6 ms·

Gold will retain its value in any financial system reboot. Paper money will not.

by rapsey 6y ago

gridlockd 6y ago
The question is will gold outperform other asset classes? Historically, gold isn't that great, but that's past performance.
- rapsey 6y ago
  We are talking about a financial system reboot. Gold has been valuable since civilization existed. In a normal environment it will not outperform.
- roenxi 6y ago
  > Historically, gold isn't that great, but that's past performance. Crikey. What performance counts as good in your eyes? Gold has been a pretty rewarding investment for the last 20 years. I think the median annual performance for the last 20 years has been something like 10% in USD (worthless metric for an investor I know, but the point is that most years are very solid up years). That is a pretty reasonable performer in my low-risk book. 2010-2014 represented an unusual bad time to buy gold in a decade long trend of great years to buy gold. In terms of actual return it depends when you pick your start and end date; but the fact that we sometimes have major crisis was always totally predictable and the major governments responses have been reasonably predicable. The only surprise at the moment is the specific fact that it is a pandemic and in 2020. The price pattern on the charts is not surprising.
  - Retric 6y ago
    It’s only over short time periods that gold might look like a good investment. Inflation adjusted gold is flat over the last 40 years. That’s a real ROI of 0 from 1980 to 2020. Which means for every good investment someone else lost money. Now it’s currently above the historic average so you do get 1% real returns from 1900 to 2020. But, stop in say 2010 and things look even worse.
    - jkhdigital 6y ago
      This is the best chart I've encountered for such comparisons: https://www.longtermtrends.net/stocks-vs-gold-comparison/ https://www.longtermtrends.net/stocks-vs-gold-comparison/ There are extended periods when gold absolutely crushes everything, and periods when it is totally flat (or worse). In the long run, yes, it is a poor investment because it is an inert metal. But for certain periods of time it is absolutely a great alternative to bonds and equities.
      - Retric 6y ago
        Look at the bottom chart, gold got crushed in that time period when you include dividends. The top chart is effectively meaningless by excluding them as you can’t invest in the S&P 500 without gaining dividends. As to gold having positive returns in some window, sure but if you can time the market you can make money investing in anything. It’s doing the timing that’s difficult not looking for windows in historic data.
  - gridlockd 6y ago
    > In terms of actual return it depends when you pick your start and end date Exactly. The 20 years range is cherrypicked for to make gold look good, it doesn't generalize. If you had bought stock (and reinvested dividends) at the top of the market in 2008, you would've been better off with stock today. If you had bought gold at the top in 2011, you would've been better off with stock today. If you had bought gold at the bottom in 2008, you would've been better off with stock today. Really, the only times where gold would've outperformed (to date) in the last 50+ years is around the time of the dotcom bubble and the last ~2 years. Realistically though, you're going to buy the market at its highs and lows, you're going to exit at some point when you need to, so it's highly subjective.
  - refurb 6y ago
    Gold has been a pretty rewarding investment for the last 20 years. Sure. And a horrible investment over the last 40 years. You’d still have a negative return if you bought in 1980.
    - roenxi 6y ago
      Peering 40 years into the past to inform investment decisions is fine as far as it goes, but I feel that the investment environment today is different from what it was in 1980. Gold doesn't do much over a century, it's main property of interest is that it sits in an inert fashion wherever it is left. I'm not too surprised on worried if it has a near-0 return over 50 years. I don't actually believe it has a positive return over the last 20 years either; but most people don't accept my "the inflation rate is meaningless, stop referring to it to value real returns" argument so I usually don't bother mentioning it.
D895n9o33436N42 6y ago
Gold is a poor asset no matter how you turn it. Most people don’t hold physical gold when they trade in it. If the current financial system were to fail, do you really believe that people will begin taking delivery of their physical gold positions in their garages? They’ll simply get wiped out, and that will be the end of it. Even barring a catastrophic nosedive in the level of civilized trading, regular people aren’t equipped to store gold in their homes. The problem of securing such holdings isn’t something the average Joe will be able to solve well, and he knows it.
- daodedickinson 6y ago
  >civilized trading Does that mean dumping money into Vanguard or something else?
- baconandeggs 6y ago
  The problem of storing gold is the same as the problem of storing paper money, there is no difference. Have you tried storing a million dollars in your own home? It is not for the faint of heart. There is no difference except that in a crisis gold will retain its value, and the stacks of paper money will only remind you of the better days. Now, of course neither of them is optimal. The best way of maintaining your purchasing power is with a competent government. But that is even more rare.
  - mmmrk 6y ago
    It's no different until raiders show up at your door. Your million dollars can be stored in assets outside your home. Also, IIRC, gold quickly lost its trading value in post WW2 Germany because, uh, you couldn't eat it.
    - baconandeggs 6y ago
      Sure, neither can paper money be eaten. Well, it can, but it is not nutritious. All the problems of gold are the same with paper money, there's no need to type the wheelbarrow story again. And gold might've not been useful in germany, but other places did take your gold. No one took Reichsmarks. If you are storing a million 'dollars' in assets then you are not storing a million 'dollars', you are storing assets currently valued at one million dollars OR also 500oz of gold.
arethuza 6y ago
What would a global "financial system reboot" actually look like though?
- rapsey 6y ago
  The dollar is the worlds reserve currency. It would start with the dollar being severely devalued. What happens after that is unpredictable. One thing holds true however, gold will still be valuable after that.
  - me_me_me 6y ago
    To be precise, you can't eat gold. But unless we are in global civilization ending circumstances gold is good longterm bet, physical gold though. If solar flare wipes out all electronics, your 100tons of gold in Switzerland are meaningless.
    - deleted 6y ago
      [deleted]
    - jkhdigital 6y ago
      People have been using money since before recorded history, and bronze age technology is sufficient for gold to be used as reliable money. If any kind of financial system is to arise from the ashes of civilizational collapse, it will almost certainly use gold. So I wouldn't say "meaningless"... just not immediately useful, perhaps.
      - Retric 6y ago
        You misunderstood his point. Assuming you’re talking civilian tossed back to the Bronze Age. Whoever has access to the vault might make use of the gold in such situations, but ownership is unlikely to be tracked back to people in another city etc. Now, if you personally want to store physical gold that’s a different bet. Though personally storing significant amounts of valuables like that has plenty of obvious downsides.
- 6y ago

