Tim Price

Gold Transforming into a Completely Demonetized Wealth Asset

You misinterpret the meaning of the word 'fiat'. Fiat currency is given its apparent legitimacy by government proclamation. Fiat or paper currency is intrinsically worth no more than the politicians' promises that underpin it. Gold has legitimacy as a currency not least because it has been a store of value for thousands of years, but also because it is the ultimate means of exchange. Alan Greenspan has himself admitted that in extremis, people may shun fiat currency but they will always take gold. The value of gold expressed in fiat currencies will fluctuate. Personally, I'm with Shayne McGuire of the Teacher Retirement System of Texas who recently commented, "I don't think the question really is what is gold worth but what are currencies not worth". We are starting to see the answer to that question, and everybody should care. I'm not trying to sell anything, merely to defend gold from those who put undue faith in politicians.


On Nov 07 11:22 AM jacflash wrote:

> Gold's return versus a properly-managed global stock portfolio is
> paltry. It will continue to be paltry indefinitely, as gold is ultimately
> just another fiat currency. (What is the actual intrinsic value of
> a lump of soft metal? Not much. What's it worth? Whatever a bunch
> of folks like this guy say it is. Who cares?)
>
> Anyone who says otherwise is selling something, including, it would
> seem, FOFOA.

The Myth of Gold as an Inflation Hedge

The tone of the piece suggests that investors can EITHER invest in gold (an asset whose value is not contingent on anybody else's ability to pay and which even Alan Greenspan has conceded, in extremis, still represents the ultimate form of payment, while fiat money is accepted by nobody) OR in stocks and bonds, but not both. So much for a balanced portfolio. For sure, speculators seem to have been taking profits (and/or paying for other leveraged losses) in recent weeks by selling gold. But some of us are perfectly happy to own an asset that has been a store of value for over 2,000 years. That puts the acknowledged volatility of one month or even two-and-a-bit decades into a somewhat broader perspective. Particularly when most international banks are probably technically insolvent, and their shareholders should be unsurprised when they are diluted out of existence.