We have a good chunk of our savings in gold. We’re not really diversified, but we do have some money in other commodities, particularly silver. So, we took a hit last week, though we’re still up big time.
Frankly, I’d rather not have to speculate that much with my money, but what choice do I have? I’d be happy to put my money in something that returned 4-5% in real terms with little risk, but our modern monetary system can’t create such an asset. It needs you to spend your money. It punishes saving. The development of this financial system in which savings are punished and we’re all forced to be speculators is a cornerstone of “progress.”
Moldbug’s latest piece was long and complicated even by his standards. But his argument wasn’t particularly complicated. In one sentence it was: “you’re a dumb ass if you keep your savings in fiat Bernanke dollars.”
If I got to add another sentence, I’d add: “this means that a de facto gold standard is likely to return.”
You’re a dumb ass for two reasons: 1) the people that control how many dollars exist are trying to create as many dollars as possible; and 2) in the last few years, it’s gotten very easy to keep your savings in any form you want.
You should make some return for your savings. It should now be clear however that if you save in dollars, you’re saving in a medium that is becoming less valuable over time. In modern times, we’re all forced into being speculators – you better get used to it.
Prior to the creation of ETFs, it was hard to convert all your savings into anything other than dollars. Now, with a discount broker and PALL, you can keep all your savings in palladium, for example. This might strike you as dumb. It might be dumb. But it’s almost certainly not dumber than keeping all your savings in dollars. Bernanke is creating more dollars. God isn’t creating any more palladium.
So the question is, if you have lots of easy choices for your medium of savings, why on earth would you pick fiat Bernanke dollars? What happens to the dollar when enough people realize that it’s no longer a viable means of savings? What happens when one medium wins as the most viable form of savings (hint: it’s value goes way up)?
In the old days (like 15 years ago), if you believed in the return of the gold standard, you were considered crazy. You probably were crazy, because you were almost certainly referring to a de jure return to the gold standard. Such a return is not going to happen – governments will not willingly give up control over money.
However if you’ve followed my argument this far, you’ll see that a de facto return to the gold standard seems quite reasonable given that saving in gold is now no more difficult than saving in dollars and saving in dollars is retarded. Again, the really interesting recent development is that it’s no longer true that governments would have to formally adopt a metal-based standard for a major shift in savings to occur. If enough people decide to save in gold, it will become the de facto medium of savings.