Wednesday, April 05, 2006

Another Golden Voice

There are lots of gold bugs out there, and I've got to admit I'm one, although I'm not in the business. I'm just an observer.


[Given to my father Edward C. Harwood on his 80th birthday, by the artist Joanna St. Aubyn]

I look at both sides of the present economic picture, and my personal brand of common sense tends to come down on gold's side.

This article at Business Day is a fun read, even though the fellow has an obvious bias. As to the ultimate dollar value that gold might settle at, it's anyone's guess. Many factors will come into play.

1. The Fed just might get away with yet another loosening up of the printing press.

2. The world really has no better currency alternative unless we start to use fractional gold on international and other contracts (an idea I support, and who knows, maybe we'll actually come to it via the markets.) This lack of a better currency means that all sides will do whatever it takes to avoid a flight from the dollars they already hold.

3. We don't know what inflation will do, given (a) the global nature of today's marketplace, which is in the intermediary stage progressing towards a more unified global standard of living but which is still providing goods at unbelievably cheap prices; and (b) the amount of dollars that are circulating permanently outside the US, which some place at over 50%.

4. Unknown factors that I'd love to have readers contribute in the commentary.

For a great discussion about this subject and a possible dollar price for gold, get a collection of ideas published by the American Institute for Economic Research called "Prospects for a Resumption of the Gold Standard" here. You'll find the opinions of people such as Anna J. Schwartz, Gerald P. O'Driscoll, Jr., H. David Willey, Hugo Salinas Price, John C. Hathaway, Michael T. Darda, Richard Sylla, Michael W. Crook, Robert E. Wright, and John H. Wood.

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