6 ms·

So I'm hearing the " the dollar is over, throw everything into gold, fiat money is doomed" in other forums. Can anyone give some conterpoints to that narrative?

somebodythere 6y ago
The main counterpoint is that this stimulus would be needed to counter massive demand-side deflation.
- me_me_me 6y ago
  Well easy fix instead of giving money to the top, give it to the bottom. That will surely drive demand as more money is available to spend. It will boost confidence in local economies further growing demand and supply caps. What we see now it large parts of the stimulus package are devoured by the top level bureaucracy never doing anything but being transferred to Cayman islands as performance bonuses. How about we try the trickle up economy for once?
  - somebodythere 6y ago
    That is what the $1200 check and expanded unemployment insurance was meant to be.
  - adventured 6y ago
    > How about we try the trickle up economy for once? We are. The vast majority of the stimulus so far has gone to benefit the bottom 3/4 of the US economically. Here is some of what's in the $2 trillion recent stimulus: - $268b to extend & expand unemployment benefits. - $293b one time check (which won't be one time) - $377b small business loans & grants; this has been more than doubled since then - $150b aid to state & local governments - $153b boost health related spending - $42b boost to smaller social safety net programs, such as SNAP - $45b boost to disaster assistance - $40b boost to education spending People will attempt to retort that: well, but big corporations have improperly taken some of the small business loans; they'll try to use a rare edge case to attempt to nullify the overwhelming point that in fact most of the stimulus is going to the bottom 3/4, not the top 1%. Further, we'll do more stimulus programs yet around sending direct checks to individuals, which will continue to tilt this scale in the favor of the bottom 3/4. The small business loans, unemployment benefits boosters and individual checks also do not have to be paid back, unlike the big business bailouts (such as with the airlines). Most likely direct checks alone will cost over a trillion dollars before this is over. There is very little capable resistance to doing more in that regard, it will happen.
    - afpx 6y ago
      This is good news. Hopefully, it helps.
  - ro-_-b 6y ago
    Exactly. We are in the worst crisis since WWII & the stock market is at record levels in relation to GDP
  - um_ya 6y ago
    This was tried in the past. Bottom up stimulus typically results in inflation in consumer prices. The fed prefers pumping money in at the top, which typically results in inflation of stock/asset prices.
    - legolas2412 6y ago
      So maybe, instead of pumping 10 trillion from the top, stimulate 1 trillion from the bottom?
- jasode 6y ago
  >The main counterpoint is that this stimulus would be needed to counter massive demand-side deflation. The gp you're responding to sounds like he/she is talking about personal investment advice to protect an individual's purchasing power (i.e. micro economics). However, your response is about a macro economic government policy. Those are 2 different conversations.
lifty 6y ago
Short term, the USD will probably strengthen because of huge demand from emergent markets and other places that have USD denominated loans. For more info you can watch the Dollar Milkshake theory [1], or some of the work Raoul Pal has done. Long term, I don't know, but I think the USD will weaken. [1] https://www.youtube.com/watch?v=6mkV-c0mlZE https://www.youtube.com/watch?v=6mkV-c0mlZE
christophilus 6y ago
Look up Peter Zeihan. He’s bullish on the dollar mostly because it’s the world’s reserve currency and there really isn’t a good alternative. That said... I’ve heard the dollar referred to as the best looking horse in the glue factory.
- lowdose 6y ago
  That horse is not a one trick pony and has an enormous amount of capital invested in defensive capabilities. Enemies that become an unwanted source of distraction are deinstalled by an act of god.
- ro-_-b 6y ago
  That doesn't mean you shouldn't buy gold & other hard assets. Even if the Euro and others decrease in relation to the Dollar the Dollar might decrease in relation to gold/hard assets & in my opinion likely will in the next 2-3 years.
hydraxis 6y ago
The USD is still one of the most sane currency in terms of ratio between the money supply and GDP.
adventured 6y ago
It doesn't really need much of a counterpoint, given how silly it is. Regarding the USD, the same doom cults say the same things during every major global problem / event / disaster going back generations. The dollar was supposed to go away with the great recession; the dollar was supposed to go away with the intense inflatation of the 1970s; the dollar was supposed to go away with Nixon's abandonment of what was left of the gold standard; the dollar was supposed to be doomed with FDR's various moves. There is zero evidence the dollar is under meaningful risk here. It's fine to utilize gold as a store of value, there is absolutely nothing wrong with that. And that's an entirely different matter than whether governments will abandon their fiat currencies. The US, Eurozone, China, Japan, Russia, India and so on have absolutely no interest or willingness to give up control of their present fiat + central bank systems. They dictate whether fiat money is doomed or not, via their enforcenment capabilities. Take one blatant example. Russia has de-dollarized itself heavily, has accumulated a lot of gold lately (relatively speaking), and still has zero interest in giving up the power, flexibility and convenience that controlling the national fiat currency provides. For Russia, gold is just a diversification opportunity that backstops some of their national financial condition. The same is true for China, another accumulator of gold reserves.
