gold market - investment & analysis


MMT, Fed and Zombie Walks Into a Bar. What Does Gold Say?

May 10, 2019, 7:34 AM Arkadiusz Sieroń , PhD

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You may think you've heard every bar joke, but we are pretty confident that you have missed the one in which the MMT, the Fed and the Zombie walk into a bar. In this edition of the Market Overview, we will not tell you the punch line, but we will do something better. First, we will analyze the potential consequences of the Modern Monetary Theory, which has recently gained considerable popularity. Although it sounds like a joke, some politicians and economists really believe that the governments can spend as much as they want, simply because they can print money. We will examine this claim and figure out what would the implementation of the MMT mean for the gold market.

Second, we will explain how the new Fed's framework works. As you have probably heard, the US central bank operates under the regime of ample reserves. We will take a closer look and see what it implies for the monetary policy and the precious metals market.

Third, as the current expansion is just a few months away of becoming the longest recorded period of economic boom, we compare it with the previous expansions. The analysis will enable us to assess whether the next recession is just around the corner or we could still enjoy the boom for some time. We also draw conclusions for the gold prices.

Last but not least, we consider the idea that we will not experience the full-blown financial crisis again. Instead of deep recession, the European and American economies will gradually follow Japan and sink into stagnation full of zombie banks and zombie companies. We assess whether the scenario of zombification is realistic and what it would mean for the gold market.

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