Fiat Fraud

All that glitters is gold
Only shooting stars break the mold
--Smash Mouth

Market sage Dick Russell suggests that the primary thesis for gold is waning confidence in the 'greatest fraud ever perpetrated on the people of the world:' fiat money of all stripes. An argument (I think a good one) can be made against fiat money from a moral, ethical perspective, but these arguments ultimately rest on value judgements which are never decisive.

More decisive are economic arguments against fiat money because they are based on laws of nature and human behavior. The proof is in the pudding, of course, as we know that never in the history of the world has a fiat currency endured.

Consider Russell's example here. Cost of a one oz gold coin in 1970 = $35. Cost of a one oz gold coin in 2010 = nearly $1200. That's a 33x increase in forty yrs for those keeping score.

Some claim the gold market is bubbly. This graph compares gold to other mkts regarded as bubbles (missing here is the recent housing mkt).

The froth still seems a ways off.

position in gold