The Smartest Man in Europe Is Very Cautious

I disagree with you strongly, but I think you made a good attempt at an argument and I think it is wrong you were downvoted, so you have my meager upvote.

I think your argument is disproven by walmart. Walmart doesn't chase "the super rich" they actually chase the bottom end of the market. They make good money by doing their darndest to make prices as low as possible, both to increase volume (and marketshare) but also to cater to the market that doesn't have a lot of disposable income.

I don't see the problem here as a lack of "equality", in fact, the super rich are taxed more than the poor. If things were equal they'd all pay the same dollar amount (not even the same percentage, the same amount in absolute terms.) That would be more moral as well.

The reasons those with less money have trouble affording things is that they have been impoverished by government. Presume you're at the lower tax bracket and paying %15 to the IRS. You're paying another %15 to Social Security (though only half is reported on your check, you have to earn the other half as well or you wouldn't have your job.) You're paying- what %4 to medicare? %3 for unemployment insurance, say %5 in state income taxes (just picking a low number since some states don't have it and it varies.) That's %42 of your income right off the bat.

Now if you're just scraping by, that means you're spending all of the remaining %58! All of that is taxed at rates from %8 (city sales tax) to %30 (cable, phone, an flights) to as much as %40 (gasoline).

If we take the lowest figure there, %8, then that means of every $100 that person makes, government takes %50. It is worse fro people in the middle and lower middle incomes. Their state and federal income taxes are higher.

That's why people have trouble making ends meet.

> The first is that most people with an unsophisticated financial perspective (eg: hair dressers) are not aware of gold

Nah. Most people have an unsophisticated financial perspective, including loads of smart people. I have had many, many quite smart people I know (who aren't in finance) tell me about how they're buying gold or silver at the moment. Why?

"It's safe and it has real value. You can't eat dollar bills [sic]"

These people know what gold is, and have ultra simplistic views on why they should buy it, as well as the means.

Certainly there is more awareness of gold in the USA than there was in the 1990s. On political radio- conservative or liberal- you hear "buy gold!" advertising. I've been hearing those ads going back, at least, to 2005! They were there in between the mortgage refinance ads back in the day. On TV you see people pitching "investment grade" and "rare" gold coins. They think numismatics are the way to go, and they are charging too much money. I've seen that since the 1990s. I bet the amounts of both of these kinds of marketing of gold is up significantly in the last 10 years.

All around Europe, eastern and western europe, I've seen lots of signs at money changers and some banks who are happy to sell you gold. These signs are generally posters in the windows, not metal signs or painted, so this gives me the impression this is a new phenomena. I was very happy to see these signs, given my experience in the USA.

In the USA, if you want to buy gold, you can spend way too much to buy it on the TV. Or you can go to one of the few local retailers who sell bullion - but generally their primary business is either selling collectable coins or selling jewelry. The bullion is a side business. Unless things have changed in the last year, it is a pain in the ass to buy gold in the USA. There may be one or two of these bullion dealers in a larger sized town. You can't just go to the money changer or the bank.

I gave you several reasons for my perspective. Consider them critically. But if you're looking for someone to agree with you, and tell you I'm a dirty rotten capitalist who is full of it, you'll have no trouble finding that.

I would strongly recommend that you not rely on my opinion, or that of the "hive mind" or anyone else to make any sort of financial decisions. You have to use your own judgement and you have to learn what you can about the subject. This is why I said, "If I'm wrong, I'll be punished"-- the market will take one action or the other, long after this conversation is finished.

I would suggest reading economics books such as "Economics in one lesson" by Henry Hazlitt Free here: http://www.hacer.org/pdf/Hazlitt00.pdf

By all means, keep a critical eye on anything anyone says in favor -- or opposed-- to gold. That is why I read what you said and considered it seriously. I'm keenly looking for evidence of a bubble, and you referenced a metric I use.

I'd also recommend looking a bit into the history of gold, preferably by reading articles here: http://mises.org

Here's the short summary, see if this fits with what you know of the world: Gold is historically been the best form of money because it was difficult to counterfeit, had reasonable value per given weight, was malleable, didn't degrade, etc. But governments want to spend more than they have, so they choose paper currencies over gold. The nice thing about paper is that they can make it "money" by passing a law, forcing people to use it... and they can print as much as they want. The downside is, they get addicted to this spending, and in doing so, they always need to spend more and more. The more paper there is in circulation the more pieces of paper it takes to buy anything tangible, and prices rise, which means costs rise for the governments and they need to print paper at an even faster rate.

These effects take a very long time to play out. They ultimately result in a currency crisis, however. Gold is merely something that is difficult to counterfeit, and it is difficult to bring new mines into production. So it serves as a hedge against currencies.

I don't think there's ever been a gold bubble. When gold has gone up in response to a currency, really it is the value of the currency declining with respect to gold. The amount of gold in the world doesn't change very fast- it can't- at least in terms of currencies, and thus really the "gold price" is the "price of the currency in units of gold." $1,580 is not a gold price, it is a measure of the value of the dollar.

Can you show me a Times, Newsweek, CNN, MSNBC, ABC, CBS, or NBC article, that's not an editorial, taking a pro-gold position? That's the mainstream. That's what the mostly-unsophisticated read and believe.

The genuinely unsophisticated have a negative net worth, and they're not holding gold. They haven't dug themselves out of the hole they got into during the housing bubble.

Do you know where we can find statistics of financial holdings by households in the USA? I'm sure it will show an increase in gold holdings, but the vast majority of people who have any savings at all have them in naive instruments like mutual funds. Even holding individual stocks is a level of sophistication that puts you above probably %80 of the population.

Holding gold is probably at the level of holding stocks in terms of sophistication right now... to do so you have to recognize the fundamental error in the worldview held by essentially the entire media-- and that takes a lot of thinking.

I do see a lot of people who aren't completely unsophisticated, but not very sophisticated who bash gold. These are the people who hold mutual funds and don't understand why paying %1 of your total assets to a mutual fund in order to underperform the market (which they think they're not doing because they have an "index" fund) is a bad idea, even after you try to explain it to them. ("Stocks are too risky, that's gambling" they say).

For the past 10 years, I've been seeing the same arguments, mostly ideological, against owning gold. I won't call these people unsophisticated, as it take some sophistication to understand why gold is a threat to their ideology.

IANAM, but I do know it was an unassailable problem in Russell + White's efforts to found mathematics on a firm basis in Principia Mathematica [1].

[1]:http://en.wikipedia.org/wiki/Principia_mathematica#Consisten...