The stupid chart included business and household debt. Without any reference to household and business assets, it's useless.
Gold beats paper over the long haul every time.
It doesn't beat stocks. Would you like to see a few examples that beat gold?
"It doesn't beat stocks. "
Yes and no. Some stocks have been worth far more than metals ever could but most stocks have fizzled and many public companies have ceased to exist.
Also, most stocks do not provide dividends such that to realize the value of a stock the stock must be sold, thereby releasing any future value the stock may provide.
Metals have rarely been a great investment for gains but right now they are.
It is a relevant chart since it's apples-to-apples over 100 years. Computing debt is easy. Computing GDP is accomplished in a fairly straightforward manner, and is a metric, even if not 100% accurate. How do you compute the sum of all assets? What do you think would happen to the price of those assets when everyone tried to realize their "value" by selling?
It doesn't beat stocks. Would you like to see a few examples that beat gold?
The Dow-to-gold ratio has stayed constant between 3 and 5 over most of the 20th century. It traded above this range during the 3 secular bull markets of that century, and below that range in the secular bear markets that followed. In our latest bear market, the ratio has already dropped from 45 to 20. (It is interesting to note that each succeeding bull market brought higher highs, and each succeeding bear market produced lower lows-- if that holds true this time, you'll be able to buy one Dow Jones for an ounce of gold).
Also, keep in mind that Dow Jones average is sort of cheating since it simply kicks out poor performing companing and adds strong performing companies to its average (the Dow Jones today is not composed of the same companies that comprised it in 1900). Also, it assumes that the average investor gets to change horses for free. It doesn't count broker's fees to sell the old company. It doesn't count the capital gains or other taxes on this transaction. And it doesn't count the broker's fees to purchase the new company.
It would really be interesting to see a plot of gold vs. the original Dow Jones over 100 years.
Having said all that, I make the following claims:
1) It cannot be disputed that gold has outperformed the most widely held paper asset of all in the United States over the past century: the dollar.
2) It cannot be disputed that gold has outperformed ALL fiat currencies over time.
3) I will concede that a fair analyis (including taxes, broker fees, etc....) of stock prices vs gold prices MAY conclude that stocks have outperformed gold over the past century. However I have yet to see that data, so until then we must use the previously referenced chart. Nonetheless, I would not be surprised if stocks still won out over the 20th century due to the massive economic growth of the US. Looking forward, I do not expect this growth to repeat itself in the 21st century for a number of reasons.
4) While many individual stocks undoubtedly did outperform gold during the 20th century, many (most?) others did not. The Dow Jones is sort of cheating by eliminating those companies that did not, and adding those that did over time. So an apples-to-apples comparison is suspect since it favors the Dow.