I really have to take exception to the myths you are promoting – gold is a commodity and a store of “wealth” in relation to the money supply of a society, but it is definitely not “money” – certainly not the quintessential essence necessary to create a supply of “MONEY TICKETS”, whose principle purpose is to facilitate trade.
The purpose of “Money” is to provide a convenient and flexible medium of exchange, and even though gold has been used for this purpose in the past, it really has no bearing on the number of “money tickets” needed for a growing economy. The real criteria is the productive capacity of an economy that can serve the consumption demands of that economy. There is absolutely no purpose in producing anything if it is not going to be consumed.
We would argue that credit facilitates trade more than money – and credit and money are distinctly different. The provision of credit, without some sort of monetary anchor (like gold) can go on ad infinitum and completely dwarf the productive capacity of an economy. Which is exactly what has happened in the past 40 years.
You mention the parabolic rise in AAPL (Apple), look at a chart for gold for a comparison, also rose in a parabolic fashion, as did silver, followed by a decline. Many other shares and commodities have risen in similar fashion, AAPL is no exception, singling them out is unfair unless comparing to other similar rises, including gold and silver which you promote the investment in.
There is a major difference between gold and Apple. Since bottoming in 2001, gold in US dollar terms has increased by around 550 per cent. Since bottoming in 2003, Apple’s share price has increased…more than 8,000 per cent! And half of that gain has been delivered since June 2011.
But no one is talking about a bubble in Apple. That’s when you know it probably is one.
When Bernanke and his coterie of world improvers thoroughly destroy peoples’ trust and faith in the currencies they manage, sending gold and silver prices to absurd levels, we hope we have the courage and foresight to know it’s a bubble and tell you all about it.
But we think it will be quite a few years before we get there.
for The Daily Reckoning Australia
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