- roenxi 6y ago
  > the dollar was supposed to go away with Nixon's abandonment of what was left of the gold standard; the dollar was supposed to be doomed with FDR's various moves. The value of the dollar in 1968 was - roughly - (1/40)th of an ounce of gold. The dollar today is roughly (1/1660)th of an ounce of gold. That is a >95% reduction in value over less than a lifetime. The people who argued the dollar was going to undergo intense inflation would probably be confused about why people argue they were wrong. Some of the young ones (~30 in the 1970s) are probably still alive to argue that point although not on HN. Anyone who stuck with gold rather than dollars when Nixon closed the gold window has been making ~7.7% per annum nominal investment return from holding on to a rock.
  - AnimalMuppet 6y ago
    Yes, but wasn't gold still pegged to the dollar in 1968? That means that the comparison is artificial, because none of the inflation from 1935 (or whenever the price was set to $35/oz) to 1968 has been allowed to show up in the gold price.
raverbashing 6y ago
The gold fans fail to realize that liquidity is more important than hoarding metals. Gold was important at the time where balances were done manually and purchases between countries were settled with physical gold. (And no, this is not a defense of bitcoin. Bitcoin has to be much more liquid and stable for it to work as a store of value)
- ro-_-b 6y ago
  This is true for short term store of value. Both gold & Bitcoin are doing terrible. In the medium/long term gold & Bitcoin have been historically very good store of value assets
  - taffer 6y ago
    In the long term, real estate and stocks have done much better than gold and in the short term fiat money is more useful.
- tempsy 6y ago
  The market has plenty of liquidity. Gold at decade highs. Not sure what you are pointing to exactly that would signal a bearish trend for Gold.
PragmaticPulp 6y ago
> So I'm hearing the " the dollar is over, throw everything into gold, fiat money is doomed" in other forums. Broadly speaking, these people distrust a money supply that can be influenced by governmental powers. They're always making noise about fiat money, gold, and sometimes cryptocurrencies like bitcoin in internet forums. They tend to become extremely vocal whenever the government intervenes in financial markets, such as the current financial crisis. The first counterpoint would be that the anti-fiat crowd has been declaring fiat dead ever since the gold standard was abandoned ( https://en.wikipedia.org/wiki/Gold_standard#Abandonment_of_the_gold_standard https://en.wikipedia.org/wiki/Gold_standard#Abandonment_of_t... ). They made the same claims in the recessions of the 2000s, the 2008 housing crisis, during the low interest rates of the 2010s financial boom, and now in the 2020 crisis. Maybe they'll be right one day in the future in the same way that a broken clock is right twice a day, but are you sure this is their time to be right? The second counterpoint is that outside of very specific windows, gold hasn't performed very well against traditional investments. The gold proponents had a good run for a few years after 2009 when gold was a hot topic, but it generally hasn't been the home run investment that the proponents expect. You can view long-term gold vs S&P trends here: https://www.longtermtrends.net/stocks-vs-gold-comparison/ https://www.longtermtrends.net/stocks-vs-gold-comparison/ Drag the bottom sliders to set different start/end dates. It's possible to find periods of time where gold outperformed the S&P 500, but generally you'd have to get both your buy and sell dates just right to come out ahead. That is, market timing. If you bought gold in 2009 and held you're doing okay. If you bought gold in 2012 and held, you just barely came up to net positive returns after 8 years. The third argument is that it's not a great idea to bet against the weight and power of the government. People declaring fiat dead are assuming that the government is going to destroy the value of money via manipulation, but most of them can't put together cohesive explanations for how the Federal Reserve operates. The Federal Reserve is a complicated system that can be difficult to understand. If you misunderstand the function or purpose of certain steps, it's easy to get the wrong impression that the government is printing money to buy stocks like all of the memes say. In reality, the system is much more complicated than that and you're unlikely to find unbiased explanations in internet forums, especially if they're coming from people who are heavily invested in gold or bitcoin and would like to see everyone else prop up the price of their chosen investments. It's best to spend an hour or two reading up on the Federal Reserve, why the gold standard was abandoned, and what the Federal Reserve is actually doing with their balance sheets. Wikipedia actually has decent articles that explain the high level details well enough: https://en.wikipedia.org/wiki/Federal_Reserve https://en.wikipedia.org/wiki/Federal_Reserve
