You need to read the comments to Krugman's article to see how screwed many Americans will be:
krugman.blogs.nytimes.com
A sampling, excuse my failure to format. And lots more comments at the link, if you wish to take an informal poll. Note particularly the linking of politics with gold, i.e., conservatives buy gold, liberals don't. I am a conservative of the Eisenhower variety, find most of the Tea stuff repugnant, Palin utterly unpalatable, etc.
Anyway, the point is that gold ownership has nothing to do with politics, but with perceptions about the nature of the financial and economic future. In fact, if you throw politics into the mix, you are likely to misstep.
Arrrgh! So frustrating to deal with this kind of partisanship.
1.
Bridget
asheville, nc
July 19th, 2011
6:54 pm
Hypothesis: Stupid people buy gold.
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2.
flakesobran
Washington DC
July 19th, 2011
6:54 pm
You didn't push your analogy far enough.
The primary market for Gold recently has been fiscal conservatives. Many of those same affluent conservatives either supported or became recent inductees into the House of Representatives.
Because gold is in theory a hedge against Hyperinflation, arguably if the United States defaults on its debt, the value of gold goes up and these conservatives stand to make a killing. If the United States becomes solvent, the price of gold will go down and a lot of fiscal conservatives stand to loose a lot of money.
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3.
jeff p
San Diego, CA
July 20th, 2011
11:05 am
Not sure if this explains why central banks around the world, including those in India and China, are buying gold.
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4.
Caveat Emptor
Florida
July 20th, 2011
11:05 am
Ron Paul recently acknowledged that he had recently invested heavily in gold. Is there a political equivalent of insider trading? Should there be?
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5.
John Farmer
L.A.
July 20th, 2011
11:05 am
Ad campaigns for gold are a mainstay of talk radio. (On the left too, though there's little balance between left and right radio.) A typical ad has the host saying, "I've owed gold for [X number of]* years...," with X = number of years since the sponsor first bought time and gave a stake to the host.
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6.
TheDave08
Gibson City, IL
July 20th, 2011
11:05 am
"Hypothesis: Stupid people buy gold."
Based off of what evidence? The fact that the price of gold has gone up over 500% in the last decade when the Dow is worth less than it was?
The stupidity lies in the belief that we can build an economy on gov't spending, debt, and inflation.
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7.
Steve
Ithaca, NY
July 20th, 2011
11:05 am
I this time of changing values and perceptions of what really wealth is, isn't the value of gold more realistically related to its use in electronics, particularly weapons systems?
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8.
art
belmar
July 20th, 2011
11:05 am
Where were the gold bugs when the price was 275 per ounce? Now I am advised from every direction to buy gold...another bubble in the making.
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9.
mickeyrad
Centerville Iowa
July 20th, 2011
11:05 am
Gold is probably the most rigged market in the history of markets. Gold has little intrinsic value - it's used in some electronics, but that's it. The only real value gold has is for conspiracy theorists aka gold bugs.
Whether the US defaults or not, gold is meaningless. Euros have value; all currencies have value. Any value gold has is purely an illusion. And that's why gold is perfect for hacks like Beck to flog.
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10.
pazooter
WA
July 20th, 2011
11:05 am
"Connection" is not really the same as "comparison" or "parallel." It sends a message that is to some small degree, misleading.
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11.
Ken
California
July 20th, 2011
11:05 am
I would really like to see an economist go through the supply demand numbers concerning gold and explain to us all why the price has reached such lofty levels.
The way it looks to me is that each year there is a solid surplus of gold 'production' from both mining operations and from 'scrap' gold jewelry being remelted into pure gold bars. Yet the prices continue to go up. How can that be? The surplus production, according to the reports, is not being absorbed by investments or by central banks or whatever, it is just sitting there, I would guess unsold. So how do prices keep going higher?
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12.
Hammer2000
New York, NY
July 20th, 2011
11:05 am
2 points.
#1 - Why do Krugman's beloved central banks own gold, when they can just print money? Gold positions held by international central banks rose about 2.2% between 2008 and the end of 2010 – from 29,870 tonnes to 30,535 tons. As of March 31, 2011, the IMF's gold holdings amounted to $130.2 billion at current market prices. I guess the guys at the IMF watch too much G. Beck. /sarcasm.
#2 - Why don't you "liquidity trap" liberals put your money where you mouth is, load up on 30 year Treasury bonds, and us Tea-Party neanderthals can continue to load up on Gold. We'll check back in 5 years and see which one of us is broke.
Get a life, Krugman.
Recommend Recommended by 24 Readers
13.
Alex
New York, NY
July 20th, 2011
11:05 am
I think a substantial part of the story is professional investors who know that gold is overvalued, but also see a market that is being driven by the effectiveness of a Glenn Beck campaign targeted at stupid people. I know George Soros has been on the record as calling gold a "massive bubble," but that didn't stop him from amassing a pretty sizable position in it (which he liquidated just recently). My instinct is that people like Soros don't actually believe hyper-inflation fears, but bought gold thinking (correctly) that Glenn Beck's ranting would bring enough buyers into the market to drive the price higher.
A perfect example of Keynes's description of investing as a beauty contest in which judges have to decide who the other judges will find most beautiful.
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14.
