocrats.  And, although only created for a short period of time, from 1900 to 1915, Edwardian jewelry still looms large in the imagination today.

The Edwardian era took its name from the reign of the British monarch King Edward VII, who ruled from 1901 to 1910.  He ascended the throne on the death of his mother, Queen Victoria, who had ruled for an astonishing 64 years.  Under Queen Victoria’s reign, Great Britain grew into the most powerful and wealthy country on earth, with a colonial empire unrivaled in both size and prestige.

However, Victoria was a traditionalist.  In fact, she was often viewed as a slave to formality and ceremony.  This was partially reflected in Victorian fashions, which were invariably elaborate, heavy and sometimes suffocating.  Although the Victorian period was immensely prosperous, the upper class was constrained by the staid Victorian ethos espoused by the Great Queen.  Conspicuous consumption was something one simply did not do in Victorian England.

King Edward VII’s ascension to the throne, however, brought a renewed sense of lightheartedness and enjoyment to high society.  The new king and his wife, Alexandra, loved grand parties and were unrepentant socialites.  King Edward VII led by example in this brilliant new era.  He enjoyed gambling, overeating and womanizing.  He even indulged in smoking both cigars and cigarettes, although not at the same time.  In the Edwardian period it was perfectly acceptable to be rich and revel in it.

Although King Edward VII was the monarch of Great Britain, his lavish parties and hedonistic behavior established the spirit of the age in Continental Europe as well as America.  In France, this period was known as the Belle Époque – the beautiful era.  In the United States it was called the Gilded Age.

But regardless of the name used, the Edwardian era was a brilliant flourishing of culture, leisure and the arts.  In many ways, the Edwardian period was the apogee of European imperialism and global dominance carried forward from the late 19th century.  Great Britain and France both had extensive colonial possessions that spanned the globe, while Germany was a rapidly rising world power.

Then, just as a star burns brightest right before it is extinguished, Europe was plunged into the horrors of the First World War in 1914.  The extravagant parties and opulent holidays abruptly ended.  Even the luxurious frivolity of the fashion world stopped almost overnight.  In the darkly prophetic words of the British Foreign Secretary Sir Edward Grey at the onset of the War, “The lamps are going out all over Europe; we shall not see them lit again in our life-time.”

Antique Edwardian jewelry was characterized by ribbon, bow, garland and heart motifs.  However, unlike the contemporary Art Nouveau jewelry style, Edwardian jewelry didn’t adhere slavishly to naturalism.  It wasn’t uncommon for Edwardian pieces to have geometric or linear elements, foreshadowing the future rise of Art Deco jewelry styles in the 1920s.

 

Edwardian Rings for Sale on eBay

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The Edwardian stylistic movement, with its delicate yet dazzling appearance, was directly inspired by 18th century Rococo jewelry and the Louis XVI style.  Pierced or filigree settings added a playful and airy sense that was absent from earlier Victorian jewelry.  Fine Edwardian jewelry always possesses a delicacy and lightness that is not found in later Art Deco jewelry.

Diamonds and colored gemstones were often mounted in millegrain settings during the Edwardian period.  Millegrain is a goldsmithing technique where the bezel around the perimeter of a stone is minutely beaded or ridged, giving the piece a rich, glittering look.  It also wasn’t unusual for bezels in Edwardian jewelry to use a different, contrasting metal from the rest of a piece.  Yellow gold bezels emphasized the richness of colored stones while white gold or platinum bezels accentuated the dazzling whiteness of diamonds.

The discovery of massive diamond deposits in South Africa in the 1870s led to increased availability of these coveted gemstones during the late 19th and early 20th century.  Diamonds, formerly rare and reserved for the aristocracy, were quickly embraced by mainstream jewelers.  As a result, diamonds were one of the preeminent gems of the period, often adorning Edwardian jewelry in profusion.

Most diamonds found in Edwardian jewelry are either old mine cut or old European cut diamonds.  These older diamond cuts were hand-fashioned by highly skilled old world craftsmen in order to maximize the fire of these stones under low light conditions.  Fire, otherwise known as dispersion, is when a diamond breaks light up into the spectral colors of the rainbow before returning it to the viewer’s eyes.  These old cut diamonds possess a warmth, charm and charisma that complements Edwardian jewelry beautifully.

