The Economist proclaims that:
The financial world, it sometimes seems, is broadly divided into those who believe in gold as the ultimate currency and those who don’t. In the latter camp are most economists, the most famous of whom, John Maynard Keynes, described gold as a “barbarous relic”.I suppose that statement is correct although I can't help pointing out that most of those "economists" have failed to provide any logical or consistent explanation of their subject, especially monetary economics. For that you need to consult these guys who are firmly on the other side of the divide.
The Economist continues:
It used to be that gold bugs touted the yellow metal’s credentials as a hedge against inflation. But the link was anyway pretty feeble, except for currencies with hyperinflation. And though consumer prices have risen a bit this year, it would be hard to make the case that inflation is about to roar anywhere in the developed world.But the Economist is wrong: the link is not feeble. I wrote this a couple of years ago:
Since 1913, the pound has lost 98% of its value and the dollar has declined by 95%. As long as we have a fiat currency with money being created out of thin air, inflation will continue. The Austrians showed that sound money can only exist if it is 100% based on a commodity, probably gold or silver.I don't think that losing all but 2% of your money in less than a century is unimportant. An annual inflation of 3% would wipe out half of your savings in just twenty-three years. It's no mystery why we have a pension crisis. Consider this quote:
"Regardless of the dollar price involved, one ounce of gold would purchase a good-quality man's suit at the conclusion of the Revolutionary War, the Civil War, the presidency of Franklin Roosevelt, and today."I recall reading somewhere that an ounce of gold would also buy you a good-quality toga in Roman times. That's consistency. I'd rather trust gold and silver than any politician. Let's see, it's about twenty centuries since the Roman regime was at its peak. Will the Economist sell me a 2,000-year subscription at today's sterling rates?
Peter A. Burshre