Kirk Tofte
Des Moines, IA
July 20th, 2011
11:05 am
Frankly, I'm surprised and disappointed that Paul Krugman hasn't commented today on the Gang of Six deficit reduction proposal that Obama trumpeted today. It's patterned after the awful, awful recommendations of the Bowles-Simpson commission, although in many ways the Gang of Six initiative is far worse.
Obama is strongly endorsing a plan that will cut discretionary spending to the bone, reduce entitlement spending (and, therefore, benefits to Medicare and Social Security beneficiaries) and "reform" the tax code to the benefit of the richest Americans. The enemy stopped being the GOP long ago. It is now Obama and Obama alone.
Recommend Recommended by 11 Readers
15.
Alan
Tsukuba, Japan
July 20th, 2011
11:05 am
One of the WSJ's MarketWatch commentators posted a column a few months ago. "Buy gold!" repeated at least five times.
Recommend Recommended by 4 Readers
16.
kingbadger
badgerland
July 20th, 2011
11:05 am
The Street Light post uses a linear chart to look at gold. Linear charts are the bane of financial analysis. The misleading linear chart seems to lead Kash to assume that the rise in price in the last few years has been "dramatic", when it only looks that way because of the linearity of the chart. Then Kash pushes the Glenn-Beck-did-it line, as if gold hadn't been going up like that for years before Beck came along. Fooled by linearchartness.
Recommend Recommended by 6 Readers
17.
Nylund
Dallas
July 20th, 2011
11:05 am
If I say, "You should give me all your dollars because they are going to become worthless," the first thing a reasonable person would ask is, "if they are going to become worthless, why do you want them?" Apparently, Glenn Beck's audience wasn't smart enough to wonder that. Many of them got horribly ripped off and lost a lot of money. Glenn Beck literally helped a company scam people, many of them quite elderly.
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18.
Martin
Branford, CT
July 20th, 2011
11:05 am
Many investors prefer gold stocks or funds over physical gold. This is not mentioned in the Kash quote. So, can some helpful economist tell us what is the real price elasticity in gold and gold stocks? Is this purely a psychological game among those $1M portfolios? BTW even if so, it may be a reasonable investment strategy at the 5% level.
Recommend Recommended by 2 Readers
19.
oldchemprof
Hendersonville NC
July 20th, 2011
11:05 am
"Market prices almost always tell you something useful."
"--In 1942 a grateful and very anxious citizenry rewarded its soldiers, sailors, and airmen with a substantial increase in pay. . . . in prompt response to this advance in wage income, the prostitutes raised the prices of their services. This was at a time when, if anything, increased volume was causing a reduction in their average unit costs."
--John Kenneth Galbraith, “The Affluent Society”
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20.
jjhare
Falls Church, VA
July 20th, 2011
11:05 am
I'm always struck by the idea gold will have any value in a society where the dollar is no longer a secure store of value. It's not particularly useful for making weapons or farming equipment. If we're going all Mad Max, I would figure large quantities of steel and secure housing would more important than gold hoarding.
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21.
Nick R.
Kyoto
July 20th, 2011
11:05 am
The value of gold is another way of looking at the value of money. Gold's soaring price is an inconvenient, and daily, reminder that investors increasingly expect financial repression.
Your support of the Fed to hold rates at zero, and advocacy of further fiscal stimulus are precisely the kind of factors that lead to a rising gold price. The rising price of gold is one more sign that endless deficit amidst unorthodox monetary policy spending is not a panacea. It is, instead, a race to the bottom. It's fun to blame this on Glenn Beck, but you might want to do a little bit more soul searching.
Recommend Recommended by 10 Readers
22.
dw
maryland
July 20th, 2011
11:06 am
gold is the classic bubble: its price it going up because its price is going up. it draws safe haven demand because its price is going up. Sure, if a mere fraction of the 3 million wealthy put their money in gold it would go up... but if they sell it will go down.
the same arguments were made about housing... internet stocks... tulips. At least you could eat tulips when they were worthless. with gold... well, i guess you will look good as you starve to death.
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23.
Jerry Hough
Durham, NC
July 20th, 2011
11:06 am
Someone who bought gold at $300 in 1998 will have done about 5 times better than someone who was in "rational" stocks. The rise has been orderly and the chart does not remotely have the appearance of a bubble now. There has not been a five times inflation, but Jim Cramer says institutions are way under proper weight. It is a feeling that no currency looks solid and a bet there might be a huge spike if, in X number of years, something happens. It is also the same thing as the spike in Chinese and Indian paintings. Some emerging nation people have a lot of money--and there are a lot of people there, and gold has been traditional. The supply-demand ratio looks very good.
Recommend Recommended by 7 Readers
24.
Jerry
Texas
July 20th, 2011
11:06 am
Where I live they air infomercials disguised as documentaries on the horrors of fiat currency. They broadcast the infomercial disclaimer before the "documentaries" air. for a while these were broadcast a few nights a week on MiCasa network in Houston. These "documentaries" feature people like Ron Paul, Lew Rockwell, G.Edward Griffin. Can't imagine what purpose they would have other than to convince people to buy gold.
Recommend Recommended by 7 Readers
25.
GaryH
OH
July 20th, 2011
11:06 am
Commodities bubble! Brace for it now.
Recommend Recommended by 3 Readers |
