Warren Buffet vs goldbugs

Warren Buffet thinks buying gold is dumb: specifically, he thinks that buying gold is speculation, not investing, because gold doesn't do anything productive. Here, he waxes eloquent on the subject:

“If you put your money into gold or other non-income- producing assets that are dependent on what someone else values that in the future, you’re in speculation,” he said. “You’re not into investing....”

To illustrate the point, he asked readers to picture the world’s entire gold stock melded together into a cube 68 feet (21 meters) on each side valued at $9.6 trillion at then- prevailing prices. For the same amount, an investor could have purchased all the farmland in the U.S., 16 replicas of Exxon Mobil Corp., and still have about $1 trillion of “walking- around money.”

A century later, the farmland will be producing valuable crops no matter the currency, and dividends from the companies would probably added up to trillions of dollars, Buffett wrote.

The 170,000 metric tons of gold “will be unchanged in size and still incapable of producing anything,” he wrote. “You can fondle the cube, but it will not respond.”

Mr Buffet has a lot more faith in the longterm health of soil in an agribusiness context than I do, but the point is still an interesting one.

Buffett Mocking Gold Sidesteps Slump As He Bets on Stocks (via JWZ)


  1. I thought the whole point in buying gold was to actually buy and own the physical gold.  The reasoning being…umm-something about end of the economy, doomsday, preppers, some bullshit about a barter society.

    insert something about making Glenn Beck rich….

    Hell in the end of the economy scenario you are better off hoarding steel and learning how to be a blacksmith.

    1. That’s the current trend. But traditionally the “buy gold!” thing, and even now with the nut jobs, was  built around claims that gold NEVER loses value or ALWAYS goes up in value. Which isn’t really true. Particularly in a post-apocalypse situation where survival is more important than pretty metal of marginal use.  

      1. There’s another, perfectly sensible reason.  When nations are unstable, the price of gold rises, because currencies weaken.  If you are confident the future holds trouble, gold might be a sound investment, as a small part of a balanced portfolio.

        But one can participate in a rising gold price by buying shares of mining companies – and then you get income as well as appreciation.  Which is kind of Buffet’s point.

    2. Well right, the goldbug market is driven by cynical shills who preach the end of the world so that they can profit by manipulating the market & thowing their lot in with company that make short term profits by taking advantage of those suckered in by their end of the world rhetoric.

        1. Who are “They”?
          A German person selling his family heirlooms for a few hundred billions of Marks, enough for his family just to eat another day, or the people selling the “bling” on the international market?  
          WWI had been won more by starving the civilian population than in battle. Over three quarters of a million civilians had been starved to death. Germany had a very low obesity rate then.
          In 1923, less than four years later, the “Germans”, as in ‘Germany’, was an occupied nation of very skinny people with hyperinflation.  France was a harsh victor, unlike Britain and the USA. 

          “On 1st November 1923 1 pound of bread cost 3 billion, 1 pound of meat: 36 billion, 1 glass of beer: 4 billion.” it says on a plaque pictured on Wikipedia. 

    3. Or things like expensive liquor or other luxury goods, provided that someone might still want these they’d make great trade goods.

      Alternatively, medical supplies.

      1. Some survivalist types expend considerable mental energy on what would be useful for trade if the proverbial shit ever hit the fan.  One consensus is that “mini” (50 ml) size liquor bottles would be quite worthwhile.  

    4. try shaving off a couple of flakes of gold to get a beer and a pack of cigs.
      silver is a better bet.
      But I digress. Buffet said this awhile ago. this ain’t news.  He’s an investor not a FOX news watching paranoid.

    5. Redneck investment guide, investing in lead, making bullets.

      Gold derived its value from a combination of three factors:

      – Scarcity
      – Hard to fake, relatively easy to verify.
      – Productive uses
      – Utility as a medium of exchange

      Because of this it was used as a medium of exchange for thousands of years. It’s a counter-party risk free medium. You could take it on a ship and sail halfways around the world, and when you arrived, it was still a worthy currency, without any government backing up its value.

      Gold is still scarce, and it is still hard to fake and relatively easy to verify. But it’s utility has not kept up. Industrial use of gold is only a fringe need of yearly production. There are some medicinal, aeronautic, space, chemical and electronic applications. But a lot of these applications can be done with other materials, and are contested by new materials (like Graphene). It’s utility as a medium of exchange has vanished because of paper money.

