Posted on 12/07/2005 10:10:37 AM PST by DebtAndDelusion
The price of gold passed $500 an ounce last week, its highest level since the late 1980s. This is either an ominous development—or it isn't...
If you'd lived a century ago, gold would have been the basis of your money. Great Britain dominated the global gold standard; its currency, the pound, was freely convertible into gold...
On April 5, 1933, President Franklin D. Roosevelt ordered Americans to surrender their gold coin; the country effectively went on a paper-money standard...
Higher demand collides with constricted supplies; wham, prices rise...
Gold is an unending mystery, because its value lies less in what it does for us (it is not like sugar, copper or oil) and more in what it symbolizes. It is almost as unfathomable as the human drama itself.
(Excerpt) Read more at msnbc.msn.com ...
Since the dividend tax cut, dividends have been on the rise. Even Microsoft pays one now.
When dividends begin to regularly surpass headline inflation, then a reconsideration of portfolio weighting toward stocks will be prudent.
Let me know when the dividend for gold surpasses headline inflation. The secret is buying stocks that raise their dividends on a regular basis. For instance, Philip Morris has increased its dividend 25% in the last 3 years.
My view is that gold used to provide at least some limit on how much governments could inflate the money supply - Yes, it is necessary to extinguish currency, FED open market operations etc.. But politicians are prone to changing the rules. Inflation is a hidden tax on everyone - what we are talking about here is the _unit of account_; we call them dollars. How would you feel if the state re-defined an acre
as one half its former dimensions, citing a "restrictive acre policy, and confiscated 50 per cent of your land? That's what happens. Or, "The meter lost several centimeters in heavy trading against the yard yesterday.."
We don't _need_ to use gold as money, money is an abstraction - bits and bytes these days. But I don't see the discipline by our leaders to make paper money work. It is true that every single paper currency in history has utterly failed, not a very good track record.
Gold=Light Green Nasdaq=Dark Green S&P 500=Light Blue Dow=Dark Blue
The Nasdaq is by far head and shoulders ahead of all. The Nasdaq has outperformed Gold since 1971 by 1830%. But Gold has outperformed the S&P 500 by 7.2% and the Dow by 75% since 1971. Again, this does not include dividend re-investment but you can clearly see from the chart from 1971 to 1991, Gold offered the best returns. I'd wager with dividends re-invested, the Dow and S&P 500 came close to the same returns by 1991.
You may well be right. I'm speaking only in terms of long term strategies. In the long term, bonds are both safer and better yielding than gold.
Yes, that's true. But inflation did occur under the gold standard. So did deflation.
It is true that every single paper currency in history has utterly failed, not a very good track record.
The dollar hasn't utterly failed.
Not my chart. I originally saw it credited to Jeremy Siegel which is why I posted it when some clown called Siegel a buffoon.
Prior to 1971, Gold was fixed at $35 an ounce. It did not appreciate.
So how is a chart showing it didn't appreciate deceptive?
It could not appreciate so measuring its return prior to 1971 against investment vehicles that could appreciate is deceptive.
Surely you cannot argue that paper money has a good track record. The point still stands. Also - consider for a moment that, back in the day you were to counterfeit gold coin in your basement. It was at least .900 fine, as pure as the "real" stuff. Visually undetectable. Nobody would have cared. In fact, that's how the US mint used to operate. You broughts yer gold to the mint, and they gave you coins back in return. Gold has a certain fiat value as well, as governments have almost always used seignorage. Contrast that with running your own printing press. THAT will invoke the ire of authorities. Ever wonder why? I'm using the same paper, the ink - no one can tell! So my argument is not necessarily for a metallic money standard, but some form of sanity and rationality to "money". In some ways I believe cheap money begets cheap people.
No doubt the cliches of stocks always go up rings in their heads as well. Such as the DJIA never goes down for any long period of time, true perhaps but they change out the stocks like the Pony Express changed out horses. It seems us barbarians must hold our gold forever and that the rule of "buy low sell high" does not apply to us when it comes to the antis.
Didn't it appreciate very rapidly in the 1930s? Once?
It's done okay lately. Are you saying gold money had a good track record? Define good track record please.
Define "lately"...
Yes, it appreciated very rapidly in the thirties since the federal government reneged on the gold clause. That is, contract law. The government's position was that the citizenry was "hoarding" gold. So they confiscated all they could. Somehow, keeping all that gold at Ft. Knox isn't "hoarding".
Ok, 20 years it is. Anyway, have you ever heard of an expedition being assembled in order to find some monarch's long-lost checkbook? Why do you suppose that is?
No. Are you saying gold money had a good track record? Define good track record please.
Enhhhh.... I guess that could be argued but in reality the government re-valued Gold and it stayed at that same value for nearly 40 years. Since the re-valuing took place post confiscation of Gold from US citizens, individual investors were generally unable to profit. It has only been since 1971 that Gold has fluctuated in price like other investments and individual investors have been able to profit during times of appreciation.
"Inflation did occur under the gold standard"
That's the econ 101 view, but the reality is different. It's OK to have different opinions but it's not OK to be wrong in the facts used to make up those opinions. The "price" of gold was ~ $20 for a looong time, roughly 150 years. Personally I don't care one iota whether we are on a "managed money" standard or whatever, only that there is a standard for the unit of account. Gold held that standard for several thousand years since it was A. relatively rare, and B. not easily counterfeitable.
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