by Egon von Greyerz    

Will gold be confiscated? Yes, of course, it could be. Desperate governments will take desperate actions. And as the world economy is now slumping into a hyperinflationary depression, unlimited money printing will cause currencies to collapse, leading to a surge in the gold price measured in worthless paper money. 

So the first question we must ask is: Why would governments punish prudent savers who have taken protection in gold against the irresponsible mismanagement of the economy and the currency?


Global financial assets are estimated by Credit Suisse to be $360 trillion. Of that stocks are $85 trillion or 24%. The global bond market is $100 trillion (28%). Investment gold is around 35,000 tonnes or $1.9 trillion. This represents a mere 0.5% of global financial assets.  

With investment gold representing only 0.5% of global assets whilst stocks are 24%, you can ask why the US government, are doing all they can do drive up the value of stocks by printing money and at the same time suppressing the price of gold. Why are shareholders supported to become rich whilst gold holders are penalised?

Governments are clearly supporting ever higher stock since this buys votes. But with so few investors holding gold, the government will lose very few votes by manipulating the gold price down.  


Since we are now entering a period of major currency debasement and potential hyperinflation, you could ask why governments would stop investors from preserving wealth in the form of gold. So would the US government, instead of encouraging thrift and prudent wealth preservation in the form of gold, confiscate the savings of the Americans?

Well, some observers like Jim Sinclair – “Mr. Gold” – thinks this is possible also for US gold mines. He does believe though that coins of the Realm like Eagles would be excluded.

But the confiscation by Roosevelt in 1933 was a totally different situation and not comparable with today. At that time, the US was in a depression and the dollar was tied to gold. The economy was under pressure and the US government decided that the dollar needed to be devalued.

A dollar devaluation automatically meant a revaluation of gold since the two were totally interlinked. But FDR decided that the US holders of gold should not get the benefit of a revaluation. Thus gold was confiscated and then revalued from $20.67 per ounce to $35. Gold in bank safe deposit boxes was taken but many Americans hid their gold at home. Gold held outside the US was not confiscated.


Today gold ownership is global. US investors for example are legally storing gold in many countries – Canada, Singapore, Australia, UK, and Switzerland to mention a few. Substantial  amounts of gold are stored by US citizens in these countries. Switzerland is a major gold hub where gold is stored in the big banks as well as in many private banks. In addition, there are many private vaults outside the banking system in Switzerland storing considerable amounts of gold. 

It would be totally impractical to require Americans to ship the gold back to the US. Also, many countries would not cooperate. I have heard people criticising Switzerland for giving in to the US authorities and revealing the names of Americans who held undeclared accounts in Switzerland at UBS and other banks.

As a Swiss I also consider that the Swiss government should not have succumbed as they did this in contravention of the Swiss constitution. Banking secrecy was holy and law in Switzerland at the time.

But there was pressure from many European countries also that the Swiss were complicit in tax fraud. In Switzerland, not declaring funds or income was not a criminal event. 


So Switzerland gave in at the time and the banks had to open up their books. And today all banks in the world exchange information based on the OECD Common Reporting Standard. This is an Automatic Exchange Of Information (AEOI) between virtually all countries. Gold held within the financial system is included in this reporting. 

The reason Switzerland gave in was the enormous pressure the US authorities put on them, which supposedly included freezing all the assets of the UBS US branch. But also morally the Swiss government had to give in since it was hard to justify actions that were allowed in Switzerland but fraudulent in the US and most other countries. 

Gold or other precious metals held in private vaults is at the present not reportable by Americans in their tax returns. The same goes for property. But based on the strict compliance and AML (Anti Money Laundering) regulation, no serious company involved in precious metal storage would accept undeclared funds or metals. Thus no respectable company dealing with gold would accept client funds or gold which are not tax compliant in the country of the client. 

So today, gold or other precious metals held in Switzerland by Americans are totally tax compliant. For that reason, I doubt that the Swiss government would cooperate with the US tax authorities if they required the gold to be returned. 


Gold confiscation in Switzerland is very unlikely. Refining and storing gold in Switzerland is a strategic industry. Switzerland refines 70% of the gold bars in the world.

This makes our country a very important party in the global gold industry that could not be replaced elsewhere. In addition, gold is 29% of Swiss exports which is very significant. Also, Switzerland stores a major part of the private gold in the world. 

Saving in gold as well as giving gold to children or as a wedding present is a long-standing Swiss tradition. The Swiss will normally buy the Swiss Vreneli coin.

The gold stored in Swiss private vaults is growing significantly every year. The stable political system, rule of law, being a very old democracy and neutrality all contribute to this. Gold confiscation would also be against the constitution.

A senior Swiss politician friend of mine told me that if the Swiss government confiscated gold, the people would revolt. For these reasons, I believe that Switzerland will become an even more important gold hub and the best place in the world to store gold.



The US declares holding 8,000 tonnes of gold. This gold has not had an official physical audit since Eisenhower’s days in the mid 1950s. There is clearly a reason for a country not properly auditing their stated $450 billion gold holding. Almost all countries are in the same position.

Nobody has an official physical audit of their gold. Since they are all declaring how much gold they hold, they clearly have a responsibility to their people to publicly audit their alleged gold holding. 

The answer is simple of course. They don’t have the gold they say that they hold. That can be the only reason why it is never audited. In my view many central banks, including the Fed have covertly reduced their official gold holding.

In addition, all central banks are lending or leasing a major part of their gold and most probably also lending the same gold many times over. We know for example that HSBC and JP Morgan hold a major amount of central bank gold. They are also custodian for the biggest gold ETF – GLD.

