The big story today (and actually for awhile) is the collapse in gold, which has just fallen below $1500/oz.
If you look on Twitter, or anywhere else econ types chat, there's a lot of glee over this news.
Why should the decline of a relatively irrelevant commodity creating such a reaction?
There's two reasons for this:
- Gold bugs are frequently jerks.
- This vindicates the economic ideas of the economic elites.
The latter point is the most significant.
To respond to the economic crisis, economists and mainstream policy makers have favored highly unusual policy measures (massive Fed balance sheet expansion, massive stimulus, etc.). These ideas are usually based on years of traditional economic research (Keynesianism, monetarism, etc.).
All of these ideas have been slammed by heterodox types like Austrian economists, who have warned of hyperinflation, and gold going to $10,000.
So the collapse in gold is not about gold, but about vindication for a large corpus of belief and economic research, which has largely panned out. It's great that our economic elites know what they're talking about, and have the tools at their disposal to address crises without creating some new catastrophe.
Things aren't great in the economy, but the collapse/hyperinflation fears haven't panned out, and the decline in gold is a manifestation of that.
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