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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 399.29+0.9%Dec 17 4:00 PM EST
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To: TobagoJack who wrote (79998)9/21/2011 9:52:43 PM
From: Hawkmoon1 Recommendation  Read Replies (1) of 218546
 
Did you tell her that Gold is not "real money" either since it's nothing more than a shiny, although rare, metal that is dug out of mother earth?

Money is a medium of exchange. When people are not exchanging things, they have less need for money, real or not.. Which is why banks are not willing to "borrow" it at high rates from depositors (lenders). They simply have less demand for it and cannot re-lend it out at higher rates.

I hope your indoctrination is not going to stifle her ability to think about other variables.

For instance, did you tell her about how "real money" gold lost nearly 75% of it's purchasing power between 1980 and 1999?

Yes, it has more than made up that difference now, having more than doubled over that 30 year period (break that down into annual return.. 3.3% effective annual return?).. But there is nothing to prevent this current bubble in Gold prices from collapsing again in the midst of a deflationary spiral where all asset prices suffer.

In sum, Gold is "real money" and a storehouse of value ONLY if you purchase it at the right time and then know when to discard it for another undervalued asset that represents a better form of "real money".

Suggest you may want to expose her to more Technical Analysis and the "Greater Fool Theory". Gold is not immune from those two variables.

Hawk
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