      Paper money has been around for at least a millenium and a half. But it was infeasible for much of that time because it is a vehicle with counterparty risk (somebody has to back the paper). And when you travelled some distance, the reach of that backing waned. This only changed with globalization a couple hundred years ago, when the paper printed halfway around the world was still worth something (the reach of the backing power extended).

      Both paper money and gold however face a big challenge, from a combination of globalization and digital revolution. Commerce (even very simple things like a candystore) became global enterprises due to the digital revolution and the internet. But the existing media of exchange (neither gold nor paper money) can satisfy the requirement to be sent over the internet. An attempt at a solution of this problem where credit cards, invented 40 years ago and married to the internet about 23 years ago.

      Credit cards where an interesting concept, whereas a creditor would take up the risk of backing a transaction with “virtual” paper money, until the (equally counterparty risk ladden) paper money eventually moved around for real. As such it is a second-order counter party risk derivative. Consequently there are relatively high fees attached and it funnels all transactions trough a central point of control. Credit institutions are challenged by globalization because they cannot scale. They are also challenged because their last invention was made over 40 years ago, and has not substantially changed trough a period of monumental societal upheval. Lastly the central point of control is contested as it hangs the fate of a business relying on these third parties, on the goodwill of these third parties.

      Bitcoins attempt to solve the problems of gold, paper money and credit cards taking into account the massive societal upheval that the digital revolution introduced. They try to preserve essential qualities of each of those intstrument, while getting rid of the issues that plague them.

      Problems bitcoin solves:

      – Like gold, bitcoins are scarce.
      – Like gold, bitcoins are hard to fake, and they are far easier to verify as valid than gold>
      – Like paper money bitcoins are of great utility
      – Like credit cards, bitcoins can easily be used to send money, trough the internet.

      Issues bitcoin avoids:

      – Bitcoins do not contain counterparty risk of any order, unlike paper money or credit cards.
      – Bitcoins retain their utility unlike gold, because they can be sent trough the internet.
       – Bitcoins can easily scale, because they have no central point of control (and failure)

    1. (m’self) i was curious about the inscription:
      which we learn from here (for example) is:

      dies marchen wird wohl niemands wahr
      das leben lehrt sei klug und spar

      upon which i’ll apply the raw powers of my highly limited German language skills and cough up:
      “This is likely no one’s fairy tale realized,  Who is taught to live wisely and save.”
      (apologies to my German teachers everywhere)

      1. It basically says, “fairytales won’t come true, be smart and save”, referring to (I think) one of the Grimms´ fairytales about a donkey who shits gold…or Tywin Lannister, maybe.

        1. The history of gold shitting/shit eating (or gold-shit eating) illustration is fascinating in and of itself. Probably because there… is… a history there.

        2. Seems like good, timeless advice, but if I simply save I’ll lose money, cuz the interest rates are lower than inflation. But then, I wouldn’t know what constitutes a solid and conscientious investment either, so, screwed all around I reckon.

    1. This is a good place for a Venn Diagram. For extra fun, include people who do not think contraception OR abortion should accessible to women and/or MRAs and  I think we have research material here.

    2. It’s another doomsday obsession that they will have gold when the rest of the world goes to hell, and they’ll be king of the cul-de-sac with theie pallets of ammo, MREs, and gold coins. 

    3. Also the gold standard did nothing to prevent a series of tremendous financial panics and crashes. Nor does it allow a coutry to grow since the money supply is limited. 

  2. I bought a pizza restaurant instead of gold. If the “end times” come I will have a couple hundred pounds of flour, salt, sugar, oil and canned fruits & veggies to barter with… and absolutely no use for gold!

    1. Why would you barter the ingredients when you could barter pizza? You could build a pizzocracy and rule the land.

    2. And pizza sauce will not cause home invaders to spend a long weekend using a meat cleaver to whittle away at your fingers while screaming “Where’s the gold?”

  3. I’ve never understood why a shiny metal is worth so damn much…is the world populated with 5 year olds? just use it all for its conductive properties and be done with it.

    1. It’s not that gold is worth so much but the rather the U. S. Dollar is worth so little because they are in such abundance.  Since 1913 the Dollar has lost over 95%of its value and gold is a hedge against inflation.  Historically gold and silver have been considered money, not fiat paper which is backed by nothing more than a government’s promise.  Government’s hate gold because it is a barometer on well they manage the economy.  Seeing that gold has risen from $255/oz to over $1900 since 2001 I’d say the smart investor knows how poor a job our government is doing in bringing fiscal stability to our economy.

