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Saturday, January 23, 2010

Gold is NOT the answer

Let me be clear, I may become a huge investor in gold once again, but that isn't because I believe gold is a true form of money. If I do turn to gold, it will be to catch the bubble in gold as a valuation asset, but it too will eventually implode as it is just a shiny rock, not true wealth.

Gold as a utility for money has some advantages, a small amount has large value, so it is portable, it has universal value, and it has a scarcity in the production.

The negatives are many, first off it only has high value if it is in demand. If governments declare it illegal tender, or other measures, it will devalue. If the public becomes disgusted with gold due to disappointment of it's valuation, it will fall. Gold as previously blogged is not a good mechanism to capture productivity in the form of money. It forces every action in society to be linked to mining activity, hardly a good thing to tie to.

Bill Still of the Secret of Oz has a video where he tries to highlight historical refrerences how a Gold standard does not help the common person.

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