When the gold holdings by GLD increases, there is no gold bought from the Swiss refiners.

Instead, the custodians just lend them the central bank gold they hold which has probably been lent many times over. 


In the past when central banks leased out gold, it would stay with the bullion banks in  London or New York. Today, the big buyers are China and India. They buy gold from the bullion banks in London or New York.

These 400 oz bars are shipped to Switzerland to be broken down into kilo bars by the Swiss refiners. The kilo bars are the desired size both in India and China. These bars are then shipped on to the East. The bullion banks lease the 400 oz bars from a central bank and then sells them on the buyers in the East. 

So instead of staying in London or New York, the central bank has now leased the gold to a bullion bank which has sold it to China or India. The result is that the bullion bank no longer has the physical gold and all the central bank has is an IOU from the bullion bank. This means that the physical gold is permanently lost by both the bullion bank and the central bank. It will never return.

The bullion bank will default because they can’t deliver the gold to the central bank which in turn has lost its physical gold forever. This is why central banks don’t have a fraction of the physical gold they declare to have. 


Jim Sinclair and Bill Holter, two of the most respected individuals in the gold industry, have calculated the real value of the US gold based on 8,000 tonnes allegedly held by the US and balancing the balance sheet of the US.

The projected value is $50,000 to $87,000. And as Jim says, that assumes the US holds 8,000 tonnes. Let’s say that the US only holds 4,000t, then the gold price would be double these estimates.

And assume that virtually all the US gold has been sold or leased, that would be a gold price going to infinity.  But 4,000t or slightly less seems more realistic. 


China has been accumulating gold for decades. Their official holdings are 2,000 tonnes. But it is widely assumed that their real holding is over 10x that. Insiders who have been working with the Chinese confirm that they are likely to hold over 20,000t. All the domestic Chinese gold production, currently 400t p.a. goes to the government. 

When China announces a gold-backed yuan, which is not unlikely, they will declare their 20,000+ tonnes and then challenge the US to prove they have the 8,000t. This will lead to some interesting exchanges of aggression, hopefully only verbal. 


As I said initially, it is possible that some governments attempt to confiscate gold. But in my view, it is an extremely difficult exercise to both legally and logistically conduct. Also, if the gold is held abroad many countries will resist or refuse to ship gold to the US. 

Also, the gold market is today global. In China, 1.4 billion people are encouraged by the state to own gold. In India, it is a tradition for most families to hold gold and to give gold as wedding presents. And in Russia, gold reserves have gone from 400 tonnes in 2006 to 2,300 today, a fourfold increase. These countries understand the vital importance of gold.

In today’s global markets, it would be almost impossible to stop companies or individuals to trade gold outside the US or Europe in Shanghai, Singapore or Zurich. 

With the epicentre of the gold market moving to China and the East, it is very unlikely for the US and the West to confiscate gold. This would precipitate the fall of the dollar and the Euro and substantially weaken the US and EU positions and their economies. 



Thus I believe that confiscation is very unlikely. Governments have a much simpler way of getting at the assets of the wealthy through high taxation. And this is what I believe will happen and not just for gold. As government deficits surge, all assets of the rich will be taxed heavily and not just gold which today represents only 0.5% of global financial assets. 

Therefore, tax planning including various jurisdictions is as important as wealth planning. 



Stock markets are in the course of finishing a correction up. It could take another week or two. Once finished, we will see rapid falls across the globe to new lows. 


The precious metals are in a strong uptrend. The 2011 high for gold in dollars will soon be reached. All other currencies have surpassed the 2011-12 high in gold in the last two years and so will gold in dollars. Remember that corrections are always part of a sound uptrend. 

It is totally irrelevant what price gold reaches in worthless paper money whether it is Sinclair’s $58,000 or my 18-year-old prediction of $10,000 in today’s money. Time will tell. 


China-US rivalry and threats to globalisation recall ominous past

The world has been here before and knows that superpower rivalry only brings ruin

Martin Wolf

China USA boxers

How will Covid-19 change the world? We do not know.

But one result is evident: a marked further deterioration in relations between the two superpowers. This is sure to have longer-term consequences.

Today’s world has powerful echoes of the early 20th century, when rivalries between established and rising powers led to war. That in turn led to the collapse of an era of globalisation — “the first globalisation”. Today, our “second globalisation” is under threat.

Yet that is only a part of what is at stake as the superpowers embrace an intense rivalry.

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Consider recent events. Donald Trump blames China’s “Wuhan virus” for the devastating impact of Covid-19 on his country, in order to divert attention from his own failures.

Xi Jinping’s autocratic China imposes draconian security legislation on Hong Kong, in violation of treaty obligations. Not least, the US administration has released a new Strategic Approach to the People’s Republic of China, guided by what it calls “principled realism”.

This stresses the threat posed by China to US national security and economic interests.

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The early 20th century was also an era of globalisation and unbridled great-power rivalry, as the relative economic might of the UK fell and that of Germany, Russia and the US rose. While the rise of the US was the most significant, proximity made competition between Germany, which was determined to enjoy its place in the sun, and the UK, which saw Germany as a mortal threat to its independence, decisive.

