Really? Gold has been a pretty good investment over the past 10 years.
It’s been an excellent investment. But there’s no logic behind the gold bubble.
Bubble? That’s a controversial word to use. How do you know the gold price will collapse?
I don’t mean the gold price will collapse. When I say “bubble”, I’m thinking of a more technical category: gold is a bubble because its investment value isn’t connected to the stream of income it produces. Housing produces rent. Bonds produce interest payments. Shares produce dividends, or at least the prospect. But gold doesn’t produce any income stream, and its value as jewellery or for industrial uses is inconsequential. Gold merely offers the prospect of resale to somebody who also wants to hold gold. Therefore it is a bubble. It may remain an excellent investment: any bubble that has persisted for 4,000 years has to be pretty resilient.
Great analogy helps clear this bubble metaphor !!
Indeed. To change the subject for a moment, did I ever tell you about the Island of Yap?
Yap!
It’s been an excellent investment. But there’s no logic behind the gold bubble.
Bubble? That’s a controversial word to use. How do you know the gold price will collapse?
I don’t mean the gold price will collapse. When I say “bubble”, I’m thinking of a more technical category: gold is a bubble because its investment value isn’t connected to the stream of income it produces. Housing produces rent. Bonds produce interest payments. Shares produce dividends, or at least the prospect. But gold doesn’t produce any income stream, and its value as jewellery or for industrial uses is inconsequential. Gold merely offers the prospect of resale to somebody who also wants to hold gold. Therefore it is a bubble. It may remain an excellent investment: any bubble that has persisted for 4,000 years has to be pretty resilient.
Great analogy helps clear this bubble metaphor !!
But this is all a distraction. The point is not that Germany is buying up gold but that it’s physically moving the gold it already has. So something else is going on.
Indeed. To change the subject for a moment, did I ever tell you about the Island of Yap?
Yap!
There’s no need to snap. Be polite and you might learn something. Yap is in Micronesia in the West Pacific. Its coins, the rai, look like stone doughnuts. Some are fairly portable, the size of actual doughnuts, but others weigh as much as a couple of cars. The process of producing these things, 250 miles across the sea in the quarries of Palau, used to be a gigantic effort – a Victorian naturalist witnessed a tenth of Yap’s adult male population digging these things out of the ground and sailing them back to Yap.
Gosh. Couldn’t they have been more profitably employed producing something with practical value?
Gosh. Couldn’t they have been more profitably employed producing something with practical value?
Tell me again that gold isn’t a bubble.
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