The newsertainment programs this morning were obsessed with the new all time high set by gold yesterday which they attributed to fear over the debt crisis. They made much of gold being over $1600/oz but didn’t mention that it had been over 1600 a couple of months ago before falling back by more than a $100 and true to form it fell back by one percent today.
The investment analysts were out in force to tell everybody to sell gold and buy stocks as stocks have done so much better over the last 25 years. They didn’t mention that over the past ten years stocks are up only twenty percent and gold is up 500%. Keep in mind that the actual market for investment gold is very small. So small that just Glenn Beck convincing a relatively small number of paranoid millionaires to shift some part of their holding to gold would be enough to drive the market. The University of Texas has put a billion dollars of its portfolio into bullion that it keeps in a vault. (though they probably weren’t suckered by Glenn Beck and Goldline)
The truth is gold is a terrible investment although not as likely to fall through the floor as stocks. Stocks are just pieces of paper with no real tie to anything tangible. The replacement value of the companies’ assets in the DOW 30 at current prices are only worth half the value of their stock. You tell me if that’s a safe investment. Historically all stock market lows have gone down to ¼ of replacement value. (If you can’t do the math, that’s 1500 points or an eighth of what you think you have now).
Gold on the other hand will always have substantial value but it’s a commodity and no currency is tied to it anymore. There has also been a real mining boom especially in China so you can expect gold to drop sharply at some point. Most people don’t think that will happen anytime soon, but you’d need a crystal ball to that know for sure.
The Libertarians want to issue gold coins but to monetize all the USD in circulation into the available metal would require gold to be valued at something on the order $10,000/oz. This is how they rationalize that gold will keep going up and up and up. Don’t hold your breath. Did I mention gold fell sharply today?
So what do you put your money into? If you have a lot of money you could jump in on the farm land boom. Unlike gold they aren’t mining any new farm land and it does generate an income (and no you don’t need to become a farmer, most land is now rented to the local corporate backed farmer). In the long run though you can expect that all the land will be corporate owned so don’t make any real plans for financial security, they will get your wealth in the end. The founders warned against bankers and corporations using successive rounds of inflation and deflation to capture all the wealth. They passed laws 220 years ago and again in the New Deal to keep that from happening, but all of that has been repealed over the past 30 years.
So you aren’t in the top 1/10 of one percent and you want to leave some wealth to your grandchildren, what do you do? You can just do nothing and hope the popular revolution goes your way. You might better buy stocks.
Political action and educating the public are the only viable options. There are progressive candidates to work for. If you still have money then you need to get serious about contributing, hanging onto your money won‘t work in the long run. If the rich have already cleaned you out then you need to work for change. Work like the lives of your grandchildren depend on it. www.prairie2.com