Another diamond cut often found in Edwardian jewelry is the rose cut.  It is a flat-bottomed, faceted dome – sometimes irregular – that rises to a single point.  The rose cut is actually a very old diamond cut, first originating in Europe in the middle of the 16th century.  By the Edwardian period at the beginning of the 20th century, rose cut diamonds were usually used in less expensive pieces of jewelry.  Edwardian jewelry was the last style of jewelry to feature the widespread use of rose cut diamonds.

Because of the extensive use of diamonds in Edwardian jewelry, white metals – primarily white gold and platinum – were de rigueur in these pieces.  Platinum, in particular, became a hallmark of high quality Edwardian jewelry.  Platinum has an extremely high melting point and can take a great deal of expertise to properly work.  So although the rare white metal was known decades before the Edwardian period, the early 20th century was the first time platinum was commonly used in jewelry production.

 

Platinum Edwardian Jewelry for Sale on eBay

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Platinum was uniquely suited for use in Edwardian jewelry.  Unlike silver, platinum’s mesmerizing gray-white color doesn’t tarnish over time.  In addition, platinum is incredibly strong compared to sterling silver or even karat gold.

As a result, jewelers were able to create profoundly complex yet magnificently diaphanous scrollwork, filigree and millegrain effects in platinum that would have been impossible in traditional silver-topped gold.  As an added bonus, the new metal’s great strength allowed platinum Edwardian jewelry to be surprisingly light for its size.  This was a reversal from earlier Victorian jewelry made from silver-topped gold, which was invariably bulky and heavy.

Another gem often mounted in Edwardian jewelry is pearls.  The really interesting thing about good quality pearl jewelry from the Edwardian period – circa 1900 to 1915 – is that it exclusively employed natural pearls.  This is because the cultured pearl industry, pioneered by the enterprising Kokichi Mikimoto, didn’t produce commercially viable harvests of round pearls until the late 1910s.

Natural saltwater pearls could only be harvested by highly trained oyster divers who would descend to the sea floor in search of wild mollusks.  These divers would descend to depths of up to 100 feet without any breathing apparatus, risking not only drowning but also the dreaded bends.  It is estimated that every ton of oysters collected would yield only a few high quality pearls.

It is incredibly significant that Edwardian jewelry was the last style of jewelry, historically speaking, to rely solely on natural pearls.  Natural saltwater pearls have been prized for thousands of years for their luster, iridescence and otherworldly, almost ethereal appearance.  Natural saltwater pearls were so rare that matched necklaces were only within the reach of the very wealthiest members of society.  In fact, the renowned French jeweler Jacques Cartier reputedly traded a mere two necklaces of natural pearls for his flagship Fifth Avenue New York store location in 1916.

 

Pearl Edwardian Jewelry for Sale on eBay

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Other gemstones often encountered in Edwardian jewelry are sapphire, aquamarine and ruby.  Turquoise, peridot and amethyst were used in somewhat less expensive pieces.  In any case, delicate, softly-colored pastel gems often found top billing alongside dazzlingly bright diamonds and platinum.

Edwardian jewelry provides a wealth of opportunities for the aspiring antiques investor.  Along with the contemporary jewelry style of Art Nouveau, Edwardian jewelry was the first type of jewelry to look effectively modern.  Unlike Victorian or Georgian jewelry, fine Edwardian jewelry can still grace the hand or neck of a gorgeous woman without looking dated.

When buying Edwardian jewelry for investment purposes there are a few rules to follow.  Large, expensive gemstones like ruby, sapphire and diamonds were frequently mounted in important pieces and are very desirable.  However, it is more common to find a multitude of smaller accent stones without a single large gem in more modest pieces.  Although these less elaborate examples are still quite collectible, they will always be less valuable than a similar piece set with a large precious stone.

Pearl Edwardian jewelry represents a tremendous buying opportunity due to the fact that it is perhaps the single best source of affordable natural pearls left in the market today.  As always, large, round pearls with good luster and no damage will be the most desirable.  Seed pearls, split pearls and baroque pearls are also commonly found in Edwardian jewelry, but are significantly less desirable than large, fully round pearls.  It should be noted that natural saltwater pearls were so rare that it wasn’t unusual for pearls used in antique jewelry to only be approximate matches for color, roundness and size.  Allowances should be made for these natural variations.

As noted above, platinum is the premier metal for high end Edwardian jewelry.  However, yellow gold was also frequently used.  In addition, yellow gold topped with platinum or silver is also commonly encountered.  It is recommended that the serious investor only entertain pieces made from 14 karat (58.3%) gold or better.  Platinum used in jewelry, in contrast, is almost always 90% fine.  All else being equal, a given example rendered in platinum will always be more desirable than a similar piece made in karat gold.

