Wednesday, June 06, 2012


A quick question for my readers.  Given global turmoil and chaos, what is better:

1.     A billion “dollars” (or whatever value metric you wish to impose) which would weigh approximately 25 tons?
2.     U.S. Dollars denominated in thousands weighing in at 2000 lbs?
3.     Several pieces of rare impressionistic art weighing 120 lbs?
4.     An international currency bank account weighing zero pounds?

Lets also just assume the Billion dollars experiences no security cost “decay” (does anyone think that insuring 25 tons of gold is the same as insuring a bank account?) that effectively inflates the discount rate of its future value. (for the option guys out there, lets assume zero theta)

Of course, all of these have their strengths and weaknesses, and I realize the decreasing utility of weight given its portability costs, but who really thinks that gold is “the” safe haven in times of instability?

It is fascinating to see the gymnastics put on the gold bug crowd.  We have heard the doom knell of "inflation is coming because of QE and such!" for years now...and yet the statistics do not bear this out (I have said repeated times here that without the wage pressure that appears to be a pipe dream, it ain't gonna happen).

So Au is now just a "safety" play.  


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