Regardless, it is certainly a consumer's right to store their assets in something that is not inflationary, as most do. Is the population holding empty real estate or gold instead of currency really that much better for the economy? No.
Smart money will simply shift out of cash in an inflationary environment, and the value will not necessarily be productively invested.
An opposing viewpoint more thoroughly articulated:
Owning Real Estate (and making money off of it) entails taking care of it. People taking care of their land (so that it can appreciate in value) is a good thing. The typical Real Estate "investor" adds a ton of value to their home, not just through maintenance, but also additions (ie: a new deck).
This maintenance is true value added to the economy. True value that wouldn't have been added if the investor just left his cash in something else.
No one wants to buy a 30-year old home that had no maintenance on it. Unless you're a fan of buying homes with leaky roofs and a flooded basement...
Relative to what? The USD?
http://pricedingold.com/us-dollar/
Real estate?
http://pragcap.com/real-estate-gold-ratio-falls-to-30-year-l...
Gold is an asset that holds its purchasing power pretty well. It is what it is. It is not however a "piss poor" investment.
After all, Gold reached a glorious bubble of inflation-adjusted $2200+ / ounce in 1970s, and has fallen since then. (yes, even with today's inflated prices, Gold is no where near its inflation-adjusted high).
Lets take a more reasonable graph of Gold, ehh? Something longer term... and see what happens to your trend.
http://www.macrotrends.org/1437/gold-to-s-p-500-ratio
Gold's trend is downward compared to the majority of the market. Each valley is lower, and each peak is lower than the last (with exception of stagflation period in the 70s)
Stocks as investment:
http://www.macrotrends.org/1378/dow-to-gold-ratio-100-year-h...
And of course, ycombinator. You know... the angel fund / venture capitalist firm that runs this website? We're all here because of investors investing into technology. They do so because they believe they can ultimately make money with technology investments. At least, more so than Gold, Real Estate, or even Stocks.
You might be able to make a little bit of money, but unless the global economy collapses entirely, I doubt we'll see another major increase. Gold actually has gone down in value before, so it could easily happen again again.
Do you know something that the Chinese, Germans and Russians don't ?
"Central Banks Bought Most Gold in Nearly 50 Years"
http://www.cnbc.com/id/100458951
"The Russian central bank will continue to buy gold as it seeks to diversify its foreign reserves away from paper assets it views as risky"
http://www.reuters.com/article/2013/01/24/russia-cbank-idUSL...
"The startling news that Germany is repatriating its gold reserves from the United States and France has got precious metals speculators worried that this is the first major sign that trust between central banks across the globe could be deteriorating."
http://www.forbes.com/sites/robertlenzner/2013/01/19/the-ger...
"How Much Gold Does China Really Have?... China is the world’s leading gold producer and also the world’s leading gold importer. And surprisingly their official gold holdings haven’t risen an ounce in over three years."
http://www.moneymorning.com.au/20130211/how-much-gold-does-c...
Germans are bringing gold back into their own country, as opposed to holding it in other exchanges. They have neither increased nor decreased their supply.
China and India are world-class consumers of gold for jewelry, as expected of the world's most populous countries with a rising middle class. Gold is also used in microelectronic components. Chinese Banks on the other hand, have not increased their holdings according to your link. IE: China is not investing into Gold. They're using it.
As for Russian and Iraqi Central Banks buying up Gold between 2012 and today... well... they've already lost 10% on their investment as Gold has dropped in value between last year and today. I mean, if you wanna follow the example of Russian and Iraqi banks, you're welcome to do so. But I don't think anyone considers them a paragon of the investing world.
This is a foolish statement no matter what the subject:
>dotcom stocks are a piss-poor investment >railroads area piss-poor investment >Apple is a piss-poor investment
All of these are true and false at some point. You can't make blanket statements like that. There are times when Gold as a store of value makes more sense than a central-bank inflated currency. There are times when the opposite is true.
What is certainly true is that Gold is a very good long-term store of value, and the prices of Gold relative to other things, such as a loaf of bread, a barrel of oil, a parcel of land are quite stable over a long period of time.
People often make the mistake of comparing Gold against fiat currencies and decide that Gold may be going up or down in value. What they don't do is look at Gold vs other things, which typically are rising in price just as fast as Gold.
Certainly one thing is for certain, putting your savings into a fiat currency is a very bad long term plan.
Wanna take a bet on that?
http://www.macrotrends.org/1340/gold-vs-the-cpi-historical-c...
Gold is out there, sometimes swinging by 1,700% over a decade... while the CPI doesn't change any more than ~100% / decade.
Dollars (and investments measured in dollars: ie Inflation-protected Bonds like TIPS) retain their value better than Gold, while providing a more stable platform. A 10-year note at even 2% offers you 21% growth over 10 years... much better than the long "valleys" that Gold investments suffered across the last century. (And with historic rates sometimes hitting 14.56%, it was possible for 10-year notes to hit 370% growth over 10 years).
Gold doesn't grow in value in the long term. And as shown in Gold Volatility Index, Gold is also a very unstable investment historically.
In fact, Gold's volatility today is the same as the S&P 500 Index.
http://finance.yahoo.com/q?s=^VIX http://finance.yahoo.com/q?s=^GVZ
So it is just as volatile as stocks... while offering poor gains historically. Neither the conservative nor aggressive investor would want this kind of investment. That makes gold a "piss poor" investment in my books.
So you'll see it spike in value right before panics, and slowly lose value after things stabilize.
Of course, gold or any commodity is a worse investment than a stock market index over time.
Buying desert property today and selling it for profit in 10 years when the city next door expands-- that is not wealth creation.
A population holding productive factories, tools, and land is a whole lot better for the economy than people hoarding gold.
It's really not as simple as "investment = good". It's good when it's for stuff that produces value. It's not good when it's invested for the sake of investing and ends up in the stocks of corrupt corporations and shady ventures.
