By Bilal Hafeez 03-09-2019

Danielle DiMartino-Booth and Peter Boockvar on the Future of Monetary Policy (Macro Voices, 62 min listen)

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(You can listen to the podcast by clicking here)

A panel consisting of Chief Investment Strategist Peter Boockvar, Danielle Booth, and Patrick Ceresna debate whether Modern Monetary Policy (MMP) may lead to financial repression going forward. The panel is concerned that while MMP did promote inflation, it did so in the wrong place: asset prices. Markets and central banks are not well equipped to deal with inflationary pressure or, in the worst case, stagflation. This is mainly because bond markets are in a bubble (inflation can increase duration risk) and they see a limited arsenal left for reducing interest rates further. The panellists unanimously agree that MMP, instead of igniting growth in fact represses it. For example, if interest rates become negative enough, instead of generating risk-free return it taxes savers who in turn begin to hoard, resulting in economic repression as consumption, production, and investment fall simultaneously.

Why does this matter? We agree with the panel that an environment of ineffective monetary policy, the dollar’s fading status as the global currency, and real interest rates entering the negative are affecting the recent rally in gold and their suggestion that investors should accumulate gold at dips.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)

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