G.’s Blog


Posted by G. on January 25, 2010

Came across this today:  http://www.boston.com/bigpicture/2010/01/gold.html

My great uncle passed away last year. A few months before his death, he expressed regret that none of his nephews and neices had any interest in a Fixed Deposit he had at his bank for Rs. 6000. He was dismayed that nobody seemed to appreciate the struggles he had to go through to save up for that  FD, more than 30 years ago.

Here are a couple of quotes I have been thinking a lot about since then.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves – Alan Greenspan.

The truth about the long term, then, is that it consists of a sequence of short terms and these short terms are full of episodes we call history: war, peace, pestilence, progress, revolution, invention, discovery, depression, enterprise, bankruptcy, birth, death, taxes and such. Kingdoms rise and fall, debts are incurred and repaid, or – as often as not – not repaid, or repaid in money unrecognizable to the poor creditor. Interest runs for years at a time, but rarely even for decades, politics or central banks intervening to disrupt the piling up of what would otherwise be wealth too vast to be stored on the planet Earth. Through it all, just as Hall and Jastram have separately noted, gold endures, holding its value but returning no income. Well, you can’t have everything – Jim Grant.

And here’s some historic data on gold price in Rupees (grabbed from here).

Price in Rupees per 10 grams
Data from Gold Survey 2001

I’m not advocating any gold standard, nor am I suggesting going out and buying gold coins tomorrow (for all I know this post could mark the top of the recent gold price surge). I most certainly am not promoting the conspiracy-theorist/survivalist loonie-school-of-thought that has creeped into the mainstream since the financial panic of 2008. But it does confound me that, after all these years of human evolution, there still exists very few solutions to man’s search for a viable and standard way for storage and preservation of human effort (aka wealth).


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