Three Cheers for Falling Gold

A blog about business and economics.
April 15 2013 9:03 AM

We Should All Be Happy About Gold Collapsing

134281414

Photo by Attila Kisbenedek/AFP/Getty Images

I wrote on Sunday that gold is a lousy hedge against inflation fears, but an excellent Pawel Morski post reminds us that it's not a totally useless investment. Gold is, essentially, a hedge against total collapse and breakdown. If you compare gold as an investment to stocks, gold looks terrible over the long term if you look at stock markets that have a long record of continual operation. But "compared with shares in pre-revolutionary China or pre-war Poland, gold returns look pretty good."

You can smuggle gold. You can hide it. You can bury it in the backyard and dig it up 25 years later when the political system has changed and be pretty confident that it'll still be considered a precious metal. Even in a world of yearslong winters and dragons and undead monsters, people want gold.

And that's why, as Joe Weisenthal says, the collapse in gold prices over the past week seems like good news. When rich investors want to put their money in stock markets, that's essentially a sign that they think complex, law-bound patterns of peaceful human interaction are likely to hold up and lead to some kind of useful undertaking. When rich investors want to put their money in gold,* that's essentially a sign that they think it's important to hedge against total political breakdown.

Advertisement

Correction, April 15, 2013: This post originally said investments in the stock market are a hedge against political catastrophe instead of investments in gold.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Foreigners

More Than Scottish Pride

Scotland’s referendum isn’t about nationalism. It’s about a system that failed, and a new generation looking to take a chance on itself. 

iOS 8 Comes Out Today. Do Not Put It on Your iPhone 4S.

Why Greenland’s “Dark Snow” Should Worry You

Three Talented Actresses in Three Terrible New Shows

The Human Need to Find Connections in Everything

It’s the source of creativity and delusions. It can harm us more than it helps us.

Jurisprudence

Happy Constitution Day!

Too bad it’s almost certainly unconstitutional.

The Ungodly Horror of Having a Bug Crawl Into Your Ear and Scratch Away at Your Eardrum

My Father Was James Brown. I Watched Him Beat My Mother. Then I Married Someone Like Him.

  News & Politics
Weigel
Sept. 17 2014 12:02 PM Here It Is: The Flimsiest Campaign Attack Ad of 2014, Which Won’t Stop Running
  Business
Business Insider
Sept. 17 2014 1:36 PM Nate Silver Versus Princeton Professor: Who Has the Right Models?
  Life
Outward
Sept. 17 2014 1:59 PM Ask a Homo: Secret Ally Codes 
  Double X
The XX Factor
Sept. 17 2014 1:26 PM Hey CBS, Rihanna Is Exactly Who I Want to See on My TV Before NFL Games
  Slate Plus
Slate Fare
Sept. 17 2014 9:37 AM Is Slate Too Liberal?  A members-only open thread.
  Arts
Brow Beat
Sept. 17 2014 1:01 PM A Rare, Very Unusual Interview With Michael Jackson, Animated
  Technology
Future Tense
Sept. 17 2014 12:35 PM IOS 8 Comes Out Today. Do Not Put It on Your iPhone 4S.
  Health & Science
Bad Astronomy
Sept. 17 2014 11:18 AM A Bridge Across the Sky
  Sports
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.