The more things change the more they stay the same
In reading a recent piece of wayward analysis concluding that gold was headed below the $1000 level, I was reminded of an old Murray Rothbard quote that I first encountered when I entered the gold business in the early 1970s. He included it in the intriguingly titled pamphlet, What Has Government Done to Our Money:
“All pro-paper economists, from Keynesians to Friedmanites, were now confident that gold would disappear from the international monetary system; cut off from its ‘support’ by the dollar, these economists all confidently predicted, the free-market gold price would soon fall below $35 an ounce, and even down to the estimated ‘industrial’ nonmonetary gold price of $10 an ounce. Instead, the free price of gold, never $35, had been steadily above $35, and by early 1973 had climbed to around $125 an ounce, a figure that no pro-paper economist would have thought possible as recently as a year earlier.”
As you can see, even when gold was trading at $35, its adversaries were predicting lower prices ($10 per ounce), and even then under the flimsiest of arguments. Its ‘industrial” nonmonetary price? How is that different from its monetary price? Ultimately in that first leg of gold’s long term bull market, it went well over $800 per ounce – a far (very far) cry from $10!
The lesson in all this? The more things change, the more they stay the same. Gold’s critics have not changed their tactics over the years, and they are not likely to anytime soon. Make your own assessment on gold and develop a strategy that makes sense for you. The worst thing you can do if you don’t own gold, or don’t own enough, is to allow yourself to be sidelined by predictions that may or may not be based on a realistic assessment of the markets, gold and the economy.
— Michael J. Kosares
Image courtesy of the Mises Institute
What Has Government Done To Our Money/Murray Rothbard/Mises.org/Pdf download