wil421 6y ago
I’ve been hearing the same exact thing, minus bitcoin/fiat money comment, since the 2000 crash. The dollar is doomed, China’s going to collapse the dollar, buy gold, buy non-fiat money. Buy an index fund and wait I say.
- xiphias2 6y ago
  And they were right. Gold overperformed S&P with dividends reinvested over the last 20 years, and I don't expect this trend stopping.
  - Anon1096 6y ago
    Gold is currently lower than it was at its peak and subsequent crash in 2012. There's no evidence it will ever come back to those all time highs, and definitely not fast enough to outpace total market investments. There's no "trend" to see here.
    - xiphias2 6y ago
      Of course it is lower then it's peak, that's why it's called a peak. It's true for every asset. At the same time good luck finding a real gold bar at that price right now when COMEX and LBMA just added unknown, secret ,,market makers'' to ,,increas liquidy'' of the futures contracts. There are lots of strange things going on right now.
      - AnimalMuppet 6y ago
        OK, but the peak was 8 years ago. So you can say that gold outperformed the S&P over 20 years. But you can't say that over any span less than 8 years, and maybe not even over 10. So, when you say "I don't expect this trend stopping", I see a trend that already stopped - that stopped 8 years ago, in fact.
        xiphias2 6y ago
        Sure, you're both right, I didn't really explain why I think it's we're in the part of the business cycle where gold performs better. As these cycles take a long time, it's better to look at long term charts, like this: https://www.macrotrends.net/1378/dow-to-gold-ratio-100-year-historical-chart https://www.macrotrends.net/1378/dow-to-gold-ratio-100-year-... Gold is an asset that was able to keep its value for 5000 years (unlike fiat currencies), and it has to be mined, it can't just be created in an excel spreadsheet in the FED. If you put these things together, it makes sense, that having a new high every few years is normal (just like with stocks). Gold performs well in highly inflationary environments, so the question is whether the FED stops printing money, or it will just print much more than it did recently (about 4T). To me it looks like it just has gotten started.
anoraca 6y ago
My counterpoint would be: do you think that anonymous comments on the internet are a good source of information? Now that we're living in an age where national governments have large teams of people dedicated to spreading propaganda? https://en.wikipedia.org/wiki/50_Cent_Party https://en.wikipedia.org/wiki/50_Cent_Party https://en.wikipedia.org/wiki/Internet_Research_Agency https://en.wikipedia.org/wiki/Internet_Research_Agency
vmception 6y ago
As long as the relative purchasing power of a dollar, compared only to other currencies, is managed, the Federal Reserve can purchase as much as it wants. When the Federal Reserve purchases things, each transaction creates new dollars (unless it had previously sold an asset for existing dollars and wanted to use those dollars instead). The wide latitude in the side of the Fed's balance sheet comes from the weakness of other currencies. Central Banks around the world are doing the same thing - creating currency - weakening those currencies, simultaneously actual people are selling their currency for US dollars. This increases the strength of the US dollar, and means the Federal Reserve can create more dollars to weaken it, avoiding deflation. Currencies based on scarce commodities have deflationary economies as the economy grows, which hampers liquidity and investment, the US has had that before and moved away from it because it wanted liquidity and investment. So you can predict that it will avoid deflationary environments. All fiat currencies are in the same boat, but the dollar is not in that boat in isolation. Coordinated central bank accounts allow this to continue into perpetuity. Ie. If the European Central bank diluted their currency by creating trillions of Euros, the Euro might trade down to parity with the US dollars (at time of writing the 1 Euro can be traded for 1.09 US Dollar), instead of that happening in isolation, the Federal Reserve can also create an offsetting amount of dollars, weakening the dollar enough to force the Euro to still trade for 1.09 us dollars, while both banks have accomplished their goal of adding liquidity to their economy. So for massive monetary unions, it is much harder to "fail" or enter into a hyperinflationary environment. But yes, if that a lot of the newly created currency was being used to buy gold, then the price of gold would be expected to go up. It is just a much harder environment for the narrative of it becoming a replacement for the dollar to be there. Other fiat currencies outside of large monetary unions might have utility in switching to a commodity again.
OscarCunningham 6y ago
The first big jump in the graph, the Fed printing lots of money after the 2008 crisis, was followed by negative 1% inflation in 2009. The same will happen here, the Fed is creating lots of inflation, but not enough to cancel out the deflation caused by the virus and lockdown.

