Yellen's Yen Comments Spark Financial Repression Fears
Financial repression is underway in the US, according to GBI's chief economist Trey Reik. He notes six separate Treasury moves in six weeks that collectively point towards a similar outcome, without printing a single new dollar.
The key term here is 'yield curve control', which involves a central bank buying government bonds without limit to hold a target interest rate. This differs from quantitative easing, where the size and schedule are announced in advance.
Reik calls yield curve control 'the ultimate nirvana' for gold, as it would force the Fed to commit to unlimited money creation just to hold one number steady. The Bank of Japan has already experimented with this policy, capping 10-year bond yields near zero from 2016 and holding over half of all outstanding Japanese government bonds.
As a result, the yen lost roughly a third of its value against the dollar over that stretch, while gold priced in yen climbed roughly fivefold. Reik is watching for similar results to unfold in the US.