"So this takes us
to the real point: Gold – unlike bank deposits, equity or bonds, or even
banknotes – it’s separate from the real economy; it’s what you invest in when
you want to take a breather from what’s happening in the real economy. That’s
actually only a sensible thing to do in pretty extreme circumstances. Gold
returns are utterly crushed by equity markets in the long term – to a really
astonishing degree for those economies where we have continuous equity markets.
Compared with shares in pre-revolutionary China or pre-war Poland, gold returns
look pretty good. Gold is less an index of how confident we are that our leaders
a) want to b) know how to do the right thing as it is an index of how sure we
are that they won’t completely and utterly screw the pooch.
So what can go wrong?
I’m sick of hearing
about hyperinflation. The case for gold often starts off with a chart of narrow
money or the Central Bank balance sheet, and skips over the (dead-in-the-water)
dynamics of broad money. Economists like to use the parable of “helicopter
money” (banknotes thrown from a helicopter), and sadly some people appear to be
scanning the skies for scrip-dispensing helicopters. What’s actually happened
is that the helicopter pilot suffered some nasty losses on US subprime debt and
Greek Government bonds and is hoarding the new money, so it’s not having a lot
of inflationary impact."
http://pawelmorski.wordpress.
http://pawelmorski.wordpress.
