Bloomberg/Chris Anstey/6-10-2022
“‘It’s pretty clear that peak-inflation theory, like ‘transitory’ theory is kind of wrong,’ Summers told Bloomberg Television’s ‘Wall Street Week’ with David Westin. ‘The Fed’s forecasts from March, saying that inflation would be coming down to the 2s by the end of the year was, frankly, delusional when issued, and looks even more ridiculous today.’”
USAGOLD note: Summers has become the Fed’s most strident critic. A number of gold market analysts, led by Sprott’s John Hathaway, have expressed the notion that faith in the Fed, and in particular, its ability to control inflation, has been a key determinant in holding down gold demand among professional investors. “Faith in the Fed’s omniscience,” he wrote last October, “is convenient to the investment consensus because it underpins the extraordinary overvaluation of financial assets. The relationship between overvalued financial assets and belief in an all-knowing Fed is symbiotic. Loss of that faith for heavily sedated markets would lead to losses of trillions of dollars in the world of financial assets.” Faith in the Fed is a proxy for gold ownership. Once that faith is broken, it could open the floodgates on gold demand.
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Image attribution: Chatham House, CC BY 2.0 <https://creativecommons.org/licenses/by/2.0>, via Wikimedia Commons
