Changing my opinion on Gold

Well, the fact that Glenn Beck pushes buying gold is one MAJOR reason to decide to stay solidly against it, but I suppose he likes other things that I do too...sandwiches probably...so I'll allow us to be of similar mind on gold (except that I am STILL NOT BUYING any gold).

It is a common misconception that gold is an inflation hedge and that its price is tied to inflation. In fact, gold is a CURRENCY hedge. If you look at historical data, you will find that gold moves not necessarily with inflation, but rather with the value of the dollar. These are not the same thing. Of course many times the two go hand-in-hand, but not always. The value of the dollar against other currencies can change, even if there is little change in inflation numbers. It is with these movements of the dollar that gold moves. Why? Because gold is not a commodity but rather a currency. In this same vein, gold is considered to be a "doomsday" hedge, due in large part to the belief that, in the event of a major collapse of the financial system in which dollars cease to be seen as money, gold will once again be used as money.

If anyone wishes, I can provide the data to show these relationships.

I wouldn't go so far as to say that Beck endorsing gold makes it a bad idea. I even understand why he'd be used as a pitch-man, considering the size of his audience and how much they admire him (completely leaving aside the pros and cons of that calculation). But the gold commercial that has me scratching my head is the one with G. Gordon Liddy. I know he has a radio show (not in my market, so I don't really know if he's any good, but he's certainly not the draw that Beck is). But he's also a convicted felon, and a complete psycho (even if you like him, his autobiography, "Will," shows a guy who is pretty darned weird). What Madison Avenue genius came up with that one?

Tell me all your thoughts on Gold

'Cause I would really like to meet her.

And ask her why we're who we are.

Tell me all your thoughts on Gold

'Cause I am on my way to see her.

So tell me am I very far?

‘Doomsday is apt.’

We’ve been living in a fool’s paradise for decades.

The standard of living we enjoy on the West is simply unsustainable.

The outlandish pension, social security, healthcare entitlement programmes (think California) have such a total debt and liability load that they put governments into a negative net worth.

Not by just a little, but exceptionally so, ranging from more than 450% of the GDP in the ‘low end’ (and the most prosperous in the EU) Germany to well over 1,500% of the GDP in Greece.

The USA and the UK are somewhere between those figures.

With the imminent arrival of Peak Oil, (when demand outstrips supply) unless there’s a massive increase in economic growth worldwide, something of the order of a new Industrial Age Mark Two, fuelled by some amazing new source of wealth, little real economic growth can be generated - and how likely is that?

As we us in the UK, the current lifestyle of Americans these days is maintained by borrowing and debt - the US running a $1.3 trillion deficit on government spending and struggling to simply pay the interest on a $14 trillion national debt.

And the most optimistic budget estimates I’ve seen for the US, foresee another decade of crushing deficits that will grow the official deficit by some $9 trillion and the real “unofficial” deficit by perhaps another $20 to $30 trillion, once you account for growth in liabilities.

Is that sustainable?

I’m not especially pointing the finger at the USA, as we in the UK and the EU are in a more precarious situation.

One wonders, who’ll be the first country to declare national insolvency?

My instincts are that when that happens, other countries will join the collapse and rapidly start falling like dominos.

The speed of the change in our fortunes could be frightingly swift.

What value will the paper currencies of all these (and how many?) countries be when the dust settles?