I just wanted to follow up on a couple of the comments I got on my last post.
In that post, in cased you missed it (it was a cracker), I explained why I wasn’t buying gold.
I don’t think the price will go up, (more than likely will have further to fall from here) so I’m not a gold speculator. And I don’t really think gold at these prices will protect my wealth should there be some sort of economic calamity. I’m not a gold insurer.
And I’m not a gold investor, because gold doesn’t pay you any returns.
So I’m not buying gold.
Now, pretty much every time I run this line (in these blogs, at dinner parties, at committal hearings) people accuse me of having my head in the sand.
The system’s corrupt, our currencies are fantasies, a global meltdown in inevitable.
Winter is coming.
So first of all, let me make it clear that I’m not some profit/loss Pollyanna, skipping through sunlit fields of blue birds and butterflies.
I’m well aware that there are dozens of icebergs lurking in these waters. At any one time, there are dozens of roads that would take us to economic ruin town.
But will they?
Murphy’s Law doesn’t apply to economics. Just because something could go wrong, does NOT mean that it will go wrong.
I mean I could think of any number of scenarios that could lead to a house price bust from here.
Maybe for some reason the US banks decided to monetise their massive balance sheets. This leads to run away inflation in the US. The world’s reserve currency collapses, global trade shrivels up, Australia follows the rest of the world into depression.
Maybe the reform program in China comes off the rails, or the Chinese property bubble pops. Chinese demand shrinks, wiping out what’s left of the mining sector’s contribution to the Australian economy. Incomes fall, unemployment rises, and the collapse in housing demand leads to a ‘Steve Keen’ correction to prices.
Or maybe the Italians and Spaniards follow Greece into debt delinquency, the European Union collapses, Germany starts an “Occupy Rome” movement, and the following debt crisis paralyses global credit markets. Home lending at home freezes.
I’m not ignorant to the risks.
They’re all perfectly reasonable scenarios. All perfectly feasible. And if they did occur, future generations would wonder how we could have been so blind to the risks. Hindsight is 20/20.
But the question is not ‘could’ they happen? But ‘will’ they happen? Just because the trigger exists, doesn’t mean it will be pulled.
People have been talking about all sorts of economic boogeymen since before the dog was a pup – the break-away colony of America, the rise of fascism, communism, the departure from the gold standard.
Oh that last one was a classic. People were predicting that the new currency wouldn’t last five years. That gold was again the only way to store your value.
But that was over 40 years ago.
That’s not to say that there were no risks. There were risks. There still are. It just didn’t play out that way.
There are always things that could go wrong.
But I tend to think that a heightened level of risk is just the price you pay for living in a complex global economy. It’s like driving a sports car. If your top speed is 240km/hr, then there’s obviously a lot more that could go seriously wrong.
But that’s also the point.
Likewise, we live in an era of unprecedented leverage, trade and economic speed. There are more risks associated with such a system, but I for one wouldn’t be taking us back to the 1950s.
As much as I love Elvis.
The other argument I don’t get in all this is from all those people crippled by conspiracy theories.
The central banks are owned by space reptiles. The currency has no real value. The Illuminati pulls the strings of government. The whole financial system is about implode. Justin Beiber has genetically modified talent.
Again, I’m not saying I’m ignorant to the stories that are out there. And I certainly believe that if individuals found themselves with the ways and means to twist the fate of the planet to their own benefit, they would.
And there’s a lot of things about 9-11 and the GFC that make me very, very suspicious.
But what I don’t understand is why this is a reason to buy gold.
I mean, if there was going to be a market that the Illuminati would get their claws into first, surely it would be gold.
And according to the official figures (as much as you can believe them) the biggest holders of gold are the global central banks. They account for 18% of the gold ever mined. And 72% of that is held in the US (most of it belonging to foreign central banks).
(Just why does Bundesbank store their gold at Fort Knox?)
So what would the central banks do if the sh$t hit the fan? Would they resign themselves to the will of the market? I doubt it.
To me, gold seems like a very unlikely commodity to put your faith in. Particularly if you don’t actually have the gold sitting in your basement.
“Excuse me space reptile, but now that Armageddon is here I’d like to exchange this piece of paper for some shiny metal.”
But who knows what the actual truth is. I don’t. And if I did I’d probably be lock up in Guantanamo Bay.
But am I going to let this stop me from getting ahead in life?
You’ve just got to do the best you can with what you’ve got. Life’s just like that.
Maybe the game is rigged, but it’s still a game. And it’s a game that’s treated me very well up til now.
You can’t conscientiously object to the current economic system (which is not to say we couldn’t change it over time if we all worked on it). But for now, it’s all there is.
And so you’ve just got to do your best with what there is. Be the best person you can be. Invest your money as best you can. Be a loving friend and family member.
Choose to be an active investor. Not a side-line philosopher.
One last thing… Sometimes I read the comments on my blog and think, “Dude, we’re just not meant to be together.”
Oil and water don’t mix.
I don’t mind people disagreeing with me, I’m always happy to consider another view of the world. But if you vehementtly oppose my views, opinions and call me an idiot then I suggest you get off my bus and find yourself another one that’s a bit more to your philosophical views and likings.