Gold… yawn? Surely, enough has been said? Lenin despised it and thought it should be used to build public lavatories. Warren Buffet famous quote is no less contemptuous: “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
But have they missed a point? Pinkers Post believes that gold remains the ultimate hedge. We live in a virtual world and there really is nothing more gratifying than the warm and happy feeling of holding a 1kg gold bar… that extraordinary gravitational pull imbuing a sense of complete safety… yes, it’s almost as comforting as crawling back into mummy’s womb.
And what about that other tangible asset… cash? Surely on the way out? Well, far from it according to German banknote printer Giesecke & Devrient. Despite projections of a double digit increase in the use of cards and other electronic payments, G&D expect banknote production to rise by 5% a year for the “foreseeable future”. The company maintains that “cash is 100% reliable in times of crisis, in periods of panic where a solid financial system has to prove itself; the reason for this is trust in real currency.”
One of the reasons people flock to notes during financial panic and natural disasters lies in the way they look and feel; i.e. the desire to to store your wealth in a physical object increases as the world around you becomes more uncertain. Well… need more proof in the mattress? Just look at Greece after the imposition of capital controls. And what is even more surprising: 80% of payments globally are still made in cash; builders’ pockets bulging… . Black economy? So what? It’s just a process of recycling and will ultimately benefit the white economy.
But let’s not get carried away… Zimbabweans can exchange bank accounts of up to 175 quadrillion (175,000,000,000,000,000) Zimbabwean dollars for five US dollars… so the pecking order is clear: Gold first… cash a very distant second!