I just now read an article in the Telegraph (U.K.) by Ambrose Evans-Pritchard (what a grand-sounding name!) entitled "Stage two of the gold bull market is just beginning." His conclusion is that the price of gold will go up soon. I had previously this morning read an article by Gary North about how the price of gold is not going up anytime soon, although he agrees that it must eventually go up - and up a whole lot. But not now, and not for several years. Well, I don't claim to know one way or the other. And this isn't about that anyway.
As is often the practice nowadays, the Telegraph allows, and even encourages, its registered users to make comments on its articles. I'm not a registered user, and this one instance isn't a big enough deal to get me to register, but I did read the users' comments. One struck me as being particularly common, and seriously mistaken. It was from a user calling himself Christopher aus Trier. He said, "Pondy (he was replying to another user): gold is great for security as is silver; which is not nearly as much trumpeted. It is something that is universally valued and respected. It is, however, not the most ideal form of currency as there is simply not enough of it to fit the size of modern economies."
I've seen this same claim made often elsewhere, especially on Usenet. When I see it, I ask, "OK, if there isn't enough gold to operate a modern economy on, just how much gold would be enough to operate a modern economy on? I never get an answer, other than, "More than we have." But if the people making such a claim (that there isn't enough gold to operate a modern economy on) know that there isn't enough, they must have at least some idea, some approximation, some vague hint, of how much gold it would take. But they never do.
It seems to me that before one can make such a definitive claim, one should consider what one is really saying. Obviously, the amount of money in an economy is going to have profound effects on the prices in that economy. But does it really matter whether those prices are in the range of, say, several hundred thousand dollars for a nice house in the suburbs, or a few ounces of gold for the same house? If so, why? They never seem to know.
Oh well...
