That bar of chocolate you bought? It used to weigh 100 grams and now it’s 90 grams, but the price is unchanged. That bag of crisps? It’s several potato slices lighter and has been rebranded. This is shrinkflation, and while it’s not new, it’s back with a vengeance and will be with us for some time, I believe.


One widely reported example was when Toblerone widened the gaps between the ridges of its distinctive chocolate bar and then reversed the decision in the face of consumer complaints. Shrinkflation is a function of inflation and falling margins for consumer goods manufacturers and is an insidious and ongoing process.


My view is that the Federal Reserve (Fed) and Bank of England won’t be able to do much to tame inflation without unsettling financial markets and the vast debt levels in the global economy. Despite the tightrope that policymakers are walking, the market has priced in as many as three interest rate rises for the Fed next year. Such a move would risk putting the brakes on a global economy that is already slowing, and it would raise the cost of financing all that debt. We have seen this before, when the Fed became too hawkish in 2018 and made a policy error, and we feel they may do so again.

Printing cash 

Economic and political conditions today highlight to me the importance of owning an asset that holds its purchasing power for goods and services. Governments have been spending and printing vast amounts of cash to support the recovery from the pandemic and the Global Financial Crisis before that. Central bank balance sheets have swelled, with significant implications for the future purchasing power and productivity in the real economy. 

Ideal for gold 

Gold is sometimes called a hedge against inflation, but it’s really a hedge against this more meaningful term for the public — loss of purchasing power. Gold can help to protect a portfolio against the effects of inflation. I see the current environment as ideal for owning gold due to structural problems with central bank policies as well as ongoing and worsening supply problems. Holding some gold, or an actively managed gold and silver fund, may be beneficial to offset these growing risks.

Gold, shrinkflation and real money

Original money

The gold price typically moves inversely to “real’’ interest rates – or the interest available from a bond/cash after accounting for inflation. Real interest rates in the US have been negative for some time, meaning that many US Treasury bondholders face losses after inflation, and I don’t see that changing anytime soon given the difficulties facing central bankers in balancing rate hikes with rising inflationary pressures.


Gold is original and sound money, and it’s a traditional hedge used by central banks to protect against inflation and risk in markets. The Fed, the European Central Bank and others have large holdings of the yellow metal in their reserves as they understand that gold rather than US Dollars is the true risk-free form of money. The central banks know, and I agree, that gold is a much truer store of value than dollars, pounds, euros — and chocolate.

The value of active minds: independent thinking


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