somebodythere 6y ago

The main counterpoint is that this stimulus would be needed to counter massive demand-side deflation.

me_me_me 6y ago
Well easy fix instead of giving money to the top, give it to the bottom. That will surely drive demand as more money is available to spend. It will boost confidence in local economies further growing demand and supply caps. What we see now it large parts of the stimulus package are devoured by the top level bureaucracy never doing anything but being transferred to Cayman islands as performance bonuses. How about we try the trickle up economy for once?
- somebodythere 6y ago
  That is what the $1200 check and expanded unemployment insurance was meant to be.
- adventured 6y ago
  > How about we try the trickle up economy for once? We are. The vast majority of the stimulus so far has gone to benefit the bottom 3/4 of the US economically. Here is some of what's in the $2 trillion recent stimulus: - $268b to extend & expand unemployment benefits. - $293b one time check (which won't be one time) - $377b small business loans & grants; this has been more than doubled since then - $150b aid to state & local governments - $153b boost health related spending - $42b boost to smaller social safety net programs, such as SNAP - $45b boost to disaster assistance - $40b boost to education spending People will attempt to retort that: well, but big corporations have improperly taken some of the small business loans; they'll try to use a rare edge case to attempt to nullify the overwhelming point that in fact most of the stimulus is going to the bottom 3/4, not the top 1%. Further, we'll do more stimulus programs yet around sending direct checks to individuals, which will continue to tilt this scale in the favor of the bottom 3/4. The small business loans, unemployment benefits boosters and individual checks also do not have to be paid back, unlike the big business bailouts (such as with the airlines). Most likely direct checks alone will cost over a trillion dollars before this is over. There is very little capable resistance to doing more in that regard, it will happen.
  - afpx 6y ago
    This is good news. Hopefully, it helps.
- ro-_-b 6y ago
  Exactly. We are in the worst crisis since WWII & the stock market is at record levels in relation to GDP
- um_ya 6y ago
  This was tried in the past. Bottom up stimulus typically results in inflation in consumer prices. The fed prefers pumping money in at the top, which typically results in inflation of stock/asset prices.
  - legolas2412 6y ago
    So maybe, instead of pumping 10 trillion from the top, stimulate 1 trillion from the bottom?
jasode 6y ago
>The main counterpoint is that this stimulus would be needed to counter massive demand-side deflation. The gp you're responding to sounds like he/she is talking about personal investment advice to protect an individual's purchasing power (i.e. micro economics). However, your response is about a macro economic government policy. Those are 2 different conversations.

