Gold, gold, gold!
I’ve heard this for years. Buy Gold! It’s the only real measure of value when the world’s economy collapses. I’m going to go out on a limb and assume the likelihood of this worldwide economic collapse is virtually nil.
But, let’s assume for a moment that through some magical form of astronomically unrealistic prediction of the world’s economic future, the world’s economy collapses. What happens?
Well, these aren’t the middle ages. The richest people in the world won’t be those who have stacks of useless metal called gold. There is a simple reason for this. A block of metal that has the word “Gold” stamped on to it is useless as a commodity to exchange for goods. You can’t eat it.
I know, I know. You’re screaming at me right now. “Well, if it isn’t, then what would we exchange for services or goods when living in financial ruin? Especially given that gold is not of limitless supply!” Gold, like paper money, is a promise that in exchange for goods or services, you will be able to trade that gold for other goods and/or services.
Here’s where I deviate from the believers in gold as being their savior. First, those who reach financial ruin are not going to want a select group of gold hoarders to control who has “wealth” after an economic apocalypse. The majority of the “you and me people” of the world, which will not have gold, will want to trade something else in exchange for goods or services; if for nothing other than spite. Perhaps we’ll trade assets we’ve acquired throughout our lifetime (like we do today). International and domestic trade will still provide access to oil, or electricity, running water, etc. The list can go on and on.
Gold is not an economic answer to our prayers. It’s a rock, that happens to be yellow.
Now…in the real world that we live in today, where wealth is still defined by the ability to exchange goods or services for something tangible; Gold still is not the driving force of economics.
An enormous paradigm shift has occurred with the onset of the digital age, which has allowed for a much easier transfer of value from one location to the other, defining an individual’s wealth. More importantly, the entire world’s transfer of wealth is based on each countries ability to provide goods or services for which another country places value and/or need. If that value is higher than the buyer wants in exchange for his/her goods or services, the buyer goes somewhere else. International competition for trade IS the economy, not gold!
If China wants to sell rice at the lowest cost available, they are in a position to trade their goods (rice in this case) for whatever goods or services that another buyer is willing to trade. We call this money. The value of “money” fluctuates as the market, which defines value, fluctuates.
No matter what happens to the economy regarding “money”, the necessity to exchange goods and/or services will always remain. The bare human requirements for survival are food, shelter and clothing; not gold.
“Buyer beware” should be duct-taped on to every piece of gold bullion sold today. It’s not the answer for which you are looking. The answer is: what can I do for you in exchange for what you can do for me. That is a currency which is not defined by a yellow rock. It’s a currency that is transgressing every day toward a digital exchange of goods and services. Value is placed on something valuable. Worldwide trade will always exist, despite the existence of gold.
Gold does have value today as it is used as component in a larger item which may be sold. For instance many forms of electronics use gold as parts. A means to an end. But defining the world’s economy? I think not.
Many years ago, a friend of mine was convinced that the world would face economic collapse at any moment. Well, I’m sorry to say for him (who purchased a lot of gold with currency he could have traded for something tangible), the economy has not collapsed. We’re still alive and kicking. And that is never going to change.
I’m happy to keep saving that currency which actually can be exchanged for goods and services, and I’ll live a more secure and happy life because of it. I can pay for my car, my house, my children’s education. And it’s all thanks to that currency that gold hoarders want us to believe is not useful. Because, despite what all the naysayers want you to believe, exchange as it exists today ain’t goin away any time soon.