 

Edwardian Bracelets, Earrings & Pins for Sale on eBay

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A fine piece of Edwardian jewelry will always communicate an unmistakable delicacy and lightness that is innately appealing.  Poorly made Edwardian jewelry will tend to be clunky or ponderous.  The serious connoisseur will skip over these subpar examples.

Modern reproductions in the Edwardian style will often have similar shortcomings, projecting an awkward or clumsy aura.  They will not only lack the subtlety and spontaneity of original pieces, but are also usually set with modern cut diamonds, which is a dead giveaway.  These modern reproductions are unfit for investment purposes.

As usual, it is important to avoid buying damaged, broken, bent or otherwise compromised pieces of Edwardian jewelry if future investment performance is important.  Pearls, especially, should be checked to ensure they haven’t pealed, cracked or discolored.  Watch out for chipped gemstones or diamonds as well.  They can be almost impossible to economically replace.

It is important to note that synthetic rubies and sapphires went into commercial production just before 1900.  Because of this, the Edwardian period was the first time that synthetic gemstones were widely used in jewelry.  However, just because a piece of jewelry employs synthetics, it doesn’t mean that it isn’t desirable.  Synthetic gemstones were still very expensive and difficult to produce at the time.  Therefore, it isn’t unusual to find them mounted in very fine settings – often as matching calibre cut stones – along with completely natural, high value gems, like diamonds and pearls.

Due to its tendency towards high intrinsic values, investment quality Edwardian jewelry can be quite expensive.  Pricing for good quality, investable Edwardian jewelry generally starts at around $500 for simpler examples.  Prices quickly escalate for more elaborate specimens or pieces mounted with large, valuable gemstones like diamonds, sapphires or rubies.  Superlative examples can easily command sums of $10,000 or more.

The Edwardian period was an age of sophistication, elegance and grandeur.  Its alluring combination of carefree leisure and tremendous wealth still inspires us today.  Edwardian jewelry is a window into that past, embodying the zeitgeist and splendor of that pre-World War I golden age.

 

Read more in-depth Antique Sage vintage jewelry investment guides here.


Silver and Glass WWI Era French Liquor Flask

Silver and Glass WWI Era French Liquor Flask
Photo Credit: Only-At-The-Antique-Boutique

Silver and Glass WWI Era French Liquor Flask

Buy It Now Price: $596.25 (price as of 2017; item no longer available)

Pros:

-This is a stunning example of an antique French liquor flask crafted from solid silver and glass.  The silver portion is decorated with an engine-turned, diamond pattern emblazoned with an engraved crown motif while the contrasting glass is gently fluted.

-The liquor or hip flask first gained popularity in the 18th century among wealthy Europeans.  By the late 19th century, every middle-class gentleman or respectable woman owned one of these discreet, yet portable drink dispensers.  They could be used to sneak a refreshing shot of brandy, absinthe or other flavored liquor of choice at the opera, theater or a dinner party.

-This French liquor flask measures 5.875 inches (14.9 cm) tall by 2.875 inches (7.3 cm) wide.

-This magnificent piece of antique French silver was made by the renowned firm of Gustave Keller, also known as Keller Frères.  Gustave Keller was headquartered in Paris on 22 Rue Joubert from 1891 until sometime during the 1920s.  The firm of Gustave Keller was famous, winning prestigious awards at the 1889 and 1900 Paris Exposition Universelle.  The last Russian Czar, Nicholas II, also admired the firm of Gustave Keller and often bought items from them.

-This antique French liquor flask is stamped with the French 1st quality hallmark on both its lid and base, indicating that it is made from high purity, 950 fine solid silver.  The interior of the silver parts are also richly gilded.  These are exactly the attributes you would expect for such a fine piece of antique French silver.

-Given that the restrained, geometric style of this French liquor flask seems to foreshadow the starkly linear design language of Art Deco, I would tentatively date it to around the World War I era.  However, it could conceivably have been produced anywhere from about 1900 to 1922, the last active date for its hallmarks.

-Some antiques perfectly embody the zeitgeist of their time, possessing that conspicuous “it” factor.  This silver and glass French liquor flask is one of those antiques.  You can clearly imagine a jaded French World War I soldier fresh from the trenches who is sitting in a dingy Parisian café taking liquor shots from this flask in order to forget the horrors he has seen.

