It is sad to see banks of all people recommending Gold as an investment.
A true investment, as Smith showed us, is one which increase the output of the land and labor of a country. Gold is a metal which has value because of it's scarcity, not it's use. Gold can't be used to make things, make machines, etc. Compare this to copper which has so many industrial uses.
When people invest in Gold they actually take away valuable capital from productive parts of the country or world to a useless part. Granted everyone is nervous in market crashes-but doesn't mean that we should revert to Tartar and uncivilized world practices like hiding Gold in treasure troves. That's essentially what Gold ETFs are. In their short term zeal to hide money banks overlook their long term goal of directing peoples' savings to productive uses. In the end everyone loses, because of gross misallocation of capital.
The civilized world (and if you are reading this blog you belong to it) needs to focus on productive investments, which increase output of society, increase productivity-and noone became more productive by wearing a better earring or having a pound of gold in their bank locker. It is dead stock, as Smith would say.
Sanjay
You have it exactly backwards. You should go to mises.org and read "In praise of the miser". When people take money out of circulation by hoarding it, they decrease the money supply. This makes prices drop, which benefits everyone else.
ReplyDeleteGold "hoarders" do the same thing.
The price drop is nominal on money hoarding-eventually we are exchanging things with one another-money is just a medium. The real price of things doesn't change with the variation of measuring unit. The real value of an object if the labor of procuring it, which is independent of shenanigans of money (temporarily of course u can be fooled, but not for long-that's why whenever latin american governments tried to print money to pay off debts, there was rampant inflation).
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