Gold will retain its value in any financial system reboot. Paper money will not.

by rapsey 6y ago

Gold will retain its value in any financial system reboot. Paper money will not.

The question is will gold outperform other asset classes? Historically, gold isn't that great, but that's past performance.

rapsey 6y ago
We are talking about a financial system reboot. Gold has been valuable since civilization existed. In a normal environment it will not outperform.
roenxi 6y ago
> Historically, gold isn't that great, but that's past performance. Crikey. What performance counts as good in your eyes? Gold has been a pretty rewarding investment for the last 20 years. I think the median annual performance for the last 20 years has been something like 10% in USD (worthless metric for an investor I know, but the point is that most years are very solid up years). That is a pretty reasonable performer in my low-risk book. 2010-2014 represented an unusual bad time to buy gold in a decade long trend of great years to buy gold. In terms of actual return it depends when you pick your start and end date; but the fact that we sometimes have major crisis was always totally predictable and the major governments responses have been reasonably predicable. The only surprise at the moment is the specific fact that it is a pandemic and in 2020. The price pattern on the charts is not surprising.
- Retric 6y ago
  It’s only over short time periods that gold might look like a good investment. Inflation adjusted gold is flat over the last 40 years. That’s a real ROI of 0 from 1980 to 2020. Which means for every good investment someone else lost money. Now it’s currently above the historic average so you do get 1% real returns from 1900 to 2020. But, stop in say 2010 and things look even worse.
  - jkhdigital 6y ago
    This is the best chart I've encountered for such comparisons: https://www.longtermtrends.net/stocks-vs-gold-comparison/ https://www.longtermtrends.net/stocks-vs-gold-comparison/ There are extended periods when gold absolutely crushes everything, and periods when it is totally flat (or worse). In the long run, yes, it is a poor investment because it is an inert metal. But for certain periods of time it is absolutely a great alternative to bonds and equities.
    - Retric 6y ago
      Look at the bottom chart, gold got crushed in that time period when you include dividends. The top chart is effectively meaningless by excluding them as you can’t invest in the S&P 500 without gaining dividends. As to gold having positive returns in some window, sure but if you can time the market you can make money investing in anything. It’s doing the timing that’s difficult not looking for windows in historic data.
- gridlockd 6y ago
  > In terms of actual return it depends when you pick your start and end date Exactly. The 20 years range is cherrypicked for to make gold look good, it doesn't generalize. If you had bought stock (and reinvested dividends) at the top of the market in 2008, you would've been better off with stock today. If you had bought gold at the top in 2011, you would've been better off with stock today. If you had bought gold at the bottom in 2008, you would've been better off with stock today. Really, the only times where gold would've outperformed (to date) in the last 50+ years is around the time of the dotcom bubble and the last ~2 years. Realistically though, you're going to buy the market at its highs and lows, you're going to exit at some point when you need to, so it's highly subjective.
- refurb 6y ago
  Gold has been a pretty rewarding investment for the last 20 years. Sure. And a horrible investment over the last 40 years. You’d still have a negative return if you bought in 1980.
  - roenxi 6y ago
    Peering 40 years into the past to inform investment decisions is fine as far as it goes, but I feel that the investment environment today is different from what it was in 1980. Gold doesn't do much over a century, it's main property of interest is that it sits in an inert fashion wherever it is left. I'm not too surprised on worried if it has a near-0 return over 50 years. I don't actually believe it has a positive return over the last 20 years either; but most people don't accept my "the inflation rate is meaningless, stop referring to it to value real returns" argument so I usually don't bother mentioning it.

