Fermion
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
And that doesn't count storage costs if you wanted to hold physical gold.
Mason jar: $0.79, which works out to like $0.02 per year.
And that doesn't count storage costs if you wanted to hold physical gold.
Remember the Twilight Zone episode "The Rip Van Winkle Caper". Robbers stole a shipment of large gold bars and then hid in a cave with "coffins" that put them in a state of suspended animation for 100 years. When they wake up, their greed ultimately kills them, but we find out that gold is now worthless because it can be manufactured.
A gold price of $35 per oz. was set by law until 1971 rather than by the market, so that is somewhat misleading. I would look at my adult life instead. When I graduated from college in May 1981, it was $479 per oz. It is $1655 today. That's a compound growth rate of 3.05%, and only 0.11% more than inflation over the same period. And that doesn't count storage costs if you wanted to hold physical gold.
Heck, I'm going to Canada next year and I'm wondering if my bills and coins for my 1992 trip will still work.I always thought they did that episode all wrong. They should have stolen cash. Then, after 100 years, they would find out that, indeed, the cash was worth practically nothing - or no longer existed. That not only would be "reality" it would be believable - because we've ALL experienced it.
To be a useful store of value against inflation the price of gold should respond to short term changes in CPI. If it takes a decade or two to catch up it’s not a useful option. A look at the inflation adjusted price of gold - US$ and US CPI - shows long periods of loss of value. See here
In effect, gold is not useful to protect against inflation. Gold purchased in the year 2000 has lost 1/3 of its inflation adjusted value.
Over time the best store of value has been US equities. Over short periods of time of 1-2 years, inflation adjusted bonds purchased new and held to maturity.
That's very high! Even in Louisiana, which has very hot summers that require lots of AC, my electricity costs less than $1,000 a year.Oh geez...if my electric bill was $29,000 a year I would either be rich or broke.
Gold as an inflation hedge? I forget which year but at the least last Fall maybe it was 2 years ago spot gold was a little above $1960 and I think it actually got above $2000 for a short time. Today gold is around $1670. So that's a $300+ drop in value but the clowns selling gold are making money.
That's very high! Even in Louisiana, which has very hot summers that require lots of AC, my electricity costs less than $1,000 a year.
If they told me it was going up to $29K, I'd probably have to turn off the AC. And New Orleans without AC would definitely be the Hot Place.
Actually only from 1971 to 1980.So it was an excellent hedge as measured 1971 to today.
Strictly speaking:Actually only from 1971 to 1980.
A hedge is an investment that is made with the intention of reducing the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting or opposite position in a related security.
No. It was positively correlated with inflation. Beta is just slope.Strictly speaking:
No, from 1971 to 1980 it was negatively correlated with more beta. (Which is a good thing if you were holding it. )
Yes, and the asset here is cash (i.e. value of the dollar), not inflation. The negative correlation was with cash, not inflation.Hedge: A hedge is an investment that is made with the intention of reducing the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting or opposite position in a related security.
(emphasis added)
The effectiveness and performance of a hedge depends upon how much you put on. The fact that gold increased faster than inflation is not relevant. Gold was, in fact, a hedge against inflation in the 1970s. It was also a blow-out winner meaning if you had put your dollars in gold in 1971 and sold in 1980 you would have had more inflation-adjusted dollars than when you started. That made gold more than a hedge, it made it a great investment. hedges sometimes work out that way. It hasn't been a great investment (or hedge) since.So if gold went up at the same rate as inflation, it would be a perfect hedge. Gold was $37.33 at 1/1/71, $589.50 at 12/31/1980, which is much more change than inflation during that period.
Just messing with you a bit. Sort of.
No. It was positively correlated with inflation. Beta is just slope.
Yes, and the asset here is cash (i.e. value of the dollar), not inflation. The negative correlation was with cash, not inflation.
No. It was positively correlated with inflation. Beta is just slope.
Yes, and the asset here is cash (i.e. value of the dollar), not inflation. The negative correlation was with cash, not inflation.
The effectiveness and performance of a hedge depends upon how much you put on. The fact that gold increased faster than inflation is not relevant. Gold was, in fact, a hedge against inflation in the 1970s. It was also a blow-out winner meaning if you had put your dollars in gold in 1971 and sold in 1980 you would have had more inflation-adjusted dollars than when you started. That made gold more than a hedge, it made it a great investment. hedges sometimes work out that way. It hasn't been a great investment (or hedge) since.
Good luck messing with me on statistical matters. I have a MS in Statistics and a minor in Economics.
The Bank of England (BOE) has now restarted QE after their currency got wrecked and bond yields going parabolic.
Of course, it is "temporary and targeted" (perhaps they should have just said "transitory" ) opcorn
Professor Richard Murphy tweeted: "The Bank of England has restarted quantitative easing today precisely because the Truss government has failed to manage the economy – a staggering achievement in three weeks."
The crisis was triggered by Kwarteng’s mini-budget on Friday when he unveiled a massive £45 billion tax cut funded by Government borrowing.
A huge tax cut, funded by additional debt, in a rising inflationary environment.Love these Brits initiating a big tax cut for the wealthy. It blew up in their face:
A huge tax cut, funded by additional debt, in a rising inflationary environment.
You just can't make this stuff up [emoji15]
Don't worry, it will be repeated here.
Regardless of whether it is a tax cut funded by additional debt, or spending programs that increase debt, or just plain "old" MMT the net result is the same. It is fiscal stimulus and increases debt.
All good, the Brits have just turned that money printer back on....as will we.
If that happens here (anytime soon), Powell is out and the market will go to the moon. Get your cash ready!