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

History

The Self-Made Man

The story of America’s most pliable, pernicious, irrepressible myth.

The GOP Senate Candidate in Iowa Doesn’t Want Voters to Know Just How Conservative She Really Is

Does Your Child Have “Sluggish Cognitive Tempo”? Or Is That Just a Disorder Made Up to Scare You?

The Supreme Court, Throughout Its History, Has Been a Massive Disappointment

Why Indians in America Are Mad for India’s New Prime Minister

Damned Spot

Now Stare. Don’t Stop.

The perfect political wife’s loving gaze in campaign ads.

Building a Better Workplace

You Deserve a Pre-cation

The smartest job perk you’ve never heard of.

Rehtaeh Parsons Was the Most Famous Victim in Canada. Now, Journalists Can’t Even Say Her Name.

Parents, Get Your Teenage Daughters the IUD

The XX Factor
Sept. 30 2014 12:34 PM Parents, Get Your Teenage Daughters the IUD
Moneybox
Sept. 30 2014 12:04 PM John Hodgman on Why He Wore a Blue Dress to Impersonate Ayn Rand
  News & Politics
Jurisprudence
Sept. 30 2014 2:36 PM This Court Erred The Supreme Court has almost always sided with the wealthy, the privileged, and the powerful.
  Business
Building a Better Workplace
Sept. 30 2014 1:16 PM You Deserve a Pre-cation The smartest job perk you’ve never heard of.
  Life
Education
Sept. 30 2014 1:48 PM Thrashed Florida State’s new president is underqualified and mistrusted. But here’s how he can turn it around.
  Double X
The XX Factor
Sept. 30 2014 12:34 PM Parents, Get Your Teenage Daughters the IUD
  Slate Plus
Behind the Scenes
Sept. 30 2014 3:21 PM Meet Jordan Weissmann Five questions with Slate’s senior business and economics correspondent.
  Arts
Brow Beat
Sept. 30 2014 3:59 PM The Trailer for Taken 3 Is Here, and Guess Who’s on His Phone Again
  Technology
Future Tense
Sept. 30 2014 2:38 PM Scientists Use Electrical Impulses to Help Paralyzed Rats Walk Again
  Health & Science
Bad Astronomy
Sept. 30 2014 7:30 AM What Lurks Beneath the Methane Lakes of Titan?
  Sports
Sports Nut
Sept. 28 2014 8:30 PM NFL Players Die Young. Or Maybe They Live Long Lives. Why it’s so hard to pin down the effects of football on players’ lives.