Archived The Washington Post says: Gold is doomed (washingtonpost.com)
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Archived on: 2/12/2017 1:51:00 AM
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Archived The Washington Post says: Gold is doomed (washingtonpost.com)
submitted ago by Allrightsreserved
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[–] acheron2012 ago
I would mostly agree. The one point you miss is that all central banks will take ANY action necessary to not only create inflation but to also prevent deflation. The why is as simple as the reason for fiat currency in the first place. Inflation is a built in discount on debt. So if you sell a bond yielding 3% but can sustain 2% inflation then your net borrowing cost is 1% (minus some secondary factors of course).
One of the original treatises on fiat money proposed a hard ceiling of 2% inflation. Of course today central planners aim for 2% and don't get really nervous until it approaches 5. The reason is quite simply because of the French Revolution. If you steal too much too quickly from the none-too-bright general public even they will catch on. Sometimes that doesn't end so well for the guilty - Vive la Revolution!
The problem is for over a decade it has been just not been the done thing to pay dividends -- the honest income from holding stock. If it were Apple wouldn't be sitting on 206 Bbbbbillion dollars! Thus stocks are not a real investment. Especially not at 15-50 times earnings when hundreds of years of history show 6 times earnings AND proper dividends is the correct valuation. Stocks today are just gambling. You pick one you think a bigger sucker will pay you more for tomorrow. Most bonds have either no hope of ever paying their principle, but allege a good interest rate, OR will likely pay their principle but the interest rate is near, often below, zero. Also they have the aforementioned problem of paying off in dollars that are worth a LOT less than the dollars/euro/etc that you gave them. Buy a 10 year bond for $1000; get a real interest return of -0.15%; and then after 10 years get an inflation adjusted payout of $940. Great gig if you can get it -- until the revolution.
Gold is not exciting. It doesn't generate more of itself sitting around. But exactly where you can invest to get a "Return OF principle" not to even worry about "Return ON principle" is a very very serious problem today.
[–] merton ago
First, most bond offer more than inflation rate, at the exception of government bonds.
Seconds, stocks do not pay dividend anymore, not because they can't, but they rather not to. The reason is to avoid paying taxes. You say that there therefore needs a next sucker to take on your stock, this is false. The company could decide to give dividend or buyback if no buyers are available for people to sell their stocks. On the other hand, gold NEEDS a next sucker, like any other currency. If no one wants your gold, it becomes worthless. But again, neither senario will ever happen (no one wanting your stock, and no one wanting your gold).