A fascinating paper by Markus Brunnermeier and Harold James of Princeton University and Rush Doshi of Brookings argues that “the rivalry between China and the US in the twenty-first century holds an uncanny resemblance to the one between Germany and Great Britain in the nineteenth”. Both rivalries took place in an era of economic globalisation and rapid technological innovation. Both featured a rising autocracy with a state-protected economy challenging an established democracy with a free-market system. Moreover, both rivalries featured “countries enmeshed in profound interdependence wielding tariff threats, standard-setting, technology theft, financial power, and infrastructure investment for advantage”.

“Latecomers”, such as Germany then or China now, simply will not accept permanent disadvantage.

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The same was in fact true of the US in the 19th century. Alexander Hamilton developed the infant-industry argument for protection. The UK moved to free trade, while the US stayed highly protectionist. The UK sought to protect its intellectual property, while the US tried to steal it. Rivalry of this kind is always inevitable.

The conflict that began in 1914 did not finally end until 1945, with Europe, east Asia and the global economy in ruins. It took the entry of new great powers on to the global scene, the US above all, to restore stability and global peace, however imperfectly.

As Maurice Obstfeld, former chief economist of the IMF, shows in another excellent paper, it took 60 years before economic integration returned to 1913 levels relative to global output.

Globalisation then went far further, prior to the global financial crisis of 2008.

In the process, it also brought about a large reduction in global inequality and mass poverty.

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Rising friction between China and the US, and the weakening of globalisation, have been apparent since the global financial crisis. But Covid-19 has accelerated these trends. The pandemic is turning countries inward.

The demand for self-sufficiency is rising. This is particularly true in products relevant to health. But other supply chains are also being broken.

The economic collapses, stratospheric unemployment and pandemic-constrained recoveries make some leaders, especially populists and nationalists, happy to blame foreigners. The perception of US incompetence weakens its credibility and emboldens autocratic China.

As the US withdraws from international organisations and treaties, and China pursues its own path, the fabric of co-operation tears. Even armed conflict is possible.

As Larry Summers has argued, Covid-19 looks to be a hinge moment in history. This is not so much because it is changing trends, but rather because it is accelerating them. It is reasonable to bet that the world which emerges on the other side of the pandemic will be far less co-operative and open than the one that entered it. That is where current trends are taking us.

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Yet that does not make this desirable. When we look at the awful mistakes of the past, we must be struck by how understandable and human they were, and by how inescapable the drift to conflict and economic collapse seemed to those responsible.

We must also see that purblind nationalism and fantasies of grandeur did not produce an elegant balance of power, but rather a cataclysm. It was from this disaster that the world of institutionalised co-operation emerged.

This sort of world has not become any less necessary. It has just become far more fragile.

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Above all, we must not forget how unbridled great-power competition has normally (though not always) ended.

Yet today’s world economy is far more integrated than ever before and so the costs of deglobalisation must be correspondingly greater. We need to remember, too, that the weapons now available are far more destructive than those of a century ago.

This time, too, there are no outside powers able to save China and the US from themselves.

Perhaps most important, we need a far higher level of global co-operation than ever before if we are to manage our global commons.

These are difficult and dangerous times. We need to rise to the occasion but are not.

This is a fact. Recognise it.

No safety net


And pre-existing conditions seem to worsen the prognosis

THE 2010S WERE not a happy decade for proponents of global trade. Though fears of an increase in protectionism following the financial crisis of 2007-09 did not materialise, nor did the growth of the 1990s and 2000s re-establish itself.

Finance was tamer; China was richer and developing its internal market; transport was no longer getting cheaper. As a share of global GDP, neither global trade, foreign direct investment, nor stocks of cross-border bank lending returned to their 2000s peak.

And then, belatedly, fears about protectionism came good with the election of President Donald Trump. In 2018 he launched a trade war against China; he applied tariffs in the name of national security; his administration hog-tied the World Trade Organisation’s appellate court.

Optimists might have seen the 2020s getting off to a slightly better start. The “Phase One” deal between America and China, signed on January 15th, left tariffs six times higher than they had been before Mr Trump launched his trade war. But at least it seemed a step in the right direction.

The covid-19 pandemic has since, by curtailing trade across the Pacific, made it very hard to see how China can increase its imports from America in line with the Phase One deal’s requirements.

But that is the least of the trading world’s worries.

The United Nations Conference on Trade and Development is predicting that covid-19 will reduce flows of foreign direct investment by 30-40%; the World Bank expects remittances to fall by 20%; the WTO reckons trade could fall by as much as a third.

Much of this carnage is because of crashing demand, not new barriers to trade. But the crisis has not made international commerce any easier.

Travel bans, quarantines and a widespread desire to stay at home even among those not ordered to do so means that the movement of individuals from place to place, the one aspect of globalisation that had continued from strength to strength, came to a juddering halt.

Fewer passengers means fewer planes means less room for air freight. In a forecast of covid-related costs made this April, the WTO took into account higher air-cargo prices, extra time spent in transit for goods having to go through more stringent border checks, and travel restrictions making trade in services and the delivery of equipment that needs bespoke installation more difficult.

Overall, the WTO thinks the rise in costs could be equivalent to a 3.4% global tariff. For comparison, in 2018 the global average tariff was around 8%.

As firms have foundered, fears have mounted that foreign state-supported companies will swoop in and snap them up. The European Commission has urged member states to be “particularly vigilant” in making sure businesses are not sold off. The German, Italian and Spanish governments have all tightened their processes for screening foreign investment.

The Australian government is requiring that all foreign investments be approved by the Foreign Investment Review Board. India has enacted new restrictions, too; China calls them “discriminatory”.

