Wednesday's Market Minute: Gold Bugs & MMT Junkies Both Need A Reality Check

Winds of change blow fiercely across financial markets. Some of it is happening within the equity market itself, as we have detailed this month in the start-stop trade-off in leadership between the Nasdaq and Russell, value against growth. The more groundbreaking move capturing investors’ attention right now is, of course, gold. And few market participants expect regime change more than gold bugs and bitcoin bros.

Paired with the rapid decline in the U.S. dollar, the extreme end of this group says the recent moves herald a reckoning of central bank monetary policy that marks the beginning of the end of American economic dominance. Yes, it’s extreme, but just because an event is of low probability does not mean we should ignore an increase in its odds. Every time the government fires off another bullet of nation-wide direct deposit, we wade deeper into the unknown.

What’s important to realize in the debate over money-printing is that it’s not just the bitcoin bros who are embracing the fringe; it’s also those who portray this as business as usual or purport to have a good grasp of the outcome. The authority to print is a virtue of strength – effectively, a permitted abuse of power. That requires constant reassessment of America’s economic position on the world stage. It behooves us, then, to move as slowly as possible. Gold bugs giddy for the dollar’s demise as the world’s reserve currency may one day be right, but the collapse they’re looking for is far from obviously imminent. Modern Monetary Theorists giddy to push the envelope also need a reality check.