JSF

Gold Is Just a Brick ('Active Value Investing' Book Excerpt)

What academic planet is the author on? Gold was $20.67 an ounce in 1930. Today it is $863 an ounce. The U.S. dollar today buys perhaps 5% of what it bought in 1930. The history of fiat currencies like the dollar has been a steady erosion of value, while gold has maintained value.

More importantly, gold has more than tripled since 2001 when it was about $256 an ounce, while (and because) fiat currencies like the US dollar have been losing value at the same time. As the dollar and other currencies lose value gold will pass $1,000 an ounce within the next 24 months or less. It could pass $2,000 an ounce in the next 60 months if the loss in confidence in the dollar and other currencies becomes extreme.

Writing an article about gold referencing a 200 year time frame is mostly ridiculous. Prior to 1933 we were on a gold standard, and the government could fix the price of gold and then successfully defend that price because they were not rapidly running up debts and the money supply. (After 1933 the price of gold was fixed at $35 an ounce until 1971. It was a bad investment mainly because the US government made owning gold illegal until 1975.) All this changed, and the connection between gold and "dollars" has been gradually eliminated (1913 - creation of the Federal Reserve; 1933 - FDR's gold confiscation; 1971 - Nixon closes the gold "window"; 2000-2008 - central banks dump gold reserves onto the market each year while increasingly ramping up the money supply).

What is a barbaric relic is not gold, it is those little pieces of paper that get devalued year after year!