Around the world, governments responsive to their people are concerned with little more than keeping them something close to safe and solvent. Meeting the needs of the public is taken to mean being able to provide for them independently. Kevin O’Rourke of NYU Abu Dhabi sees a parallel with the period which came immediately after the second world war.

Policy was neither being driven by corporate interests seeking protection from foreign competitors, nor by a calamitous attempt to impose capital controls, but rather voters’ desire for safety. It is a powerful justification for protective measures.

Let me down easy

Take medical supplies. In 2018 China alone supplied about 42% of the world’s exports of personal protective equipment. Almost three-quarters of Italy’s imported blood thinners come from China; so do 60% of the ingredients for antibiotics imported by Japan. Such dependence on any country seems unwise. Such dependence on China, which has been known to abuse its market dominance, seems idiotic. Smaller, poorer countries have little choice but to build stockpiles. But the bigger, richer countries and blocs are thinking of ways to shake up the status quo.

On April 27th Bernd Lange, head of the European Parliament’s Committee on International Trade, suggested that requirements could be imposed on companies to source certain intermediate products from several countries, or to develop strategic agreements with companies for their assembly lines to change quickly in a crisis. Alternatively, the EU could create a list of strategic goods for which European production would be required.

Mr Trump’s trade adviser, Peter Navarro, is clearly itching to set procurement rules which would force health-care providers to buy American-made products. Mr Trump’s administration is reportedly also trying to remedy what it sees as a strategic vulnerability by convincing Intel and Taiwan Semiconductor Manufacturing Company, two companies on the frontiers of chipmaking, to build new factories in America.

A survey of members of the Global Business Alliance, a group of companies with investments in America, published on May 11th, revealed that 77% expected the country to become more protectionist in terms of cross-border mergers and acquisitions, government procurement and trade because of the pandemic.

Those businesses, and their peers, are currently in crisis-management mode. When the dust gets to settling, they have some reconfiguring to do. Adjusting their supply chains will probably accelerate the trend towards regionalisation, particularly in complex cases where assemblies cross borders repeatedly. This will have the knock-on effect, desired by some, of reducing the centrality of China.

Take regionalisation first. In the automotive supply chain, which stretches from the leather for seats to the chips for dashboard displays, 59% of trade is already intraregional. Such integration is self-reinforcing; it becomes increasingly easy, and enticing, to replace suppliers farther afield with ones nearer to hand.

Comparing the second half of 2019 with the second half of 2017, China’s share of car parts imported by the United States fell by 2.2 percentage points. The share coming from elsewhere in North America increased by 2.8 percentage points (see chart).

What works for cars, though, does not work for everything. Near-shoring imports of furniture, toys and clothes may not be worth the fuss. As China’s (sizeable) share in America’s imports of clothing, toys and furniture fell between 2017 and 2019, North America’s barely budged. Drops in electronics imports from China were offset not by suppliers closer to home, but mostly by other Asian countries.

That demonstrates the other strategy companies are developing: globalisation with fewer Chinese characteristics. Last October a survey of American multinationals found that around 40% were either considering or in the process of relocating manufacturing or sourcing outside of China. A more recent survey suggested that 24% were planning to adjust their sourcing outside of China as a result of covid-19.

For some companies, this is not a straightforward retrenchment, but an embrace of what is known as “China+1”. The strategy is still to use Chinese suppliers, not least so as to go on serving the very attractive Chinese market, but also to encourage suppliers elsewhere in case something goes wrong.

Witness Google’s reported investment in Vietnam to produce its Pixel smartphone or Microsoft’s to produce its Surface tablet. The strategy’s purported benefits, though, are not bought cheaply, argues Jake Parker of the US-China Business Council, a lobby group. It will take five years for any such reconfigured supply chain to achieve costs as low as what they would have been if based in China. In the meantime prices will have to rise.

In the longer run, and once companies have more cash to spare, it is possible that they will attempt to set up new clusters of production. Mike Jette of GEP, a supply chain consultancy, reports hearing from some electronics manufacturers that they want to get 30-40% of their supply chain within the same region as the customer, leaving around half in China.

If the customer is in Asia, that will be fairly easy. If the customer is elsewhere, it will be harder. Their historical and geographic ties give the nexus of Asian electronics suppliers a huge advantage over comparatively isolated firms elsewhere, even if customers are actively trying to encourage the challengers. The Asian advantage will be hard to dislodge.

To the extent that companies do go looking for new secure sources of supply, they will keep in mind how countries have responded to covid-19. Kristin Dziczek of the Centre for Automotive Research says that the Mexican government’s haphazard approach to the pandemic generated huge uncertainty for car companies, and raised questions about their reliance on the country as a supplier.

Rise of the robots

Such concerns will be weighed against countries’ other advantages, such as trade deals, existing sophisticated manufacturing capacity, and competitive labour costs. In Mexico’s case, an incoming trade deal with America and Canada will increase the incentives to source car parts from within the region.

Pierre Sauvé of the World Bank reckons that deals with America and/or the European Union mean that the likes of Colombia, Costa Rica, Morocco and Tunisia could also gain from shifting supply chains, as could Malaysia and Vietnam, which enjoy broad, well-established trade ties with Japan and Korea.

Such countries need not limit themselves to whittling away at China’s manufacturing role. Trying to supply digital services could be a better long-run strategy—one that the pandemic may be making easier.

White-collar workers have just been jolted into a mostly digital existence. If managers get used to supervising staff remotely, why should they not get used to managing more overseas?

Employers will be keen on cost savings after the shutdown, notes Richard Baldwin, who works at the Graduate Institute in Geneva.