lifty 6y ago

Short term, the USD will probably strengthen because of huge demand from emergent markets and other places that have USD denominated loans. For more info you can watch the Dollar Milkshake theory [1], or some of the work Raoul Pal has done. Long term, I don't know, but I think the USD will weaken. [1] https://www.youtube.com/watch?v=6mkV-c0mlZE https://www.youtube.com/watch?v=6mkV-c0mlZE

christophilus 6y ago

Look up Peter Zeihan. He’s bullish on the dollar mostly because it’s the world’s reserve currency and there really isn’t a good alternative. That said... I’ve heard the dollar referred to as the best looking horse in the glue factory.

lowdose 6y ago
That horse is not a one trick pony and has an enormous amount of capital invested in defensive capabilities. Enemies that become an unwanted source of distraction are deinstalled by an act of god.
ro-_-b 6y ago
That doesn't mean you shouldn't buy gold & other hard assets. Even if the Euro and others decrease in relation to the Dollar the Dollar might decrease in relation to gold/hard assets & in my opinion likely will in the next 2-3 years.

hydraxis 6y ago

The USD is still one of the most sane currency in terms of ratio between the money supply and GDP.

adventured 6y ago

It doesn't really need much of a counterpoint, given how silly it is. Regarding the USD, the same doom cults say the same things during every major global problem / event / disaster going back generations. The dollar was supposed to go away with the great recession; the dollar was supposed to go away with the intense inflatation of the 1970s; the dollar was supposed to go away with Nixon's abandonment of what was left of the gold standard; the dollar was supposed to be doomed with FDR's various moves. There is zero evidence the dollar is under meaningful risk here. It's fine to utilize gold as a store of value, there is absolutely nothing wrong with that. And that's an entirely different matter than whether governments will abandon their fiat currencies. The US, Eurozone, China, Japan, Russia, India and so on have absolutely no interest or willingness to give up control of their present fiat + central bank systems. They dictate whether fiat money is doomed or not, via their enforcenment capabilities. Take one blatant example. Russia has de-dollarized itself heavily, has accumulated a lot of gold lately (relatively speaking), and still has zero interest in giving up the power, flexibility and convenience that controlling the national fiat currency provides. For Russia, gold is just a diversification opportunity that backstops some of their national financial condition. The same is true for China, another accumulator of gold reserves.

roenxi 6y ago
> the dollar was supposed to go away with Nixon's abandonment of what was left of the gold standard; the dollar was supposed to be doomed with FDR's various moves. The value of the dollar in 1968 was - roughly - (1/40)th of an ounce of gold. The dollar today is roughly (1/1660)th of an ounce of gold. That is a >95% reduction in value over less than a lifetime. The people who argued the dollar was going to undergo intense inflation would probably be confused about why people argue they were wrong. Some of the young ones (~30 in the 1970s) are probably still alive to argue that point although not on HN. Anyone who stuck with gold rather than dollars when Nixon closed the gold window has been making ~7.7% per annum nominal investment return from holding on to a rock.
- AnimalMuppet 6y ago
  Yes, but wasn't gold still pegged to the dollar in 1968? That means that the comparison is artificial, because none of the inflation from 1935 (or whenever the price was set to $35/oz) to 1968 has been allowed to show up in the gold price.

