16 Sep 10
Originally posted by twhiteheadYes, unless there was a fundamental reason for the increase of the dollar's value.
Yes. We discovered that it is a more reliable investment than US dollars.
Gold is largely a currency and should be analysed as such. If the dollar had increased in value relative to other world currencies, would you similarly be suggesting a bubble?
16 Sep 10
Originally posted by twhiteheadany currency that is rapidly increasing in value likely has some "bubble aspects" to it
Yes. We discovered that it is a more reliable investment than US dollars.
Gold is largely a currency and should be analysed as such. If the dollar had increased in value relative to other world currencies, would you similarly be suggesting a bubble?
16 Sep 10
Another way of thinking about it is this: the value of gold is staying still while that of all other currencies is dropping. You can buy more dollars, or whatever, for your gold, not merely less gold for your dollars, or whatever.
Clearly, something is debasing most fiat currencies. Maybe it has to do with the recent expansion of the money supply. Maybe it has to do with anticipated currency crises caused by unpayable debt. Maybe it has to do with permanent low interest rates and high spending precipitating a massive eventual bust through sustained malinvestment. Maybe it has to do corporatism and socialism choking the engines of production and initiative.
Whatever it is, I'm glad part of my savings are in gold.
16 Sep 10
Originally posted by KazetNagorraCould it be that inflation is adjusting the prices of other currencies downward?
I don't see the fundamental reason for an inflation-adjusted price increase of 200% over the last decade. Did we invent some new application for gold in the last decade that would make it more useful?
It's curious that you require gold to have a use to be valuable, but not paper money. Has paper money gone down in value because we have fewer uses for it?
Gold's value as a store of wealth lies in its resistance to inflation, because its supply cannot be arbitrarily increased to any great extent.
17 Sep 10
Originally posted by twhiteheadmaybe there was a bubble and no one noticed.
Yes. We discovered that it is a more reliable investment than US dollars.
Gold is largely a currency and should be analysed as such. If the dollar had increased in value relative to other world currencies, would you similarly be suggesting a bubble?
on the other hand, we can print more dollars. rather more difficult to mine and smelt and maintain (vaults, guards, etc.) gold.
17 Sep 10
Originally posted by twhiteheadmaybe there was a bubble and no one noticed.
Yes. We discovered that it is a more reliable investment than US dollars.
Gold is largely a currency and should be analysed as such. If the dollar had increased in value relative to other world currencies, would you similarly be suggesting a bubble?
on the other hand, we can print more dollars. rather more difficult to mine and smelt and maintain (vaults, guards, etc.) gold.
17 Sep 10
Originally posted by twhiteheadmaybe there was a bubble and no one noticed.
Yes. We discovered that it is a more reliable investment than US dollars.
Gold is largely a currency and should be analysed as such. If the dollar had increased in value relative to other world currencies, would you similarly be suggesting a bubble?
on the other hand, we can print more dollars. rather more difficult to mine and smelt and maintain (vaults, guards, etc.) gold.
17 Sep 10
Originally posted by twhiteheadmaybe there was a bubble and no one noticed.
Yes. We discovered that it is a more reliable investment than US dollars.
Gold is largely a currency and should be analysed as such. If the dollar had increased in value relative to other world currencies, would you similarly be suggesting a bubble?
on the other hand, we can print more dollars. rather more difficult to mine and smelt and maintain (vaults, guards, etc.) gold.
17 Sep 10
Originally posted by KazetNagorraBut surely the value of currency could always be labelled 'bubble' as the only real value of currency lies in the fact that other 'investors' have put their faith in it and attribute some value to it.
Yes, unless there was a fundamental reason for the increase of the dollar's value.
If people loose faith in a currency and the bubble bursts, then it looses all its value.
Obviously as the government is a key 'investor' and guarantees not to 'sell', the investors essentially trust in the government not to sell. But if you don't trust the government, you don't want their currency. I've got a billion Zimbawe dollars.
The vast stock piles of both Gold and US Dollars that many nations maintain, means that both Gold and US Dollars are in one massive practically permanent bubble. Either may burst one day. But I don't think recent increases in the value of Gold relative to the Dollar tells us anything whatsoever about the relative sizes of the two Bubbles. All that counts is how big the stock piles of the two items really are.
17 Sep 10
Originally posted by IshDaGeggBut we have not seen huge inflation in currencies.
Could it be that inflation is adjusting the prices of other currencies downward?
It's curious that you require gold to have a use to be valuable, but not paper money. Has paper money gone down in value because we have fewer uses for it?
Gold's value as a store of wealth lies in its resistance to inflation, because its supply cannot be arbitrarily increased to any great extent.
17 Sep 10
1 edit
Originally posted by KazetNagorraWe haven't seen huge price rises, true.
But we have not seen huge inflation in currencies.
However, the stock of money has hugely expanded. So why haven't prices risen?
One reason is that the money is not in circulation. It's capitalizing banks, who are lending less. Plus, business uncertainty and personal thrift are reducing the velocity of money. This keeps prices lower, due to lower demand.
Indeed, one could paradoxically argue, despite the current recession, prices have not fallen. Why not? It could be the larger money stock. In other words, prices have remained roughly stable because the greater money supply, and the lesser money velocity, are currently counterbalancing one another.
I think this also means the following: if sentiment picks up, and credit is loosened again, then the excess money stock will start to circulate and cause inflation, all else equal.
17 Sep 10
Originally posted by twhiteheadThere is arguably no bubble in gold.
But surely the value of currency could always be labelled 'bubble' as the only real value of currency lies in the fact that other 'investors' have put their faith in it and attribute some value to it.
If people loose faith in a currency and the bubble bursts, then it looses all its value.
Obviously as the government is a key 'investor' and guarantees ...[text shortened]... two Bubbles. All that counts is how big the stock piles of the two items really are.
How many people have gold in their portfolio relative to property? It's still a minority and secondary investment strategy for most people.
17 Sep 10
Originally posted by IshDaGeggA bubble does not depend on how many people are investing in it, just that significantly more are investing compared to a previous situation.
There is arguably no bubble in gold.
How many people have gold in their portfolio relative to property? It's still a minority and secondary investment strategy for most people.