That said, trade is not the only way to realise savings. Bernard Hoekman of the European University Institute warns that companies may choose to automate services rather than to offshore them. The same warning applies, in reverse, to people hoping that reshoring production brings back jobs. It may do if you are an engineer. It will not if you wait tables.

As defenders of the status quo try to explain that strength lies in openness, and critics crow about globalisation going too far, the reality is that both will probably get their way. The medical and pharmaceutical sectors should expect pressure to localise more of their production in those countries that have enough clout to apply it.

Those Chinese companies hoping to take advantage of the global market in ideas will find it harder to access. Foreign acquisitions will be treated with suspicion. American scrutiny of their suppliers will make international commerce harder.

But once companies can start investing again many will continue to set up their supply chains in such a way as to chase the next source of growth—mindful, of course, of governments prone to placing obstacles between them and their favoured suppliers.

It is something global business knows how to do pretty well (see article). “If I were advising Davos man, I would advise him to keep quiet and take it on the chin,” says Mr O’Rourke, adding that his study of history has taught him the benefits of moderation in all things.

That return to the norm could be impeded if political leaders see the public desire for security as requiring an all-out assault on what went before. “It was clear that this kind of globalisation was ending its cycle,” Emmanuel Macron, the president of France, recently told the Financial Times in a disquisition on the lessons of the covid-19 pandemic and the retrenchment it might bring.

If so, better for the world to start a new, rebalanced cycle, less centred on a single dominant exporter, than to give up on the process altogether.

Inside Trump’s coronavirus meltdown

What went wrong in the president’s first real crisis — and what does it mean for the US?

Edward Luce in Washington

When the history is written of how America handled the global era’s first real pandemic, March 6 will leap out of the timeline. That was the day Donald Trump visited the US Centers for Disease Control and Prevention in Atlanta.

His foray to the world’s best disease research body was meant to showcase that America had everything under control. It came midway between the time he was still denying the coronavirus posed a threat and the moment he said he had always known it could ravage America.

Shortly before the CDC visit, Trump said “within a couple of days, [infections are] going to be down to close to zero”. The US then had 15 cases.


A few days afterwards, he claimed: “I’ve felt it was a pandemic long before it was called a pandemic.”

That afternoon at the CDC provides an X-ray into Trump’s mind at the halfway point between denial and acceptance.

We now know that Covid-19 had already passed the breakout point in the US. The contagion had been spreading for weeks in New York, Washington state and other clusters. The curve was pointing sharply upwards. Trump’s goal in Atlanta was to assert the opposite.

Wearing his “Keep America Great” baseball cap, the US president was flanked by Robert Redfield, head of the CDC, Alex Azar, the US secretary of health and human services, and Brian Kemp, governor of Georgia.

In his 47-minute interaction with the press, Trump rattled through his greatest hits.He dismissed CNN as fake news, boasted about his high Fox News viewership, cited the US stock market’s recent highs, called Washington state’s Democratic governor a “snake” and admitted he hadn’t known that large numbers of people could die from ordinary flu.

He also misunderstood a question on whether he should cancel campaign rallies for public health reasons. “I haven’t had any problems filling [the stadiums],” Trump said.What caught the media’s attention were two comments he made about the disease.

There would be four million testing kits available within a week. “The tests are beautiful,” he said. “Anybody that needs a test gets a test.”

Donald Trump at the Centers for Disease Control and Prevention in Atlanta on March 6 with, from left, Alex Azar, secretary of health and human services, Robert Redfield, CDC director, and Steve Monroe, associate director for laboratory science and safety at the CDC

Ten weeks later, that is still not close to being true. Fewer than 3 per cent of Americans had been tested by mid-May.

Trump also boasted about his grasp of science. He cited a “super genius” uncle, John Trump, who taught at the Massachusetts Institute of Technology and implied he inherited his intellect.

“I really get it,” he said.


Maybe I have a natural ability.”

Historians might linger on that observation too.

What the headlines missed was a boast that posterity will take more seriously than Trump’s self-estimated IQ, or the exaggerated test numbers (the true number of CDC kits by March was 75,000). Trump proclaimed that America was leading the world.

South Korea had its first infection on January 20, the same day as America’s first case, and was, he said, calling America for help. “They have a lot of people that are infected; we don’t.”

“All I say is, ‘Be calm,’” said the president. “Everyone is relying on us. The world is relying on us.”

He could just as well have said baseball is popular or foreigners love New York. American leadership in any disaster, whether a tsunami or an Ebola outbreak, has been a truism for decades. The US is renowned for helping others in an emergency.

In hindsight, Trump’s claim to global leadership leaps out.


South Korea, which has a population density nearly 15 times greater and is next door to China, has lost a total of 259 lives to the disease.

There have been days when America has lost 10 times that number. The US death toll is now approaching 90,000.


What has gone wrong? I interviewed dozens of people, including outsiders who Trump consults regularly, former senior advisers, World Health Organization officials, leading scientists and diplomats, and figures inside the White House. Some spoke off the record.


People often observed during Trump’s first three years that he had yet to be tested in a true crisis. Covid-19 is way bigger than that.

“Trump’s handling of the pandemic at home and abroad has exposed more painfully than anything since he took office the meaning of America First,” says William Burns, who was the most senior US diplomat, and is now head of the Carnegie Endowment.


