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Gold - a six thousand year-old bubble
- joubert 17y agoScarcity?
- jrockway 17y agoMy fingernail clippings are more scarce than gold, but they are worth much less.
- kingkongreveng_ 17y agoYour fingernail clippings will turn to dust in fifty years. Refined gold is eternal, and universally valued.
- redorb 17y agoeternity is a long time.
- lurkinggrue 17y agoI prefer tulips.
- byrneseyeview 17y agoMoney is the bubble that doesn't pop. http://unqualified-reservations.blogspot.com/2008/02/return-to-castle-goldenstein-gold.html http://unqualified-reservations.blogspot.com/2008/02/return-...
- Asmodeus 17y ago"When the debasement rate is 10% and interest rates are 7%, the negative debasement-adjusted interest rate is a debt factory. It is easy for borrowers to make decisions that assume these rates will continue. If they end, the typical result is a recession. These kinds of dependencies make it very hard for politically sensitive authorities to end debasement, or even significantly reduce it." From (http://www.safehaven.com/article-5205.htm http://www.safehaven.com/article-5205.htm) likely by the same author in a different mood...written in 2006.
- davidmathers 17y agoThe US dollar is about to collapse because of a simple economic fact that no one has the power to change or conceal. http://en.wikipedia.org/wiki/Millenarianism http://en.wikipedia.org/wiki/Millenarianism These people are exactly like those Christians who think the rapture is always just around the corner. Maybe next year.
- Asmodeus 17y agoActually, I was trying to direct you away from the sensationalist title, but hey, maybe next year.
- mcantelon 17y ago"I don’t want to argue with a 6000-year old bubble [but] I would not invest more than a sliver of my wealth into something without intrinsic value, something whose positive value is based on nothing more than a set of self-confirming beliefs." He neglects to say what he would invest in. The mainstream financial media keeps on with the "gold is bad" drum, but provides no alternatives. The simplicity of gold and the fact it can't be conjured out of thin air (and vanish into thin air) likely make it attractive in times of massive con games.
- laut 17y agoWhat is intrinsic worth anyway, and what does it mean? Some, like Karl Marx, argued that the value of a product is based on how much labour you put into it. Not whether people want it or not. What is interesting is how much you can trade something for. Now and in the future. The subjective theory of value http://en.wikipedia.org/wiki/Subjective_theory_of_value http://en.wikipedia.org/wiki/Subjective_theory_of_value How much can you trade 11 US $100 bills for in 20 years? And how much for 1 ounce of gold?
- Perceval 17y agoKarl Marx took the 'labor theory of value' argument from David Ricardo, who had taken it from Adam Smith, who had taken it from John Locke among others. Alfred Marshall's 'marginalism' completely displaced the labor theory, insofar as the labor theory is incapable of producing a theory explaining prices. The labor theory is now only kept around by philosophy students and unreconstructed marxists.
- davidmathers 17y agoYes, the labor theory of value is, in short, what it means to be labeled a "classical" economist. All economists writing before the marginal revolution took it for granted. Also, Marx never wrote anything even resembling this: Some, like Karl Marx, argued that the value of a product is based on how much labour you put into it. Not whether people want it or not. He actually mocked people, like Proudhon, who proposed such ideas.
- chaostheory 17y agoSince gold is a decent conductor, it has use in a variety of industrial applications such as for connectors, switch and relay contacts, soldered joints, connecting wires, and connection strips; so you can find it in a lot of electronics and computers. It's also used in certain medical treatments involving radiation, and in glass to make certain windows more energy efficient. Gold has real intrinsic value. I do not agree with the article, but it's an interesting point of discussion given the times.
- colanderman 17y ago"It has no remaining uses as a producer good - equivalent or superior alternatives exist for all its industrial uses." ...sounds like a statement by someone who has never worked in industry. While I can't argue what quantity of gold is actually required in industry, the value is certainly non-zero -- or else all those gold connections in ICs would be replaced with cheaper copper equivalents.
- 3pt14159 17y agoGold production per year: 1.2% Population growth rate: 1.19% M3 index growth rate: 2 to 12% I'll stick with gold, silver, and investments where I actually put my brain to work, like my own company. I believe in stable stores of value for emergencies and a growing stores of value for future luxuries. The ft.com author can stick to investing in ponzi schemes. Just for kicks he can take a look at how the DOW has done versus gold in the past 10 years.
