“After every major economic crisis that we’ve had, we’ve adjusted our economic thesis — how we approach markets from a central bank perspective and how we manage economies going forward,” Deane pointed out.
It’s a real fine line that they have to walk whereby raising rates doesn’t dramatically cause a huge U-turn in the economic stability that they’ve been able to create,” Deane explained.
When interest rates are 6%, and you raise them ten basis points, the overall impact on a borrower is not that dramatic.
“That’s the problem we face … We haven’t had a disaster yet or a major issue yet.
There are currently two types of views dominating the marketplace when it comes to inflation.
“It’s just natural for people to go out and say, ‘I didn’t have any dinners out last year, so I’m going to do it twice this year,’ and that will cause inflation.
And that’s a risky decision because it is hard to get inflation under control once it starts running hot,” Deane said.
From the assets side of things, hard assets are the major winners, whether it’s real estate, gold, bitcoin, precious metals, hard commodities.
The 2021 roadmap for gold is more of an inflation trade rather than the uncertainty trade,” Deane elaborated.
Medium and long term, if my thesis is correct and this is secular inflation, we’re going to see materially higher gold in the next 12-18 months.
“If they lose the ability to control inflation, lose the ability to ensure job growth, lose the ability to ensure a safe society, then what naturally happens is a lot of these currencies get debased.