raverbashing 6y ago

The gold fans fail to realize that liquidity is more important than hoarding metals. Gold was important at the time where balances were done manually and purchases between countries were settled with physical gold. (And no, this is not a defense of bitcoin. Bitcoin has to be much more liquid and stable for it to work as a store of value)

ro-_-b 6y ago
This is true for short term store of value. Both gold & Bitcoin are doing terrible. In the medium/long term gold & Bitcoin have been historically very good store of value assets
- taffer 6y ago
  In the long term, real estate and stocks have done much better than gold and in the short term fiat money is more useful.
tempsy 6y ago
The market has plenty of liquidity. Gold at decade highs. Not sure what you are pointing to exactly that would signal a bearish trend for Gold.

PragmaticPulp 6y ago

> So I'm hearing the " the dollar is over, throw everything into gold, fiat money is doomed" in other forums. Broadly speaking, these people distrust a money supply that can be influenced by governmental powers. They're always making noise about fiat money, gold, and sometimes cryptocurrencies like bitcoin in internet forums. They tend to become extremely vocal whenever the government intervenes in financial markets, such as the current financial crisis. The first counterpoint would be that the anti-fiat crowd has been declaring fiat dead ever since the gold standard was abandoned ( https://en.wikipedia.org/wiki/Gold_standard#Abandonment_of_the_gold_standard https://en.wikipedia.org/wiki/Gold_standard#Abandonment_of_t... ). They made the same claims in the recessions of the 2000s, the 2008 housing crisis, during the low interest rates of the 2010s financial boom, and now in the 2020 crisis. Maybe they'll be right one day in the future in the same way that a broken clock is right twice a day, but are you sure this is their time to be right? The second counterpoint is that outside of very specific windows, gold hasn't performed very well against traditional investments. The gold proponents had a good run for a few years after 2009 when gold was a hot topic, but it generally hasn't been the home run investment that the proponents expect. You can view long-term gold vs S&P trends here: https://www.longtermtrends.net/stocks-vs-gold-comparison/ https://www.longtermtrends.net/stocks-vs-gold-comparison/ Drag the bottom sliders to set different start/end dates. It's possible to find periods of time where gold outperformed the S&P 500, but generally you'd have to get both your buy and sell dates just right to come out ahead. That is, market timing. If you bought gold in 2009 and held you're doing okay. If you bought gold in 2012 and held, you just barely came up to net positive returns after 8 years. The third argument is that it's not a great idea to bet against the weight and power of the government. People declaring fiat dead are assuming that the government is going to destroy the value of money via manipulation, but most of them can't put together cohesive explanations for how the Federal Reserve operates. The Federal Reserve is a complicated system that can be difficult to understand. If you misunderstand the function or purpose of certain steps, it's easy to get the wrong impression that the government is printing money to buy stocks like all of the memes say. In reality, the system is much more complicated than that and you're unlikely to find unbiased explanations in internet forums, especially if they're coming from people who are heavily invested in gold or bitcoin and would like to see everyone else prop up the price of their chosen investments. It's best to spend an hour or two reading up on the Federal Reserve, why the gold standard was abandoned, and what the Federal Reserve is actually doing with their balance sheets. Wikipedia actually has decent articles that explain the high level details well enough: https://en.wikipedia.org/wiki/Federal_Reserve https://en.wikipedia.org/wiki/Federal_Reserve

wil421 6y ago

I’ve been hearing the same exact thing, minus bitcoin/fiat money comment, since the 2000 crash. The dollar is doomed, China’s going to collapse the dollar, buy gold, buy non-fiat money. Buy an index fund and wait I say.