Coffins of people who have died from Covid-19 lined up in a funeral home in Queens, New York. Recent estimates suggest 135,000 people will die by late July
Coffins of people who have died from Covid-19 lined up in a funeral home in Queens, New York. Recent estimates suggest 135,000 people will die by late July © Tayfun Coskun/Anadolu Agency/Getty Images

The psychology behind Trump’s inaction on Covid-19 was on display that afternoon at the CDC. The unemployment number had come out that morning. The US had added 273,000 jobs in February, bringing the jobless rate down to a near record low of 3.5 per cent.

Trump’s re-election chances were looking 50:50 or better. The previous Saturday, Joe Biden had won the South Carolina primary.

But the Democratic contest still seemed to have miles to go. Nothing could be allowed to frighten the Dow Jones.Any signal that the US was bracing for a pandemic – including taking actual steps to prepare for it – was discouraged.


'This is a great success story,’ said Jared Kushner, Trump's son-in-law and adviser, of the US coronavirus response in late April. Kushner’s advice to avoid alarming the markets is said to have had more influence on the president than the warnings from scientists

Stephen Moore of the Heritage Foundation, a conservative think-tank, who talks regularly to Trump and is a campaign adviser, says the mood was borderline ecstatic in early March.

“The economy was just steaming along, the stock market was firing on all cylinders and that jobs report was fantastic,” says Moore. “It was almost too perfect. Nobody expected this virus. It hit us like a meteor or a terrorist attack.”
 People in Trump’s orbit are fond of comparing coronavirus to the 9/11 attacks. George W Bush missed red flags in the build-up to al-Qaeda’s Twin Towers attacks. But he was only once explicitly warned of a possible plot a few weeks before it happened. “All right, you’ve covered your ass,” Bush reportedly told the briefer.

At some point, Congress is likely to establish a body like the 9/11 Commission to investigate Trump’s handling of the Covid-19 pandemic. The inquiry would find that Trump was warned countless times of the epidemic threat in his presidential daily briefings, by federal scientists, the health secretary Alex Azar, Peter Navarro, his trade adviser, Matt Pottinger, his Asia adviser, by business friends and the world at large.

Any report would probably conclude that tens of thousands of deaths could have been prevented – even now as Trump pushes to “liberate” states from lockdown.

“It is as though we knew for a fact that 9/11 was going to happen for months, did nothing to prepare for it and then shrugged a few days later and said, ‘Oh well, there’s not much we can do about it,’” says Gregg Gonsalves, a public health scholar at Yale University. “Trump could have prevented mass deaths and he didn’t.”

Demonstrators gather in Olympia, Washington to protest against the state’s stay-at-home orders. Trump adviser Stephen Moore says he told the president ‘this lockdown is causing more deaths and misery than the disease itself’

In fairness, other democracies, notably the UK, Italy and Spain, also wasted time failing to prepare for the approaching onslaught. Whoever was America’s president might have been equally ill-served by Washington infighting.The CDC has been plagued by mishap and error throughout the crisis.

The agency spent weeks trying to develop a jinxed test when it could simply have imported WHO-approved kits from Germany, which has been making them since late January.

“The CDC has been missing in action,” says a former senior adviser in the Trump White House. “Because of the CDC’s errors, we did not have a true picture of the spread of the disease.”


Here again, though, Trump’s stamp is clear. It was Trump who chose Robert Redfield to head the CDC in spite of widespread warnings about the former military officer’s controversial record.


Some committed suicide.


Trump and Robert Redfield at a daily briefing of the coronavirus task force at the White House. Trump chose Redfield to head the CDC despite  of widespread warnings about the former military officer’s controversial record on HIV-Aids





“The last thing you need is scientists fighting with each other in the middle of an epidemic,” says Dr Kenneth Bernard, who set up a previous White House pandemic unit in 2004, which was scrapped under Barack Obama.

The scarcity of kits meant that the scientists lacked a picture of America’s rapidly spreading infections. The CDC was forced to ration tests to “persons under investigation” – people who had come within 6ft of someone who had either visited China or been infected with Covid-19 in the previous 14 days.

Most were denied. Few could prove that they had met either criterion.

This was at a time when several countries, notably Germany, Taiwan and South Korea, gave access to on-the-spot tests, including at drive-through centres – an option most Americans still lack.

Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, and Deborah Birx, White House coronavirus response co-ordinator, have been two of Trump’s key advisers and the main public faces of the crisis
Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, and Deborah Birx, White House coronavirus response co-ordinator, have been two of Trump’s key advisers and the main public faces of the crisis © Mandel Ngan/AFP/Getty Images

“You’ve been commuting by train or subway into New York every day, you show up sick in the clinic and they refuse to test you because you can’t prove you’ve been within 6ft of someone with Covid-19,” says the former adviser.

“You’ve probably been close to half a million people in the previous two weeks.”

Restrictions on testing narrow the options. “Once you get to one per cent prevalence in any community, it is too late for non-pharmaceutical interventions to work,” says Tom Bossert, who created the since-disbanded White House pandemic office before he was ejected in 2018 by John Bolton, Trump’s then national security adviser.

By March 11, just five days after Trump’s CDC visit, the reality was beginning to seep through.

In an Oval Office broadcast, Trump banned travel from most of Europe, which expanded the partial ban he put on China in February. Two days later, he declared a national emergency.

Even then, however, he insisted America was leading the world.

“We’ve done a great job because we acted quickly,” he said. “We acted early.

Over the next 48 hours, however, something snapped in Trump’s mind.

Citing a call with one of his sons, Trump said on March 16: “It’s bad. It’s bad… They think August [before the disease peaks]. Could be July. Could be longer than that.”

