Re: Gold vs Real Assets

hooray! wow, thanks boss! as a gold bug i really appreciate today's post on gold.   

1. if gold isn't money, what is? money needs to be non-perishable, divisble, a commodity, limited in supply/difficult to counterfeit, portable. what meets those requirements? time and time again, the market has chosen gold.  
 
2. alan greenspan wrote an essay called "gold and economic freedom." i hope folks will read that essay (free on the web). remember it was written by alan greenspan. it explains the link between gold, capitalism, the idea of economic freedom.  
 
3. gold is rising because there is distrust of government money. all fiat money, meaning money not backed by a commodity and whose value is entirely subject to whatever government says it is, has always resulted in theft by hyperinflation. always. you can research the history of fiat currencies to confirm. also, more correctly, gold doesn't rise. it is everything else that is falling relative to gold.  
 
4. fred's point on real estate is somewhat legit IMHO, in a "all hell breaks loose" scenario lots of people like real estate. however, see the requirements for money in point #1. also, this recent bubble was in real estate, so market forces will try to push that bubble down (government intervention will of course counter the market's natural attempt to correctly price assets, thus resulting in a perpetuation of the problem). so, there is the bubble issue we are coming off of that is specific to real estate in this current monetary crisis.  
 
VCs should all get together and create their own gold-backed currency. if you guys do stuff like this, that will open the door to a whole bunch of other stuff. it will also help you guys identify proper valuations. with all this government money printing determining the right valuation goes from difficult and requiring skill to virtually impossible regardless of one's VC talent. VCs have had negative returns for the past decade. this is not because they went dumb for an entire decade, but because government has so distorted the money supply so as to make proper free market analysis far more difficult than it should be. the cheap money obscures real value. gold does not allow inflation as easily and thus that problem is less prominent.  
 
also there is the issue of the gold standard and macroeconomy.....the US has gone from a nation of one income households with a positive savings rate to a two income household with a negative savings rate. most you youngsters are probably too young to remember but gas used to cost less than $2 a gallon. and if we go way back to the 60s....we're talking under a $1 in the USA, folks.  
 
the reason is all this cheap, counterfeit money basically robs people by devaluing the currency. the current world is also one in which all money is lent into existence. it is hardly surprising that such a system lends itself to perpetual debt crises (for which the proposed solution is more bailouts -- i.e. more debt, something that cannot be done under a strict gold standard).  
 
gold is the market disciplining the government. fiat is the government discipling the market. fiat can work, but only to the degree that government works.  
 
9/11 was an inside job, 
kid mercury