On Gold: Anybody want some BACON?
We’ve all heard ‘Pigs get fat, hogs get slaughtered…’
Well, if you ignored history (1979!), ignored economic reality, and actually believed that ‘intrinsic value’ was a real thing…
The recent small drop in the price of gold is your last warning to avoid becoming a ham sandwich….
Gold buggery is, perhaps, one of the most irrational things you will ever see related to economics…
Simply put, it violates even the most rudimentary principles: The claim that anything can have ‘intrinsic’ or ‘constant’ value flies in the face of the law of supply & demand… The notion that ‘inflation’ would drive gold from 600/oz to 1700/oz, but this drastic change in prices would skip practically everything else in the economy….
Here’s the thing:
The price of gold is and was a bubble, driven by the irrational belief that buying gold would ‘protect’ you from hard times… The price went up because demand went up (not because of inflation), but demand went up not because of sustainable factors, but out of irrational ones (fear).
Yes, gold is naturally deflationary – that is, there is presently less gold available per-capita every year (world population is growing, gold-mine production is not keeping up)… But it is not naturally deflationary to such an extent that an almost 3x price-increase in less than 5 years is sustainable.
Further… There is no such thing as ‘intrinsic value’.
Any student of history should know this, simply because what we will soon see has happened before: Gold has rocketed to obscene highs, then a few years later, crashed to extreme lows… I’m talking about the 79-81 period of course… And back then you actually had significant inflation – now you don’t.
The notion that gold somehow has a ‘constant’ value is rubbish. The 80s proved it. And we are about to see another demonstration sometime soon… Hopefully, it will bury Austrian economics for at least a generation….
Here piggy, piggy….