Eleven days later, Boris Johnson, Britain’s prime minister contracted Covid-19.

The disease nearly killed him. That was Johnson’s road-to-Damascus. Many hoped Trump had had a similar conversion. If so, it did not last long. The next week, he was saying that America should reopen by Easter on April 12.

“I was one of the ones advising him to make it ‘Resurrection Sunday,’” says Moore. “I told him then what I think now, that this lockdown is causing more deaths and misery than the disease itself.”

Trump’s mindset became increasingly surreal. He began to tout hydroxychloroquine as a cure for Covid-19. On March 19, at a regular televised briefing, which he conducted daily for five weeks, often rambling for more than two hours, he depicted the antimalarial drug as a potential magic bullet. It could be “one of the biggest game-changers in the history of medicine”, he later tweeted.

Healthcare workers gather outside Brooklyn Hospital Center in New York. The state has been the epicentre of the disease in the US
Healthcare workers gather outside Brooklyn Hospital Center in New York. The state has been the epicentre of the disease in the US © Brendan McDermid/Reuters

The president’s leap of faith, which was inspired by Fox News anchors, notably Laura Ingraham, and his lawyer Rudy Giuliani, none of whom have a medical background, turned Washington’s bureaucracy upside down. Scientists who demurred were punished.

In April, Rick Bright, the federal scientist in charge of developing a vaccine – arguably the most urgent role in government – was removed after blocking efforts to promote hydroxychloroquine.

Most clinical trials have shown the drug has no positive impact on Covid-19 patients and can harm people with heart problems.

“I was pressured to let politics and cronyism drive decisions over the opinions of the best scientists we have in government,” Bright said in a statement.

In a whistleblower complaint, he said he was pressured to send millions of dollars worth of contracts to a company controlled by a friend of Jared Kushner. When he refused, he was fired.

The US Department of Health and Human Services denied Bright’s allegations.

Other scientists have taken note of Bright’s fate.

During the Ebola outbreak in 2014, when Obama’s administration sent 3,000 US military personnel to Africa to fight the epidemic, the CDC held a daily briefing about the state of progress. It has not held one since early March.

Scientists across Washington are terrified of saying anything that contradicts Trump.

“The way to keep your job is to out-loyal everyone else, which means you have to tolerate quackery,” says Anthony Scaramucci, an estranged former Trump adviser, who was briefly his White House head of communications. “You have to flatter him in public and flatter him in private. Above all, you must never make him feel ignorant.”

An administration official says advising Trump is like “bringing fruits to the volcano” – Trump being the lava source. “You’re trying to appease a great force that’s impervious to reason,” says the official.

When Trump suggested in late April that people could stop Covid-19, or even cure themselves, by injecting disinfectant, such as Lysol or Dettol, his chief scientist, Deborah Birx, did not dare contradict him. The leading bleach companies issued statements urging customers not to inject or ingest disinfectant because it could be fatal.

The CDC only issued a cryptic tweet advising Americans to: “Follow the instructions on the product label.”

A woman protests against shelter-in-place orders at a Michigan Conservative Coalition rally in Lansing

“I can’t even get my calls returned,” says Garrett. “The CDC has led the response to every disease for decades. Now it has vanished from view.”

A former senior Trump official says: “People turn into wusses around Trump. If you stand up to him, you’ll never get back in.

What you see in public is what you get in private. He is exactly the same.”


America’s foreign partners have had an equally sharp reminder of Trump’s way of doing business. Few western leaders are as ideologically aligned with Trump as Scott Morrison, Australia’s prime minister. Early into the epidemic, Morrison created a national cabinet that meets at least once a week.

It includes every state premier of the two main parties. Morrison’s unity cabinet projects an air of bipartisan resolve in a country that has lost just under 100 people to coronavirus in three months. Some days, America has lost more people to it every hour.

Trump, by contrast, plays US state governors against each other, much as he does with his staff. Republican states have received considerably more ventilators and personal protective equipment per capita than Democratic states, in spite of having far lower rates of hospitalisation. Trump says America is fighting a war against Covid-19.

In practice, he is stoking national disunity. “It’s like saying to the governors that each state has to produce its own tanks and bullets,” says Bernard. “You’re on your own. It’s not my responsibility.”

Trump’s dog-eat-dog instinct has been just as strong abroad as at home. A meeting of G7 foreign ministers in March failed to agree on a statement after Mike Pompeo, the US secretary of state, insisted they brand it the “Wuhan virus”. America declined to participate in a recent summit hosted by Emmanuel Macron, France’s president, to collaborate on a vaccine.

Most dramatically, Trump has suspended US funding of the WHO, which he says covered up for China’s lying. The WHO confirms that Trump met the then director-general designate, Tedros Adhanom Ghebreyesus, in the Oval Office in June 2017, shortly before he took up the role.

Trump supported his candidacy.Other critics say the Geneva-based body was too ready to take Beijing’s word at face value. There is some truth to that claim.

“They were too scared of offending China,” says Bernard, who was America’s WHO director for two years. But its bureaucratic timidity did not stop other countries from taking early precautions.

WHO director-general Tedros Adhanom Ghebreyesus in March. Trump has suspended US funding of the organisation
WHO director-general Tedros Adhan om Ghebreyesus in March. Trump has suspended US funding of the organisation © Fabrice Coffrini/AFP/Getty Images

Trump alleged the WHO’s negligence had increased the world’s death rate “twenty-fold”.

In practice, the body must always abide by member state limits, especially the big ones, notably the US and China.

