Sunday, January 9, 2011

Uncertainty Continued

I was prompted to write the prior piece on the inability to achieve certainty as a result of observing (and sometimes) engaging in an ongoing debate, on three other sites, regarding the nature of, and prospects for, gold. Quite frankly, I'm more than a little tired of debating the merits of gold to those who appear programmed against the very idea of gold acting as a store of value. I detect-over and over- a combination of obnoxious recalcitrance and immaturity in those who attempt to make arguments against gold's utility. This is especially the case given the superior performance of physical gold and silver to all other asset classes over a one year, five year, and ten year basis.

In the case of one particular commentator, who asserts-his assertion being, more precisely, a belief, based as it is on projections that have nothing like a guarantee (ah, there's uncertainty again) of coming to pass-that just about anything but gold will act as the future's value storage mechanism, he neglects to admit, except very occasionally, that gold could (continue to) do well for some number of years until his model takes hold. To quote the arch hater of the old gold standard, John Maynard
barbarous relic Keynes, "In the long run we're all dead." As such, in the meantime, while waiting for the the longest running tradition in human experience of one item acting as money over time, to end, you will lose your shirt, if you haven't already, should you choose to act on the formulations of those who mistake (and misrepresent) the way the world is, for the way they envision it at some unspecified point in the future.


Johnny D. said...

"a belief, based as it is on projections that have anything but a guarantee (ah, there's uncertainty again) of coming to pass"

Edwardo, what are these projections this person bases his/her belief upon? Any idea?

I really don't know a whole lot about anything, but I can't see people suddenly deciding a metal that never corrodes, is shiny and pretty, and has been used as currency for thousands of years, is worthless or not a store of value.

Edwardo said...
This comment has been removed by the author.
Edwardo said...

They are based on a combination of assumptions about both past and future demographics that are themselves, especially in the case of the conjecture about future population trends. And even if the conjecture turns out to be correct, there is the nettlesome matter that the effects of the conjecture coming to pass are...uncertain. This is due to a surfeit of variables, that are, as yet, unknown, as are the effects of the aforesaid unknown variables.

Frankly, unless there is a disclaimer made that such and such a prognostication is simply for entertainment purposes, I can't abide predictions that do not explicitly state that the prediction is, to borrow a lawyer's term, actionable.

DED said...

I'm out of my league here, talking about gold as an investment, but I do know this: Gold will have value unless civilization completely collapses (and I do mean completely) or the human species transcends beyond materialistic needs. It may rise and fall in value, but it will always have value.

As for the current climate, the speculation as to whether or not we're in a gold bubble seems foolish to me. The way I see it, the only way it could be a bubble is if fiat money were to somehow stage a dynamic comeback. I just don't see that happening anytime soon. The US dollar is treated like crap by the people who make it. They haven't respected it and now the rest of the world doesn't either.

Gold Price in Dollars Since 1792

I think the gold skeptics are getting their mojo from the drop that occurred from 1980 - 2000. I think Reagan turned enough people away from the pessimistic outlook of the 70's to believe in America and the dollar. Yes, gov't spending continued to be a mess but people looked the other way. Since the recession of 2001, we've had unpopular presidents who have resumed massive spending deficits (after a couple years of balanced budgets during Clinton) and people are pessimistic again, markedly so since the Great Recession started. Gold made up 20 years of loss in about 5 years and has continued to surge. I don't see anything happening in the next two years to change that. The dollar has to mean something again in order for that to happen.