Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.
Gold is an August monetary asset but an undependable investment.
This last trend, that of gold as an alternate monetary asset, will be furthered by nations seeking to diversify their reserves as a reaction to a falling dollar with an uncertain future ahead of it.
His public view on the link between monetary policy and asset prices has also shifted.
The two current nominees are on record as favoring more aggressive monetary easing and BOJ asset purchases with the aim of defeating deflation and stimulating growth.
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In recent years, though, there has been disappointingly little research on how monetary policy should respond to asset-price inflation.
ECONOMIST: Should central banks try to target asset-price inflation?
Among the most sensitive asset classes to monetary easing is gold, the yellow metal that trades inversely with the U.S. dollar and is seen by many as an inflation-hedge.
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In Asia, China's Shanghai Composite slipped 0.3%, weighed down by Europe, while Japan's Nikkei Stock Average gained 0.6% after the Bank of Japan eased monetary policy by expanding its asset-purchase program.
The second and no doubt leading contributor to the gold bubble has been the world financial crisis of 2008-2009 and the subsequent worldwide central bank policy of monetary expansion to fight financial asset price deflation.
Indeed, an important element of the monetary transmission mechanism works through the asset price channel.
That adds to the struggle monetary policy faces in coping with asset-price booms and busts.
The idea that central banks need to take account of asset prices when setting monetary policy is hardly new.
ECONOMIST: Should central banks try to target asset-price inflation?
But there is already a strong case for the Fed to take account of asset prices in setting monetary policy (see article).
But the history of monetary easing is that it can lift asset prices and confidence for a time, but it cannot sustain an expansion.
The scheme "will support the flow of credit to where it is needed, complementing the MPC's asset purchase programme in easing monetary policy conditions", he said in a letter to Bank of England governor Sir Mervyn King.
The Federal Reserve, along with other major central banks across the globe, are engaged in ultra-loose monetary policy, using low interest rates and asset purchases (i.e. quantitative easing, or QE) to help support their economies.
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Charles Goodhart, a member of the Bank of England's monetary policy committee, presented a controversial paper on asset prices at a Eurostat conference this week.
"The BOJ's commitment to adopt 'monetary base control' clearly is a strong message to the markets about enhancement of the monetary policy, in terms of both working on asset prices and controlling market inflation expectations, " Nishioka added.
Officials at the European Central Bank, the Bank of England, the Reserve Bank of Australia and the Bank for International Settlements (the central banks' central bank) have given some support to the view that monetary policy should sometimes lean against a rapid growth in asset prices and build-up of debt, even if consumer-price inflation is low.
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.
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In a speech last year, Alan Greenspan, the Fed's chairman, argued that asset prices have an important role to play in setting monetary policy.
ECONOMIST: Should central banks try to target asset-price inflation?
Whether central banks should respond to asset-price bubbles is one of the hottest debates in monetary policy.
There are limits to what monetary policy can accomplish and to forecasting random variables like interest rates and asset prices.
An increasing number of central banks, such as the Bank of England, the European Central Bank and the Reserve Banks of Australia and New Zealand, now support the view that monetary policy should sometimes act to restrain a rapid increase in credit and asset prices.
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The critics assume implicitly that all the expansion on the asset side of the Fed's balance sheet is offset by monetary liabilities, which simply isn't true.
Singapore's move also comes as authorities across Asia grapple with asset-price inflation amid capital inflows from developed economies, following monetary easing programs announced in recent months by major central banks including the U.S. Federal Reserve.
What if the Federal Reserve ends its asset purchase program in June, beginning the so-called normalization of monetary policy?
In other words, the eBay reputation is an asset with a lot of value, even if is not expressed in monetary terms.
"With some softening in the dollar, players are electing to take profits as the market has risen almost without a hitch since the Bank of Japan's monetary policy loosening on April 4, " said Yoshihiro Okumura, general manager Chibagin Asset Management.
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