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gozinsa

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12/07/19

21:26

Post #: 39502280
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Originally posted by Dr.Who: ↑

Skol, you are correct as usual.

The elementary error made by some gold bugs that compare gold price today to the devaluation of currency is inflation.

Inflation is an inherent part of a currency. Inflation is good, it stimulates spending now rather than holding off for another day. That creates demand and therefore jobs. Therefore of course one can buy less with a $1 today than one could in 1930, that is the intention not a fault.

What astounds me is where I see the currency debased argument measured against gold holding its value. Those that put forward that view seem to ignore that gold is also subject to inflation. Since 1930 gold has compounded approx 5% per annum, if we call inflation an average 3% over that period (and that is probably too low) then the real return from gold is something like 2% per annum with no income. Hardly a great investment.

Gold is an asset, it needs to be measured on its return as an asset in today's money (i.e. inflation adjusted, what can be bought with that gold at today's prices).

Currency is just that currency. One either consumes today or stores it in an investment that keeps value ahead of inflation. The debased currency argument shows ignorance.

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Inflation is not good. Inflation robs you of your purchasing power of the money you rightfully earned. The argument that someone will rush out and buy a new TV or shoes as soon as they can just because it will be 2% higher next year silly.
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