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Scott Adams: Shiny Objects

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Re: Scott Adams: Shiny Objects

#31

Post by petercooper »

rue wrote: post #25
teilo wrote: post #18

Earlier quoted context omitted.

No, it's not imaginary. Far from it. Gold is not like tulips in Holland. Not even remotely. It's value is in its scarcity, divisibility, and durability. Nothing else compares. Never has (unless you want to say Silver). That is why gold has been money for thousands of years, and that shows no signs whatsoever of changing. It is one thing that no matter what the markets do will still have value. Is it an investment? No…

Scarcity does not equal value, if value is defined as "something that is useful." Perhaps the language is deficient in not making a distinction between inherent and assigned value. Gold has real value as, for example, a material used in electronics. That is about it aside from aesthetics. Additionally, humans ascribe (nonexistent) value to gold for the reasons you mentioned. You can certainly argue, as some others se…

FWIW, gold also has value in certain cancer treatments, glass making, satellite protection, dentistry, microscopy, and certain photographic films.

Not to detract from your point though - it just has wider uses than merely electronics :-)

Re: Scott Adams: Shiny Objects

#32

Post by orblivion »

jerf wrote: post #10
teilo wrote: post #6

Earlier quoted context omitted.

Yeah, unless you have gold, which you will, given time, without question be able to convert back to usable wealth.

"without question" I question. You clearly take that as virtually axiomatic, but I question. Gold's ultimate value is that it is pretty and shiny, and industry has produce metric shitloads of prettyshiny since the last time gold had any real independent value as uniquely prettyshiny. Your gold is only worth what people will give you in return for it. If society collapses, who is going to trade you gold for food? You'…

"Your gold is only worth what people will give you in return for it. If society collapses, who is going to trade you gold for food? You'd better hope enough people buy your propaganda about gold's value because it's going to be your only hope; the market for gold jewelry is going to be pretty small and effectively saturated."

Well, there's also expectation of future gold jewelry markets. Assuming we live like Mad Max until the end of time, sure, who needs gold. But if we expect things to improve later, with luxuries becoming a reality again, people holding lots of gold have it made.

Re: Scott Adams: Shiny Objects

#33

Post by dylan62 »

afterburner wrote: post #20
fnid2 wrote: post #9

Earlier quoted context omitted.

I'm not sure that's true. There is no value in gold, it's imaginary and over time, people have tended to give up beliefs in imaginary things.

What's really amusing to me is when gold-nuts rail against modern currencies as fiat currencies. It seems to me gold is just as arbitrarily denoted a currency as any other, it just has no explicit guarantor. EDIT: Also, why is it so hard to imagine taking care of the debt? Or is it because he has little faith in taxpayers' willingness to pay into it?

The difference between gold and fiat currencies is that gold cannot be devalued through inflation. We don't have a machine that can manufacture gold, but central banks can 'manufacture' as much new fiat currency as they like.

I imagine that's why Scott's friends are buying gold. Not because they think the end of the world is nigh, but because they think the dollar is going to have to be devalued to sidestep the crushing debts that have been run up.

Re: Scott Adams: Shiny Objects

#34

Post by madair »

CapitalistCartr wrote: post #7

It's always possible that a major catastrophe will destroy our economic system, but its far more likely that we will either limp along or improve. I remember the same fears in the seventies, and the concomitant buying of gold, at the same time as the price of gold spiked to $800.00. Yes, the economy was turbulent, but that's not an indication of imminent total meltdown. In the past year the price of gold has been at…

The idea is to diversify into lower-risk assets than the U.S. dollar or other currencies, even if those investments will cost more in the long run. It doesn't matter what gold costs right now if the USD experiences further free-fall, which is not out of the question.

This is generally the same reason there are buyers of sovereign debt (i.e. Treasury Notes) at a negative interest rate.

If the Eurozone collapses, as is more possible every day now, then that's a case in point for diversifying away from Euros. Some other choices in this Great Recession are USD, U.S. Treasury Notes, Japanese Yen, Swiss Francs, etc, none particularly attractive right now. The Chinese Yuan isn't a viable choice because it is pegged to the dollar.

[Edit:] The point is to deal with the current high risk of currency free-fall, not your normal everyday investment ebb and flow.

Re: Scott Adams: Shiny Objects

#35

Post by rue »

teilo wrote: post #29
rue wrote: post #25

Earlier quoted context omitted.

