The gold rally since August 2022 is a manifestation of debt sustainability fears and fiscal crisis, driven by out-of-control fiscal policy with 5-6% deficits in peaceful times.
Who's buying the gold? The price wouldn't go up without eager buyers.
Host
Robin Brooks
Central bank buying is steady and doesn't explain the crazy run-up. This is about animal spirits and retail investors worried about inflation eroding retirement savings.
What triggered this at Jackson Hole? We've had a debt problem for some time.
Host
Robin Brooks
Jackson Hole was pivotal because Powell signaled rate cuts despite high inflation, raising questions about fiat currency safety.
If there's real debt repayment concern, why aren't yields and inflation higher?
Host
Robin Brooks
The U.S. looks relatively okay compared to worse fiscal situations elsewhere, making Treasury yields attractive. Break-even inflation is low.
With no political prospect for fiscal discipline from either party, does gold stay elevated or go higher?
Host
Robin Brooks
We're at the very beginning of this debasement phenomenon. Things have to get worse before they get better, meaning gold goes higher.