Some readers have asked, in today’s inflationary environment, is gold, something worth owning? No simple answer to that question, but for this observer having a small portion of one’s assets in Gold/Silver, as inflation protection, could make sense.
Along the same line, although I don’t fully trust, or understand, the unregulated world of cryptocurrencies, a small amount in that sector might also make sense. The big advantage to gold is that it (and silver) has served as a “store of value” for more than 2000 years. The same cannot be said about Bitcoin.
A cynic once said that “Governments are the only ones who can print their names on paper, and make it worthless.” Referring of course to the fact that history has shown that “fiat” currency (paper currency issued by governments, that is not backed by real assets, like Gold and Silver) lose most of their value, over time.
An extreme example of this was the German currency after WW1 when citizens needed a wheelbarrow to carry their money to the baker for a loaf of bread.
Certainly, a much less extreme example is the U.S. Dollar which has lost 90% of its purchasing power since 1950. Of course, wise readers will point out that up until 1971, we did have a dollar backed by a gold modified standard. And we still had some inflation.
President Nixon in 1971 severed the relationship between the Dollar and Gold, created at the end of WW2, under the Brenton Woods agreement. And since 1971 we have had a paper currency issued by the Federal Reserve, without any real backing, except the “credit worthiness” of the United States.
All of these subjects: the Bretton Woods Agreement; The Gold Standard; Nixon’s decision to sever the relationship between the dollar and gold; and gold’s long term history as a “store of value” and today’s electronic gold, called Bitcoin, are all important topics which will be covered in future postings.
Stay tuned.