- Perceval 17y agoHere's a good site for looking at the Dow priced in gold: http://home.earthlink.net/~intelligentbear/com-dow-au.htm http://home.earthlink.net/~intelligentbear/com-dow-au.htm
- gnaritas 17y agoGold has plenty of value, it may be a fuel in the future; it can be used to create antimatter. http://www.msnbc.msn.com/id/27998860/ http://www.msnbc.msn.com/id/27998860/
- mey 17y agohttp://www.wolframalpha.com/input/?i=price+gold,+platinum http://www.wolframalpha.com/input/?i=price+gold,+platinum
- steve19 17y agoInteresting graph. What you need to remember is that while gold appears to have infalted rapidly, the quantity of gold is very limited - the great increase in gold has a lot to do with inflation of the USD, rather than inflation of gold. Gold has been good for the past 6000, and I expect it will be good for at least the next 200, which is good enough for me, my grandchildren and their children.
- teilo 17y agoI call shenanigans. His argument fails on two counts: 1) The value of gold IS its use as a value store. A currency, to be practical, needs to meet the following four characteristics: Be relatively scarce, be durable, be divisible, and be impossible to counterfeit. Nothing, in the past 6000 years, has even been found that beats gold on these four counts. That is why it has always been the king of currencies. 2) There are vastly more practical uses for gold today than there have ever been in the past 6000 years. Other than monetary, there have been no practical uses for gold in antiquity.
- danteembermage 17y agoWhat about copper rounds, or uranium futures, or cell phone minutes? All seem to work nearly as well and have useful production purposes. I don't think gold is going anywhere for the reasons you cite, but there are alternatives today.
- kingkongreveng_ 17y agoGold's relatively low practical demand makes the price stable, and that's the point. The alternatives you mention have volatile demand and are impacted by technological change. The prices aren't stable.
- steve19 17y agogold can be stored in a band vault, under your bed or buried in the garden. Cell phone minutes and uranium futures cannot. By "copper rounds" do you mean ammunition? If so, then yes, they hold value and will last as least 20 years, or longer (corrosive ammunition from WWII is still usable).
- camccann 17y agoA currency, to be practical, needs to meet the following four characteristics: Be relatively scarce, be durable, be divisible, and be impossible to counterfeit. But to actually be a currency, a resource still requires that people treat it as such; i.e., that large numbers of people with no practical use for the physical embodiment of the currency accept it in trade for things of practical value. This means that, practically by definition, the currency thus acquires some amount of value in excess of whatever value it would have were it not a currency. This excess is effectively "imaginary value"--a mass delusion or self-fulfilling prophecy, albeit a useful one. If nobody uses it as a currency, it loses that value, no matter how well it could theoretically work as a currency. Likewise, non-currency commodities can acquire imaginary value through various means--such as an expectation of future value, or arbitrary fads. Debt is 100% pure imaginary value, completely worthless but for the expectation that the debtor will repay it. Now, "imaginary" value is still value, and is real enough for most practical purposes, but is and always will be vulnerable to disappearing rapidly. Fiat currency is a nearly worthless commodity with substantial imaginary value. Shares of a public corporation represent a fraction of the true value of the corporation's wealth, plus some amount of imaginary value. Gold is a more useful commodity than the article seems to think, but it's still likely that gold's value is at least half imaginary, based only on the perception of it as a store of value. Real estate also has substantial value, but that didn't stop it from (temporarily) acquiring massive imaginary value as well. It's worth noting that, assuming a secure system of tracking ownership, the title to a plot of land meets your characteristics even better than gold. Yes, gold is likely to remain a de facto currency of choice, but don't kid yourself into thinking it isn't massively overpriced for exactly that reason. If you actually want a durable store of almost entirely real value, that can't be faked or quickly created, bulk dried beans might be a good start.
- detcader 17y agoAnyone else read "God - a six thousand year-old bubble"
- billswift 17y agoMaybe Hitchens should write a sequel: "God: The Ultimate Bubble".
- zandorg 17y agoI noticed an interesting phenomenon on Ebay. Looking up Krugerrands (after reference to them in a song), I found out about gold coins. Whatever country issues them, they all go for their weight in gold - even by auction. Perhaps Ebay is a great place to buy and sell gold (but maybe you could get discounts in bulk from a dealer). [I'm not advocating buying gold off Ebay, I was just interested].
- delackner 17y agoAnd how are you to go about verifying purity? This is an honest question.
- zandorg 17y agoTo be honest, all I can think of is weighing them, but they could be filled with lead! So I guess I haven't thought it through... However, the Ebay seller feedback count should be of some use. They could only sell a duff coin once (maybe twice) before being busted.
- herdrick 17y agoSilly. Gold is amazing stuff. It doesn't decay nor oxidize (under most conditions on earth). From Wikipedia: "Gold is the most malleable and ductile of all metals; a single gram can be beaten into a sheet of 1 square meter, or an ounce into 300 square feet. Gold leaf can be beaten thin enough to become translucent." So I didn't bother past the first paragraph. Did I miss anything?
- deleted 17y ago[deleted]
- stevedekorte 17y agoThe author fails to recognize that gold, unlike paper money, can't be hyperinflated into oblivion. And this isn't just a theoretical point. Roughly one paper currency per year expires from hyperinflation.