Culturalism · investing · Personal Finance

Does Gold Really Have “Intrinsic” Value?

Hanging around investing circles results in the brain being peppered by a plethora of loaded talking points. These might include specimens such as “Value Investing,” or “Contrarian Growth,” themselves miniature tribes to help organize the sphere of economic debate. An especially lovable variety is the claim summarized as, “Gold is better because it has intrinsic value.”

Yet does this argument stand up in the real world? The term “intrinsic” is defined as “belonging to the essential nature or constitution of a thing” by our frat bros at Merriam-Webster. Applied to gold, the concept becomes a little bit dicey, to say the least. To be clear, Burl Ives’ beautiful metal can be employed to build a variety of modern technologies, so in that realm its naturalistic state may hold value, providing of course that no replacement substance is found. Other metals such as silver enjoy similar advantages, although they do not necessarily track the same price levels as those bright yellow blocks.

That being said, as a firm medium of exchange versus the mocked “fiat currency,” gold’s worth should be called into question. Currencies or assets are ultimately worth something based upon how individuals (or large groups) value them. In the United States, our government has long since adopted a policy of monopoly money inflation, but this doesn’t mean people ignore a $20.00 bill lying on the sidewalk. The piece of paper holds value due to perceptions of the institution behind it. Because America remains a major world player with powerful military resources, we have not been relegated to the status of the Zimbabwean Dollar or Argentine Peso, even against eternal criticisms by Austrian-leaning economists. Inflation is of course real in the United States, but our country’s position prevents it from becoming as  visibly horrible and destructive as it might otherwise be. Were the nation to lose its international standing, or if large swaths of the population suddenly reject paper money, this would of course change.

Gold on the other hand appears safe because there is a limited known supply on earth, and it cannot be printed by central banks. True, but technology exists allowing scientists to create the metal in a lab, and while it is presently cost-prohibitive for businesses, could a powerful government with the ability to print endless sums of a (valued) currency not pursue the endeavor, and succeed in flooding the market? There is also the possibility of more sophisticated approaches being developed to reduce the expensive nature of the process, which would radically disrupt the metals bazaar.

Placing all else aside, gold like any paper currency retains value largely due to how people perceive its worth. If we take the extreme scenario of inflationary and societal collapse peddled by libertarians, the glistening doubloons will only matter for those who wish to have them, or folks seeking to construct things from the metal. Most people are liable to be interested in bartering for guns and food, two resources less popular in the Wonderful World of Mike Maloney. Not to mention the influence of private armies who could well issue their own currency, enforced as always by the barrel of a gun.

With all this I seek not to dismiss the importance of precious metals in an investment portfolio. My own includes them (but more so silver), and concentrating your resources into one asset alone is risky. It is however crucial to not drink deeply of the popular swill pushed by gold marketers. Last time I checked, most (if not all) are taking payments in that crisp-smelling green paper doomed to make our bank accounts absolutely worthless.  

Stay safe and take the Gold Pill.   

Federal Government · Personal Finance

The War On Cash

I seldom pay with cash. Nothing against Lil George or DJ Franklin, but it is rare for me to have any need, and paying with a credit card actually earns some cash back (mainly in the denomination of Abraham the Creator). Nevertheless, I have a burner phone that is refilled with smacker payments for the purposes of privacy. As I went about completing the transaction today, I snatched a prepaid card, marched to the Wal-Mart self-checkout, and saw the following sign:

Really. Not only the poor spelling, but each register strictly refused to accept cash, leaving me to drop the card by the register shelves and break the rules by exiting through a one-way entrance. For this I received a stern finger-wagging from the staff, who were terrified that I might spread coronavirus to other shoppers. Strangely enough, the store had closed down an entire entrance, as though having everyone enter and exit through the same spot is a clever way to promote public health.

Regardless, the coin question struck me as grimly predictable. The empowered news media is claiming the culprit to be a disruption of supply due to less circulation. I would argue there is a far more to the story. Many of us have been warning about the danger inherent to a cashless society, even as the authorities that preside continue zealously pursuing it. The boldest step in this direction recently came in the form of Flimsy Andrew, whose campaign centered around direct payments from the Fed to Americans, and elimination of the penny. In fairness to Yang, your money would be worth about the same if his policies went into effect, but that is besides the point.

Why do they hate cash so much? Because it is difficult to control. Someone on Craigslist can offer up a service for a flat rate fee, and pocket the cash upon completion, simplifying the process and eliminating the government’s ability to tax. Transactions are very difficult to keep track of without card payments, whether because the State wishes to monitor a person or some corporation wants to use your buying habits for marketing purposes. The only identifying factor on a cash payment receipt would be the time and whatever video footage is available in-store. Nothing else.

So naturally the pandemic is a great excuse to further diminish the freedom of citizens and consumers in everyday life. It is likely that stores will attempt to maintain these policies in the future, and perhaps prohibit cash payments altogether, unless of course they get accused of waycism for the practice. We can only speculate and see.

Actually, there are more concrete actions which can be taken. Consider starting (or building on) a stash of precious metals. I would stay away from the SLV and GLD trusts, which have unclear guidelines as to the physical ownership of the metal. APMEX is a reasonable option, and there is of course Bezosmart. Be careful with pawn shops or gold stores, as they tend to jack up prices compared to online.

Some things just glitter and shine.