

Scott Adams: Shiny Objects - cwan
http://dilbert.com/blog/entry/shiny_objects/

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CapitalistCartr
It's always possible that a major catastrophe will destroy our economic
system, but its far more likely that we will either limp along or improve. I
remember the same fears in the seventies, and the concomitant buying of gold,
at the same time as the price of gold spiked to $800.00. Yes, the economy was
turbulent, but that's not an indication of imminent total meltdown. In the
past year the price of gold has been at record highs. Why this encourages
scared people to buy is beyond me; the most likely scenario is that it will go
down in value.

~~~
madair
The idea is to diversify into lower-risk assets _than the U.S. dollar_ or
other currencies, _even if those investments will cost more in the long run_.
It doesn't matter what gold costs right now if the USD experiences further
free-fall, which is not out of the question.

This is generally the same reason there are buyers of sovereign debt (i.e.
Treasury Notes) at a negative interest rate.

If the Eurozone collapses, as is more possible every day now, then that's a
case in point for diversifying away from Euros. Some other choices in this
_Great Recession_ are USD, U.S. Treasury Notes, Japanese Yen, Swiss Francs,
etc, none particularly attractive right now. The Chinese Yuan isn't a viable
choice because it is pegged to the dollar.

[Edit:] The point is to deal with the current high risk of currency free-fall,
_not_ your normal everyday investment ebb and flow.

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teilo
Equating gold to cow manure according to the principle that only that has
value which you and others think has value is ridiculous. It ignores several
thousand years of history during which gold = money. The question is: Why?
Because gold is relatively, but not extremely, scarce; it cannot be
manufactured; it is durable; it is easily divisible; and sufficiently small
amounts are valuable enough according to the above factors so as to make it
practical as a portable store of value.

Since these traits, at least on planet earth, endure regardless of the various
cultural and economic trends which overtake economies from place to place and
from time to time, gold is insulated from the shifting winds of human whim
like no other substance on earth. THAT is why gold has = money for thousands
of years. No store of wealth based upon GDP or legal tender laws can compare
because all such stores of wealth are transitory, and given time, will fail.

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boredguy8
I'd like to highlight that debt isn't so much a problem as the trade imbalance
is. And the idea that no currently traded specie will have value at some
arbitrary point in the near future is silly: the USD might not be the currency
of global exchange, but there will still be such a currency (likely the Euro,
the RMB, or a synthetic currency) or exchange becomes incredibly difficult.

China is not likely to stop intervening in foreign currency markets, though
there is a substantial risk to their economy if they do so. But people forget
that long before China was subsidizing US trade imbalances, Japan was. And
they'd likely replace China as the purchaser of dollar securities in order to
stave off the inflation of the yen.

Please visit
[http://www.bookstore.petersoninstitute.org/publications/inte...](http://www.bookstore.petersoninstitute.org/publications/interstitial.cfm?ResearchID=1290)
for more information.

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pragmatic
If things do get that bad, that gold is the only store of value, we're screwed
anyway.

~~~
teilo
Yeah, unless you have gold, which you will, given time, without question be
able to convert back to usable wealth.

~~~
jerf
"without question"

I question. You clearly take that as virtually axiomatic, but I question.
Gold's ultimate value is that it is pretty and shiny, and industry has produce
metric shitloads of prettyshiny since the last time gold had any real
independent value as uniquely prettyshiny.

Your gold is only worth what people will give you in return for it. If society
collapses, who is going to trade you gold for food? You'd better hope enough
people buy your propaganda about gold's value because it's going to be your
only hope; the market for gold jewelry is going to be pretty small and
effectively saturated.

Gold has no value anymore. Yes, historically it was valuable, but times have
changed. A lot.

God help those who are long on gold once we start asteroid mining. Be sure to
dump your gold holdings before then, ideally several years before; once the
market figures out what that means gold will plunge even before the asteroid
gold hits the market. (By "plunge", I mean that I could see it losing 99% of
its value in less than a year. No joke.)

~~~
teilo
No. Gold's value is in its intrinsic suitability as an instrument of exchange,
far more than any other substance on earth. Can you point to any time in the
history of civilization where gold has been worthless? I mean, really, any
period of time from, say, the days of the Babylonian empire until today? Just
what about today's times have changed the intrinsic value of gold? See my
other post in this thread for just what that value is. It is by no means
arbitrary.

~~~
orblivion
This isn't like fiat currency where it's based on "our faith" like they taught
us in school. It's expensive as it is because of a) some decadent people's
actual demand for it b) other people's expectation for said decadent people's
demand for it. Usefulness as a currency I suppose can raise the price, but
only because there is an expectation of _actual_ utility in the hands of a
final consumer, somehow or other.

Really, I think gold is interesting because it's rare and thus coveted.

edit - no offense if you enjoy gold, I was just making sweeping
generalizations for expediency

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rickmode
Gold and silver used to have value because our currencies were based on it.
This prevented governments from printing money to inflate themselves out of
debt. That is, a government with a fiat currency can devalue their own
currency to also devalue the real value of their debt -- debt which is
conveniently denominated in their own currency.

Commodity based currencies prevented this sort of shenanigans because of the
non-zero cost of adding to the money supply (the cost of mining gold and
silver is much much greater than the cost of adding a few billion dollars to a
government accounting ledger).

So it seems to me the value of gold is at least in part tied to the sense that
governments will need some part of their money supply to be commodity based,
and at least in part to the sense that fiat currencies will eventually fail.

Can someone clearly explain the positive argument for going off the gold
standard?

~~~
gnaritas
Money supplies need to be inflatable to keep up with the creation of wealth,
which isn't static. While prices rise quickly in response to an abundance of
money (booms), they don't fall quickly in response to a lack of it
(recessions) and this causes a lack of necessary liquidity that feeds into
itself (bank runs) making the recession worse and worse. Prices are sticky,
businesses don't like to lower them in accordance with what supply and demand
would dictate.

Fiat money was an answer to this, it allows the Fed to inflate the money
supply during hard times to keep the money supply liquid enough to keep trade
going. Of course, they're supposed to deflate the money supply during boom
times to stave off unnecessary inflation and prevent bubbles.

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richcollins
Everyone always assumes that the value of gold isn't based in its intrinsic
properties. They don't see that gold:

* Is easy to arbitrarily divide * Is scarce * Can't be inflated * Is easy to transport

These are the properties that make it valuable as a currency, not some
irrational desire for shiny objects.

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jpc
Gold _has_ been a solid investment for the past 8 years. It went from a low of
$255 in 2001 to a high of $1,213 in 2009. So a 475% rise in 8 years.

~~~
philk
Yes, and in 1981 it was ~$800. Which means a return of ~50% over 29 years
while paying no dividends whatsoever.

You can make pretty much anything look like a good or bad investment if you
pick your start and endpoints carefully.

~~~
DennisP
Some people always say gold is a great investment, other people always say
it's a terrible one. Both sides are wrong.

~~~
nazgulnarsil
gold is a stopgap against catastrophe, not an investment in the traditional
sense.

~~~
DennisP
That's pretty much how I think of it, but I've also gotten a 39% gain with it
over the past year or so.

~~~
nazgulnarsil
whereas most people experienced catastrophe over the last year or so.
commodities move inversely to cash investments.

------
orblivion
"wouldn't trust your fortune to cow poop" sure I would, if it kept as well as
gold

edit - and smelled as well

------
nazgulnarsil
post keynesianism in a nutshell: <http://www.winterspeak.com/>