That is the reality for all multilateral bodies. The WHO nevertheless declared an international emergency six weeks before Trump’s US announcement. WHO officials say Trump’s move has badly hindered its operations.

“You don’t turn off the hose in the middle of the fire, even if you dislike the fireman,” says Bernhard Schwartländer, chief of staff at the WHO. “This virus threatens every country in the world and will exploit any crack in our resolve.”

The body, in other words, has fallen victim to US-China hostility.


Blaming America’s death rate on China and the WHO could well help Trump’s re-election campaign.

Many voters are all too ready to believe the US is a victim of nefarious global forces. Garrett, who is a former senior fellow for global health at the Council on Foreign Relations, cites Inferno, a lesser-known novel by Dan Brown, author of the best-selling Da Vinci Code, in which the WHO plays a dastardly role.

One of its leading characters is a biologist at the CFR. During a pandemic, she kidnaps the head of the WHO and puts him in the think-tank’s basement. He is rescued by a WHO military team that swoops in on the body’s C-130 jet.

In reality, the agency has no police powers at all. “We are not like Interpol,” says Schwartländer.

The WHO can no more insist on going into Wuhan to investigate the origins of Covid-19 than it can barge into Atlanta to investigate the CDC’s delay in producing a test.

'Trump’s campaign will be about China, China, China,' says Steve Bannon, his former chief strategist. A demonstrator in California echoes the administration’s anti-China rhetoric
'Trump’s campaign will be about China, China, China,' says Steve Bannon, his former chief strategist. A demonstrator in California echoes the administration’s anti-China rhetoric © Stanton Sharpe/SOPA Images/LightRocket/Getty Images

Both the US and China have spread outlandish rumours about the other.

Some Chinese officials have circulated the groundless conspiracy theory that the US army planted the virus in Wuhan at an athletics event last year.

Trump administration officials, including Pompeo, have repeatedly suggested Covid-19 originated from a bat-to-human transmission in Wuhan’s virology lab.

Last month, Australia called for an international inquiry into the disease’s origins.

“Australia’s goal was to defuse conspiracy theories in both China and America,” says Michael Fullilove, head of the Lowy Institute, Australia’s largest think-tank.

Days later, Australia’s Daily Telegraph, a tabloid owned by Rupert Murdoch, ran an apparent scoop that the “five eyes” – the intelligence agencies of the US, the UK, Australia, Canada and New Zealand – had concluded the disease came from the Wuhan lab, whether by accident or design. It appears the story had no substance.

Fauci and other scientists say the pathogen almost certainly came from a wet market in Wuhan. No “five eyes” dossier existed.According to a five eye senior intelligence officer and a figure close to Australia’s government, the Daily Telegraph story probably came from the US embassy in Canberra.

There was no chance after its publication that Beijing would agree to an international probe.

The report damaged Australia’s hopes of defusing US-China tensions. “We used to think of America as the world’s leading power, not as the epicentre of disease,” says Fullilove, who is an ardent pro-American.



So where does the American chapter of the plague go from here?

Early into his partial about-turn, Trump said scientists told him that up to 2.5 million Americans could die of the disease.

The most recent estimates suggest 135,000 Americans will die by late July. That means two things.

First, Trump will tell voters that he has saved millions of lives.

Second, he will continue to push aggressively for US states to lift their lockdowns. His overriding goal is to revive the economy before the general election.

Both Trump and Kushner have all but declared mission accomplished on the pandemic.

“This is a great success story,” said Kushner in late April. “We have prevailed,” said Trump on Monday.

'We have prevailed,' said Trump at a White House news briefing about the coronavirus earlier this week




“And hopefully the fact that he rebooted the economy.”In the meantime, Trump will probably continue to dangle the prospect of miracle cures. Every week since the start of the outbreak, he has said a vaccine is just around the corner.

His latest estimate is that it will be ready by July. Scientists say it will take a year at best to produce an inoculation. Most say 18 months would be lucky. Even that would break all records.

The previous fastest development was four years for mumps in the 1960s.

For the time being, Trump has been persuaded to cease his daily briefings. The White House internal polling shows that his once double-digit lead over Biden among Americans over 65 has been wiped out. It turns out retirees are no fans of herd immunity.

Friends of the president are trying to figure out how to return life to normal without provoking a new death toll. After an initial rally in March, Trump’s poll numbers have been steadily dropping over the last month. For the next six months, America’s microbial fate will be in the hands of its president’s erratic re-election strategy.

There is more than a whiff of rising desperation.“Trump is caught in a box which keeps getting smaller,” says George Conway, a Republican lawyer who is married to Kellyanne Conway, Trump’s senior counsellor.

“In my view he is a sociopath and a malignant narcissist. When a person suffering from these disorders feels the world closing in on them, their tendencies get worse. They lash out and fantasise and lose any ability to think rationally.”

Conway is known for taunting Trump on Twitter (to great effect, it should be added: Trump often retaliates).

Yet without exception, everyone I interviewed, including the most ardent Trump loyalists, made a similar point to Conway. Trump is deaf to advice, said one. He is his own worst enemy, said another.

He only listens to family, said a third. He is mentally imbalanced, said a fourth. America, in other words, should brace itself for a turbulent six months ahead – with no assurance of a safe landing.

Edward Luce is the FT’s US national editor

This article was amended to correct a quote by Michael Fullilove, head of the Lowy Institute. Fullilove said: ‘We increasingly feel caught between a reckless China and a feckless America that no longer seems to care about its allies.’ We originally had a feckless China and a reckless America.