In 2020, central bankers everywhere are being exposed.

Real Clear Markets/Jeffry Snider

cartoon unage if silver dollar bicycle racing ahead“What that means in late 2020 is obvious, if off-putting to mainstream sensibilities that continue to view QE, bank reserves, and whatever else the Fed or ECB does as monetary policies. They are not monetary. Full stop. Despite rebounding as it has since May, the global economy is more and more looking like it did in the middle of 2018, hindered by dollar disease more than COVID. The smallest silver lining, if you choose to see it, is that unlike 2018 this time central banks everywhere are being fully exposed.” [Emphasis added.]

USAGOLD note 1:  Ahlambra’s Jeffry Snider, if I am reading this right, throws water on the reflation trade in this essay – one that needs to be read, better put studied. In short, it’s not just the virus, stupid – as you might have gathered from the selected quote. In fact, the problem of a monetary policy on ice was evident long before COVID-19 came along (as we have pointed out here before). The average price of gold for 2018, by the way, was $1268.

USAGOLD note 2: Snider resurrects a striking 1999 quote from Alan Greenspan to set the framework for his discussion: “I must say that I have not changed my view that inflation is fundamentally a monetary phenomenon. But I am becoming far more skeptical that we can define a proxy that actually captures what money is, either in terms of transaction balances or those elements in the economic decision-making process which represent money. We are struggling here. I think we have to be careful not to assume by definition that M1, M2, or M3 or anything is money. They are all proxies for the underlying conceptual variable that we all employ in our generic evaluation of the impact of money on the economy. Now, what this suggests to me is that money is hiding itself very well.” Much food for thought at the link above ……


Repost from 11-16-2020

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