D895n9o33436N42 6y ago

Gold is a poor asset no matter how you turn it. Most people don’t hold physical gold when they trade in it. If the current financial system were to fail, do you really believe that people will begin taking delivery of their physical gold positions in their garages? They’ll simply get wiped out, and that will be the end of it. Even barring a catastrophic nosedive in the level of civilized trading, regular people aren’t equipped to store gold in their homes. The problem of securing such holdings isn’t something the average Joe will be able to solve well, and he knows it.

daodedickinson 6y ago
>civilized trading Does that mean dumping money into Vanguard or something else?
baconandeggs 6y ago
The problem of storing gold is the same as the problem of storing paper money, there is no difference. Have you tried storing a million dollars in your own home? It is not for the faint of heart. There is no difference except that in a crisis gold will retain its value, and the stacks of paper money will only remind you of the better days. Now, of course neither of them is optimal. The best way of maintaining your purchasing power is with a competent government. But that is even more rare.
- mmmrk 6y ago
  It's no different until raiders show up at your door. Your million dollars can be stored in assets outside your home. Also, IIRC, gold quickly lost its trading value in post WW2 Germany because, uh, you couldn't eat it.
  - baconandeggs 6y ago
    Sure, neither can paper money be eaten. Well, it can, but it is not nutritious. All the problems of gold are the same with paper money, there's no need to type the wheelbarrow story again. And gold might've not been useful in germany, but other places did take your gold. No one took Reichsmarks. If you are storing a million 'dollars' in assets then you are not storing a million 'dollars', you are storing assets currently valued at one million dollars OR also 500oz of gold.

arethuza 6y ago

What would a global "financial system reboot" actually look like though?

rapsey 6y ago
The dollar is the worlds reserve currency. It would start with the dollar being severely devalued. What happens after that is unpredictable. One thing holds true however, gold will still be valuable after that.
- me_me_me 6y ago
  To be precise, you can't eat gold. But unless we are in global civilization ending circumstances gold is good longterm bet, physical gold though. If solar flare wipes out all electronics, your 100tons of gold in Switzerland are meaningless.
  - deleted 6y ago
    [deleted]
  - jkhdigital 6y ago
    People have been using money since before recorded history, and bronze age technology is sufficient for gold to be used as reliable money. If any kind of financial system is to arise from the ashes of civilizational collapse, it will almost certainly use gold. So I wouldn't say "meaningless"... just not immediately useful, perhaps.
    - Retric 6y ago
      You misunderstood his point. Assuming you’re talking civilian tossed back to the Bronze Age. Whoever has access to the vault might make use of the gold in such situations, but ownership is unlikely to be tracked back to people in another city etc. Now, if you personally want to store physical gold that’s a different bet. Though personally storing significant amounts of valuables like that has plenty of obvious downsides.
6y ago