C2, you whipper snappers are too young! <In times of uncertainty and distress, and especially in times of inflation, the relatively fixed supply of gold has served as a store of value and as a means of preserving real value as currencies become worth less. >
Once upon a time, long long ago, there were quarter farthings, farthings, halfpennies, pennies, threepence [silver], sixpence [silver], shilling, florin, half crown [and I had a crown though they weren't normal currency], 10 shillings [note], pound, 5 pound, ten, twenty and I think there was fifty pound though they were as scarce as hen's teeth.
Those currency units meant business, serious business.
Before I started counting my pennies, the farthings had been inflated out of business though the halfpenny was still going. That was long before the US$ was taken off the gold standard.
The best demonstration of inflation is the current coinage in NZ which is a design replica of the 1967 currency, but shrunken to allow for inflation [with the penny, threepence, sixpence gone and the shilling [silver] down-graded from a serious piece of cash to the lowest denominator bronze 1cent piece equivalent - they need just remove the zero and it will be a 1c piece. For we old geezers, it's a sorry sight to see our once robust cash turned into toy money.
1979/1980 were times of stress, uncertainty, high inflation, distress, threat of war [hostages in Iran], carless days, the end of oil, unemployment and all that. Gold hit $800 an ounce. If people believed you then and bought gold, they would have been in for a sorry ride way down to $270 an ounce 20 years later. That's not exactly a store of value or preserving real value. That's called losing your shirt.
If instead they had bought a lot of different shares, they'd have made a fortune.
In your calculations on currency and expected hyperinflation, don't forget world record deleveraging, market clearing, how much permanent currency is being produced [not all that much], global economic growth [more than 6 billion of us now surging into the 21st century economic and technological systems]. Even the monetary expansion, aka Helicopter Ben Ruzl, is not all that much, though it's certainly enough to keep their "banking system" buddies rolling in it for quite a while, not to mention failed car companies and whoever else contrives to get their greedy paws in the till.
<We have forgotten history and are quite possibly doomed to repeat it.> What do you mean "we"? You and who else?
<they have for centuries proven themselves to be stores of value against inflated paper currencies. > Yes, but any real asset which is worth something in hard times will retain its value. Because something has worked previously, doesn't mean it will this time. Gold is too cumbersome and costly in the bid/ask spread, not to mention the storage costs, theft risks and so on. If somebody pays you with a gold coin, you'll have to assay it before acceptance. That's hard work.
I'm concocting hyperinflation too: <the nascent hyperinflation being concocted by the Fed in the US. > But until I'm ready to go, the US$ is a reasonable sort of currency. As I expected, it has done a LOT better than the NZ$ for a couple of years, zooming up from US83c to US53c to the NZ$. There is plenty of room to go too as it should reach US40c soon enough, say another year as NZers realize they have lost their shirts by borrowing from Japanese to revalue their houses upwards and wasting the money on dopey government ideology and making each other coffees and having overseas holidays. House prices have been on the way down and the pace should accelerate as reality bites.
Mqurice |