 

Cons:

-This French liquor flask is almost perfect…almost.  Unfortunately, it violates one of the five rules of investment grade antiques.  The glass portion is not durable, relatively speaking.  This reduces the desirability of the piece from an investment standpoint.  However, because it is nearly so perfect in every other aspect, I would still consider this antique French liquor flask a reasonable investment at only $596.

Fine Art as a Claim on Future GDP

Fine Art as a Claim on Future GDP

Almost everybody needs to save for something.  It could be saving for a college education, an exotic tropical vacation or a relaxing, well-deserved retirement.  But what is savings and investment at its core?  In my opinion, when people save or invest they are really trying to transmit the surplus value of their labor into the future without loss.  This is a fancy way of saying that everybody wants to preserve the purchasing power of their savings.

Unfortunately, this is easier said than done.  According to the U.S. Bureau of Labor Statistics’ Consumer Price Index (CPI), the U.S. dollar has lost 86.5% of its purchasing power to inflation over the 50 year period from 1967 to 2017.  And this shocking fact assumes that you trust the hedonic adjustments that are regularly made to the CPI by government bureaucrats.  These black box “improvements” invariably serve to lower the stated rate of inflation, thus making the long term loss of U.S. dollar purchasing power seems smaller than it would be otherwise.

Saving and investing is rendered even more difficult by the asymmetrical, activist policies of the U.S. Federal Reserve.  The Fed has mercilessly suppressed short-term interest rates, resulting in serial asset bubbles in bonds, stocks and real estate.  And bubble-addled markets rarely make good investments.  In short, there are precious few asset classes where the average saver can hope to safely invest for the future.

But there are a handful of exceptions.  Fine art and antiques are the overlooked heroes of the current investment age.  They provide a safe harbor from the coming global financial storm of unprecedented proportions.  In effect, fine art represents a secure claim on future economic output.

Fine art and antiques are among the oldest investments known to man, holding a special place alongside the tangible asset classes of raw land and precious metals.  Ancient Greek statues were widely coveted by the Roman aristocracy.  When Greek originals could not be procured, Roman elites did not hesitate to decorate their sumptuous villas with skillful copies.  The Florentine Medici dynasty was a well-known patron of the arts during the Italian Renaissance, even funding the famous artist Michelangelo.  Napoleon looted beautiful works of art from every corner of Europe, including the famous bronze horses of St. Mark from Venice.

The reason why fine art and antiques have always been so desirable is because of deep-seated human psychology.  According to Maslow’s hierarchy of needs, once people fulfill their lower physical needs, they then attempt to satisfy higher psychological desires like prestige and self-esteem.  Becoming a connoisseur of fine art is a natural way to accomplish this and history certainly agrees with this assertion.  The wealthy and social elite throughout history have always felt compelled to collect and display exquisite, thought-provoking art.

This strong demand from the well-off in society makes fine art an asset class in its own right.  And this fact has important implications for saving and investing.  When we save money or invest, we are really trying to stake a claim on future GDP.  Gross domestic product, or GDP, is the value of all the goods and services created in a country in a given year.  From a conceptual standpoint, fine art, along with the other asset classes, has a strong claim on GDP or economic output.

In other words, stocks, bonds, cash and real estate all “own” a share of GDP and can be exchanged into that share at any point in the future.  The same thing applies to the asset class of art and antiques.  It can be exchanged for its “fair share” of GDP in one year, ten years or even a century from today.  If purchased at a fair price, high quality art and antiques have a tendency to appreciate in line with the growth in GDP, thus maintaining purchasing power.  Fine art is a nearly perfect savings vehicle – a perpetual, tangible claim on future global economic activity.

However, the relative shares of asset classes can – and do – vary in relation to one another.  Therefore, some asset classes can be overvalued at the same time that others are undervalued.  This is the case right now.  Equities, debt and real estate have experienced successive bubbles for the better part of two decades, rendering them hopelessly expensive at the moment.

Luckily, fine art and antiques are currently among the world’s most inexpensive, under-owned asset classes.  This is a boon to savvy tangible asset investors and knowledgeable antique collectors.  It doesn’t matter whether you’re interested in a playful 18th century Japanese toad netsuke carving from the time of the samurai or a set of elegant French vermeil silver teaspoons from the Belle Époque era.  Fine art and antiques give you a convenient way to safely invest for a brighter future.