xiphias2 6y ago
And they were right. Gold overperformed S&P with dividends reinvested over the last 20 years, and I don't expect this trend stopping.
- Anon1096 6y ago
  Gold is currently lower than it was at its peak and subsequent crash in 2012. There's no evidence it will ever come back to those all time highs, and definitely not fast enough to outpace total market investments. There's no "trend" to see here.
  - xiphias2 6y ago
    Of course it is lower then it's peak, that's why it's called a peak. It's true for every asset. At the same time good luck finding a real gold bar at that price right now when COMEX and LBMA just added unknown, secret ,,market makers'' to ,,increas liquidy'' of the futures contracts. There are lots of strange things going on right now.
    - AnimalMuppet 6y ago
      OK, but the peak was 8 years ago. So you can say that gold outperformed the S&P over 20 years. But you can't say that over any span less than 8 years, and maybe not even over 10. So, when you say "I don't expect this trend stopping", I see a trend that already stopped - that stopped 8 years ago, in fact.
      - xiphias2 6y ago
        Sure, you're both right, I didn't really explain why I think it's we're in the part of the business cycle where gold performs better. As these cycles take a long time, it's better to look at long term charts, like this: https://www.macrotrends.net/1378/dow-to-gold-ratio-100-year-historical-chart https://www.macrotrends.net/1378/dow-to-gold-ratio-100-year-... Gold is an asset that was able to keep its value for 5000 years (unlike fiat currencies), and it has to be mined, it can't just be created in an excel spreadsheet in the FED. If you put these things together, it makes sense, that having a new high every few years is normal (just like with stocks). Gold performs well in highly inflationary environments, so the question is whether the FED stops printing money, or it will just print much more than it did recently (about 4T). To me it looks like it just has gotten started.

anoraca 6y ago

My counterpoint would be: do you think that anonymous comments on the internet are a good source of information? Now that we're living in an age where national governments have large teams of people dedicated to spreading propaganda? https://en.wikipedia.org/wiki/50_Cent_Party https://en.wikipedia.org/wiki/50_Cent_Party https://en.wikipedia.org/wiki/Internet_Research_Agency https://en.wikipedia.org/wiki/Internet_Research_Agency

vmception 6y ago

As long as the relative purchasing power of a dollar, compared only to other currencies, is managed, the Federal Reserve can purchase as much as it wants. When the Federal Reserve purchases things, each transaction creates new dollars (unless it had previously sold an asset for existing dollars and wanted to use those dollars instead). The wide latitude in the side of the Fed's balance sheet comes from the weakness of other currencies. Central Banks around the world are doing the same thing - creating currency - weakening those currencies, simultaneously actual people are selling their currency for US dollars. This increases the strength of the US dollar, and means the Federal Reserve can create more dollars to weaken it, avoiding deflation. Currencies based on scarce commodities have deflationary economies as the economy grows, which hampers liquidity and investment, the US has had that before and moved away from it because it wanted liquidity and investment. So you can predict that it will avoid deflationary environments. All fiat currencies are in the same boat, but the dollar is not in that boat in isolation. Coordinated central bank accounts allow this to continue into perpetuity. Ie. If the European Central bank diluted their currency by creating trillions of Euros, the Euro might trade down to parity with the US dollars (at time of writing the 1 Euro can be traded for 1.09 US Dollar), instead of that happening in isolation, the Federal Reserve can also create an offsetting amount of dollars, weakening the dollar enough to force the Euro to still trade for 1.09 us dollars, while both banks have accomplished their goal of adding liquidity to their economy. So for massive monetary unions, it is much harder to "fail" or enter into a hyperinflationary environment. But yes, if that a lot of the newly created currency was being used to buy gold, then the price of gold would be expected to go up. It is just a much harder environment for the narrative of it becoming a replacement for the dollar to be there. Other fiat currencies outside of large monetary unions might have utility in switching to a commodity again.

OscarCunningham 6y ago

The first big jump in the graph, the Fed printing lots of money after the 2008 crisis, was followed by negative 1% inflation in 2009. The same will happen here, the Fed is creating lots of inflation, but not enough to cancel out the deflation caused by the virus and lockdown.