Scarcity does not equal value, if value is defined as "something that is useful." Perhaps the language is deficient in not making a distinction between inherent and assigned value. Gold has real value as, for example, a material used in electronics. That is about it aside from aesthetics. Additionally, humans ascribe (nonexistent) value to gold for the reasons you mentioned. You can certainly argue, as some others se…

Correct. Scarcity does not equal value, and scarcity alone does not make a good currency. However, gold is not only scarce, but also durable, divisible, and portable. The unique thing about gold is that its value is actually in its intrinsic suitability as a currency, more so than any other substance on earth.

I can accept that with the stipulations that it is a very suitable material for currency, not necessarily the most suitable one; and that this is only true at certain early or unsophisticated stages of civilisation.

However, even then the unspoken and often ignored requirement is that there is something of real value that the currency can represent. This also ignores fluctuations in the perceived value of gold, which belies its valuation not being tied to its function as currency. Arguing that e.g. mining for gold is a service whose end product is currency, "consumed" by others is circular (but in reality that does not matter.)

I suppose it can simply be said that gold is considered to have value by common agreement; but that agreement is not irrevocable unlike some believe.

Re: Scott Adams: Shiny Objects

#36

Post by DennisP »

nazgulnarsil wrote: post #24
DennisP wrote: post #21

Earlier quoted context omitted.

Some people always say gold is a great investment, other people always say it's a terrible one. Both sides are wrong.

gold is a stopgap against catastrophe, not an investment in the traditional sense.

That's pretty much how I think of it, but I've also gotten a 39% gain with it over the past year or so.

Re: Scott Adams: Shiny Objects

#37

Post by nazgulnarsil »

DennisP wrote: post #36
nazgulnarsil wrote: post #24

Earlier quoted context omitted.

gold is a stopgap against catastrophe, not an investment in the traditional sense.

That's pretty much how I think of it, but I've also gotten a 39% gain with it over the past year or so.

whereas most people experienced catastrophe over the last year or so. commodities move inversely to cash investments.

Re: Scott Adams: Shiny Objects

#38

Post by zirbschadenpun »

philk wrote: post #12
jpc wrote: post #11

Gold _has_ been a solid investment for the past 8 years. It went from a low of $255 in 2001 to a high of $1,213 in 2009. So a 475% rise in 8 years.

Yes, and in 1981 it was ~$800. Which means a return of ~50% over 29 years while paying no dividends whatsoever. You can make pretty much anything look like a good or bad investment if you pick your start and endpoints carefully.

That's a fair point in general, but you didn't make clear in your example that you were choosing one of the worst times someone could have invested in Gold. I don't think this takes away from your argument -- it's just that I would suggest specifying whether your data point was arbitrary or carefully chosen to make your point. I think this would make your general argument stronger.

I think the most interesting, non-arbitrary comparison would be an investment starting in 1971, because this whole discussion is really about a fiat currency system versus gold, and how people value gold relative to such a system. 1971 is when the U.S. went completely off of Gold to a fiat system.

At the end of 1971, a few years after Gold started trading on open markets, the price was $41.25 an ounce [1]. Today, it is $1,100 an ounce [2]. That is a 26 fold increase.

At the end of 1971, the DJIA was $900 a share [3]. Today, it is $10,000 a share [3]. That is an 11 fold increase.

Gold outperformed our current dollar system, since its inception, by more than two fold.

That's not to mention the fact that you didn't have to do anything with Gold -- you just held it. With our dollar system, you'd be a fool to just hold the dollars themselves (because of inflation), so you are forced to speculate in the stock market or other risky vehicles.

[1]: http://www.measuringworth.org/datasets/gold/ [2]: http://www.cmegroup.com/trading/metals/precious/gold.html [3]: http://www.google.com/finance?client=ob&q=INDEXDJX:DJI

Re: Scott Adams: Shiny Objects

#39

Post by richcollins »

Everyone always assumes that the value of gold isn't based in its intrinsic properties. They don't see that gold:

* Is easy to arbitrarily divide * Is scarce * Can't be inflated * Is easy to transport

These are the properties that make it valuable as a currency, not some irrational desire for shiny objects.

Re: Scott Adams: Shiny Objects

#40

Post by rickmode »

Gold and silver used to have value because our currencies were based on it. This prevented governments from printing money to inflate themselves out of debt. That is, a government with a fiat currency can devalue their own currency to also devalue the real value of their debt -- debt which is conveniently denominated in their own currency.

Commodity based currencies prevented this sort of shenanigans because of the non-zero cost of adding to the money supply (the cost of mining gold and silver is much much greater than the cost of adding a few billion dollars to a government accounting ledger).

So it seems to me the value of gold is at least in part tied to the sense that governments will need some part of their money supply to be commodity based, and at least in part to the sense that fiat currencies will eventually fail.

Can someone clearly explain the positive argument for going off the gold standard?

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