Gold is for miners and pirates—not investors
The shiny stuff is better at preserving wealth than creating it
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The shiny stuff is better at preserving wealth than creating it
While coin clipping was practiced within the private sector, in the state sector monetary debasement took on an industrial scale. Governments, especially when in financial trouble, would recall their coinage, melt it down and reform the metal into more coins with a lower gold content. Private sector coin clipping was a crime punishable by death; public sector coin clipping (recoinage) was considered monetary policy; both caused an increase in the number of coins relative to goods and therefore inflation.So there has always been that lack of fiscal restraint and that carries on to this day, just in different forms. It may be fair to say that gold is better at preserving wealth than creating it. Say you’re a pirate and you bury your gold. If you dig it up fifty years later, all you’ve got is what you put into the ground. Sure, it didn’t rust and, unless someone found your treasure map, you’ll get the same amount back safe and sound. It might protect wealth over a number of years if the government comes along and ruins fiat money either because of inflation or because they’re pumping too much money into the system. More than anything, though, holding gold as an investment is essentially a form of insurance against a period of hyperinflation or a disastrous event affecting the global financial system. But unless you’re Blackbeard with a chest of gold buried in your backyard, you have to pay a bank to store your gold while it sits doing nothing, so that insurance comes with a price. Yes, you own that real asset but, for all of that time underground, all you’ll ever have to show for it is that same asset you had in the beginning. It didn’t compound or create revenue for you as an investment. Whereas if you bury a stock certificate that you’ve bought at a reasonable price and dig it up fifty years later you’d have the value of the stock plus any dividends it may have earned over those fifty years, creating a compounding effect—one of the secrets to investing wisely.
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