Will Biden’s Neo-Populist Economic Doctrine Support Gold?
Sunshine Profits | Sep 24, 2021 10:30AM ET
Biden scaled back on his infrastructure bill. However, with all the remaining cards still in play, his economic agenda should be positive for gold.
monetary policy – all interesting and crucial to understand trends in the gold markets – but, hey, what’s up in politics?
A lot has happened recently on this front. In particular, last month, the world was shocked by the chaotic withdrawal of U.S. troops from Afghanistan. The messy pullover and the quick takeover of the country by the Taliban is not only the end of Biden’s honeymoon, but also America’s great failure. Some analysts even say that the fall of Kabul is another Saigon time for the U.S. Indeed, it goes without saying that the collapse in Afghanistan is a huge blow to America’s reputation. So, it could weaken the faith in Uncle Sam and its currency, which could be positive for gold in the long run.
However, the end of the U.S. mission in Afghanistan doesn’t pose any direct threats to America (although terrorism could thrive under the Taliban regime) or to the geopolitical events cause only short-lived fluctuations, if any).
Another recent important development in the U.S. policy was that the Senate passed a $1-trillion bipartisan infrastructure bill, which is a big step in pushing Biden’s economic agenda through Congress. The economic effect will probably be smaller than expected, as public stimulus rarely works as intended. So, I don’t expect any material impact on gold prices, especially given that this additional government spending has already been priced in.
However, I would like to point out that Biden has scaled back his infrastructure plans from $2.2 trillion and agreed to spend these funds over a longer period. It means that the U.S. Fed’s tightening cycle .
Let’s step back: It turns out that it’s quite fruitful to look at Biden’s economic agenda from a bit broader perspective. It becomes clear that Biden – despite his hatred for Trump – actually continues Trumponomics. Nouriel Roubini calls Biden’s doctrine “neo-populist” and sees the paradox in the fact that it “has more in common with Trump’s policies than with those of Barack Obama’s administration, in which the current president previously served.”
Indeed, every president, from Bill Clinton to Obama, favored trade liberalization and a strong dollar while respecting the Fed’s independence. They were also understanding the importance of the moderate fiscal policy (although the practice differed, especially after the financial crisis of 2007-9). They were far from being laissez-faire advocates, but at least they didn’t question the economic orthodoxy.
Get The News You Want
Then, Trump stepped in, inaugurating a epidemic started.
Biden’s rhetoric is softer and his actions less erratic, but he has maintained Trump’s tariffs, pursuing similar nationalist and protectionist trade policy. He even widened the already large budget deficit, continuing the spending spree financed by pandemic . Last but not least, Biden fights with big business, introducing some anti-monopoly policies.
What does it all mean for the gold market?
Well, the continuation of neo-populist economic doctrine and shifting away from sound economics (I GDP growth ).
As we know from Latin America, the rules of populists and MMT-like policies never end well. And, as we know from the 1970s, constant stimulation of the economy (because there is still some slack) and neglecting the dangers of inflation could be disastrous. So, Bidenomics should be generally supportive of gold.
Having said that, investors should remember that many more factors influence gold prices than just the president’s actions. A part of Biden’s presidency will coincide with the economic expansion from the interest rates that will likely create downward pressure on the yellow metal.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.