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The Myth Of Gold as Inflation Hedge

Discussion in 'Shares' started by Tropo, 16th Nov, 2009.

  1. Tropo

    Tropo Well-Known Member

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    ...The myth of gold as an inflation hedge comes from a rather primitive observation, when the value of money decreases, the value of gold rises...

    ...The problem however, is that to make any money you would need to trade the gold.
    Holding anything without the intention to sell is not a strategy of any sorts.
    At some point you will need to somehow realize your investment.
    Otherwise is just a paper gain and just illusory....

    ... This commodity is the most boring commodity on earth to trade, and consequently its name is Borodium.
    Borodium only changes in price based on inflation data and is the ultimate hedge against inflation.
    Borodium places an interesting problem though, how do we measure inflation?...
    more ... The Politics of Debt The Myth Of Gold as Inflation Hedge
     
  2. Chris C

    Chris C Well-Known Member

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    A lot of people don't buy gold as an "investment" rather buy it as an "alternative currency" or "insurance policy". The notion that gold is a useless investment unless traded disregards gold's historical use - a store of wealth.

    If you liken gold to a currency then it sure holds its value better than the fiat currency that most people keep in their wallet.

    Just another article that offers a short sighted opinion. Sometimes it pays to view macro issues over periods longer than a couple of decades or even a lifetime.

    The reality is virtually all of the central banks, government, currencies, countries, businesses, systems that exist today won't exist in 500 years. Why? Because banks fail, governments collapse, currencies are debased, countries are conquered, businesses made redundant, systems break down. It's hard to guess when any of these things are going to happen, but they will. You can call it Darwinism or Creative Destuction - but whatever you call it, it's the way our world has worked for thousands of years and will probably continue to work for many hundredd if not thousands more.

    Despite all of this, gold historically has held valued all around the world as a means of payment for millennia. So I'd rather bet on that trend continuing than the US government digging itself out its mountain of debt. Yes some decades gold will be up, some decades it will be down, but if the sh*t hits the fan in our lifetime I'm sure it will be one of the things that comes out shining.
     
  3. Billv

    Billv Getting there

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    Chris
    Really?
    I doubt that VERY much.
    I think you should change your source of information
     
  4. Tropo

    Tropo Well-Known Member

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    It seems to me that he was on the phone to Nostradamus last night...:eek:
     
  5. Chris C

    Chris C Well-Known Member

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    Feel free to start rattling off a long lists of central banks, governments, currencies, countries, businesses, systems that still existed today and were formed over 500 years ago. There are a "few" but there aren't many.

    List of sovereign states by formation date - Wikipedia, the free encyclopedia
    The 100 Oldest Companies in the World | BizAims
    WikiAnswers - What is the oldest current government in the world

    My point is not that the world is going to end in our lifetime, my point is that historically central banks, governments, currency, country, businesses and system collapses eventually and are reformed, and I suspect the future won't be any different, there are countless examples over the last couple of decades of major entities of the above categories collapsing.

    Therefore it makes sense to store some of your wealth in something that is outside of the system and holds value through the creative destruction cycles.
     
  6. Billv

    Billv Getting there

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    Such as property for example, it lasts a long time and it cannot be easily stolen....:)
     
  7. Chris C

    Chris C Well-Known Member

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    A bit of property should have its place in any well diversified portfolio (not to mention they general make for a good place to live)... but property doesn't function well as a medium of exchange (currency) for necessary goods and services nor is it easily divisible, portable or liquid.