The Worst Investment of 2013?
by Bill Bonner: The
Biggest Bubble in Human†History?
Will gold be
the "worst investment of 2013"?
Has been so
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Gold held above
$1,600/oz yesterday. You'd think it would do better. Ben
Bernanke just pledged to keep his printing presses whirring...
even though some areas of the economy such as housing
Won't an improving
economy bring more of this printing press money out in the open...
where it will bid up prices?
And if the
economy doesn't improve, won't Ben Bernanke keep printing money...
even increasing the output of his dollar-printing machines... until
the old buck finally gives way?
So, why is
gold doing so badly? Is the bull market in gold, which began nearly
14 years ago, finally over?
were put to a panel of which we were part, in Cafayate last weekend.
The questioners were mostly "hard money" people. The questioned,
including your editor, had a generally gold-buggish bias too.
So, what were
We can only
recall our own:
years ago a cache of gold objects and coins was found in Yorkshire.
These were items that had probably been buried to hide them from
the fighting that was going on in the area during the 8th century.
No one knows what happened to the owners, but they never returned
to dig up the treasure. Instead, it was found by accident, 1,300
the gold of which the objects were made is just as good as it was
then. And the value of it compared to goods and services on offer
is also about the same, at least inasmuch as we are able to piece
together prices from that era and compare them with prices today.
and everything else we know about it... leads me to believe that
gold in the future will be worth more or less what it is worth today
too. In our lifetimes, we've seen gold go up and go down. But it
doesn't go away. And if you had gone out to buy a new Buick in 1935
or so... you would have paid for it with about 25 gold ounce coins.
You can do that today, too.
for the Long Run
you are thinking of the long run, you will definitely want to hold
gold rather than shares in today's corporations... or today's paper
dollars... or promises by government to repay you in its own IOU
I know that many of you are not concerned with the long run. In
the long run we're all dead. So what does matter? It's the short
run that matters. And in the short run what is gold likely to do?
But it would be very strange for a 14-year bull market to end with
its subject still reasonably priced. Typically, they end with unreasonable
is not especially overpriced now. There is no gold mania happening.
The cover of TIME magazine is not featuring a gold coin or
predicting the end of paper money. Adjusted for even the Bureau
of Labor Statistic's inflation rate, gold still hasn't come near
its high set 32 years ago.
people in America have still never seen a gold coin. But they will.
Unless this time really is different... unless this really is a
new monetary era... you can presume that what happened in the past
will happen again. And what happened in the past was that paper
money systems always blew up and gold always becomes infinitely
expensive in terms of the depreciating paper money.
know when this will happen. But we don't see any reason why it shouldn't.
They keep telling us that the Fed is doing no harm by printing $85
billion more each month.
inflation rates are low... and falling, they say. But if they calculated
the inflation rate the way they did when people were wearing Whip
Inflation Now buttons, back in the Carter
years, the CPI would be at 9.6%. And bond yields would be at
10% or 12%.
people would be struggling to pay 13% mortgages... and the feds
would be desperate to sell bonds with 15% coupons... and the dollar
would be collapsing... and the entire system would have the shakes...
we wouldn't be having this discussion. We'd all be expecting inflation
to hit 20% and happily waiting for gold to reach $5,000 an ounce.
in this room or anywhere else knows where the price of gold is going
next year or the year after. All we know is that the risks of owning
it are fairly low... while the risks of not owning it are high."
bestselling author and founder of Agora, one of the largest independent
financial publishers in the world. If you would like to read more
of Billís essays, sign-up for his free daily e-letter at Bill
Bonnerís Diary of a Rogue Economist.
© 2013 Bill Bonner
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