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Saturday, June 13, 2015

Gold heretic



I'm not going to say that gold is a useless metal. In fact it has some fine qualities: it doesn't corrode, it's very ductile, and an excellent conductor of electrical and thermal energy.

Many think gold would make good currency. There are some good arguments for it. It's rare, but not so rare that most people can't get some. Gold is durable and nonreactive. It even makes nice shiny coins that do not tarnish.

At one time I was very attractive to the gold standard. Anything that bypasses government control is fascinating to me. There was only one big problem: History. Gold based economies have a terrible record. Back when the US was on the gold standard the nation had some horrendous boom and bust cycles. Gold apologists have a bunch of excuses for that, but they all ring hollow to my ears. Any sort of growth beyond the amount that gold can be mined breaks the system. There's not enough gold currency to lubricate a growing economy.

How about gold as a personal store of wealth? Well . . . there the track record is a bit different. Gold has been a way for individuals to move wealth across borders. Let's say your country is in economic collapse, but you've squirreled some gold away. Let's assume it's in your physical possession, not in a safety deposit box or in the form of a gold certificate. Let's also assume there is place where you can go that accepts gold as wealth and allows individuals to possess it. There's often the little problem that the country you are trying to leave won't let you leave with gold in your possession. In spite of the problems people have successfully moved gold across borders.

When a whole civilization collapses, that's where things get dicey. Take the fall of the Roman Empire for example. The barbarians wanted gold. Romans had it. Barbarians took it from the Romans. Some Romans tried to buy off the barbarians. That sometimes worked -for a while. The barbarians always came back. Let's just say History isn't exactly full of examples where rich Romans retreated to their villas with gold and were left alone by the barbarian onslaught.

After a collapse, even without the threat of barbarian invasion, (maybe the barbarians are the government at that point) gold wasn't all that useful. Day to day economics revolved around labor, food, and security. Peasants would work part of the time in the Baron's fields. In return the Baron and his men would provide security.

If I actually had investment money would I buy gold? Maybe a tiny amount -about the amount a prudent person would spend on a long shot deal.

-Sixbears

8 comments:

  1. I've been watching gold closely since just before the end of the last century. You'll remember that the whole world economy and internet banking was going to implode on midnight 31 December 1999. It didn't. Gold hasn't done all that well in the last fifteen years and is now a couple of hundred dollars below it's peak of I think over US$1350 an ounce, It remains a fascination though...

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    1. How closely have you been watching? 15 years ago it was under $300 an ounce. In 2003 it broke through that resistance barrier, which was a good signal to buy. If you had bought some then, gold could fall by half and you would still have doubled your money.

      Now, in the past 4 years, coming down from its peak close to $1900 an ounce, that's a different story.

      Timing... ticka ticka ticka ticka... timing...

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    2. Timing, once again, is everything.

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  2. I think silver is more stable, and more useful.

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    1. I've heard some very solid arguments for stashing away silver instead of gold. More "in reach" for most people.

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  3. I like to prospect for gold. It is like hunting, that deer stake the hunter is eating actually cost way more than if you bought one at the store. Yes, it has cost me way, way more to find just nugget and some flakes.

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    1. Sounds like another excellent excuse to get out and play.

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    2. DD, would like to read about your prospecting ad/ventures some time.

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