      1. There’s a book called “Debt” by David Graeber that effectively blows up this myth that gold is intrinsically more currency-like than fiat currency.

        1. Sure, it is whatever you believe it is.  Carrie Fisher was my gold standard at one point.  

      2. All money is a social construct- ALL money. Gold and silver, as currency, are just as much “fiat” as paper.  Valued far above their actual physical usefulness, they waste more resources nonproductively in their creation and maintenance, and thus represent more of a drag on the economy than just printing pieces of paper- which is relatively simple and cheap to do.  That money is “dead stock” was pointed out quite clearly by Adam Smith in 1776. Buffett just revisits that lesson. 

        Modest inflation is a sign of a healthy economy. The dollar hasn’t “lost” value in real terms, in terms of what useful goods and services it can buy. The economy has become far more productive and its benefits more widespread.  What did that supposedly more valuable dollar buy in 1913? How many computers, what sort of medical treatments, how much healthy food?  What has happened to the general standard of living?  

        Warren Buffett is calling out the recent runup in gold for what it is, quite clearly, in historical terms- a speculative bubble- driven by those who have no understanding of how the real economy actually works. And by quite a few hucksters who profit from their ignorance. 

      3. I’m not an economist, and I hope that someone here will correct anything I fail to understand and/or state correctly.  But it seems to me that an economy can’t expand if it’s based on a fixed amount of precious metal as currency (or *effectively* fixed, as when mining or making more is expensive). 

        Conversely, if your economy is expanding, you have to have a parallel expansion in the money supply.  At least I think so; am I wrong about this?

        In this scenario, inflation (at a reasonable level) may be good.  Where inflation hurts is when it expands faster than the economy is expanding. 

        The main reason the world’s economy is suffering now is that over the last 3 decades or so a large amount of money has been effectively removed from circulation through its redistribution upward.  It’s become concentrated in the hands of the wealthy. 

        Contrary to some claims, the wealthy are by and large not “job creators.”  They are resource hoarders.  Their investments tend to be speculative, not productive.  Speculative investment doesn’t lead to real growth; it just moves money from one person’s wallet to another’s. In the hands of (most of) the wealthy, wealth tends to become less productive, not more.

        Therefore we can counter the current stagnation by a judicious expansion of the money supply,.  This stimulates demand as it decreases the value of hoarded wealth.  That’s why the rich hate stimulus.  They prefer its opposite, austerity, which increases the value of their holdings.

        But, as I say, I don’t have a degree in this stuff, so I may be seriously confused.

        As for bitcoin, I think it fills a need, but I don’t see a future in it.  It’s a threat to established governmental authority.  It has too much integral privacy in an era where privacy is rapidly vanishing.  I expect it’s only a matter of time before governments make bitcoin illegal (if it isn’t already).

        1. The main reason the world’s economy is suffering now is that over the last 3 decades or so a large amount of money has been effectively removed from circulation through its redistribution upward.  It’s become concentrated is the hands of the wealthy.

          Word! I don’t think you’re at all confused. That’s a simple and true phenomenon, and SO much complexifying verbiage gets spewed over the corporate airwaves trying to prevent the 99% from seeing it.

        2. I am not an economist, but have studied the subject (don’t get me started) and have made a career in financial services of various types, so I can say with a reasonable amount of authority that you understand the situation very well.

          “Contrary to some claims, the wealthy are by and large not “job creators.”  They are resource hoarders.  Their investments tend to be speculative, not productive.  Speculative investment doesn’t lead to real growth; it just moves money from one person’s wallet to another’s. In the hands of (most of) the wealthy, wealth tends to become less productive, not more.”

          That’s stellar.  Absolutely crystal clear and right.

          1.  I wonder what would happen if there was a penalty imposed on the “repatriation” of U.S. dollars held abroad in places like the Cayman Islands.  You know, the exact opposite of what Mitt Romney and others were suggesting last year.  Let the money rot; it would serve them right for trying to avoid taxation by hiding it in the first place.

        3. You are on an insightful path, but there is more to this than money supply- in normal times, that is enough, but not now.  Merely increasing the money supply is not the same thing as stimulus spending- actually getting that money in circulation. After all, the number of dollars have massively increased in recent years, with little impact on either inflation or unemployment. Business sits on trillions of dollars they won’t spend, because there is low demand, and government is prevented from spending enough to stimulate demand, or from investing in human capital or infrastructure, because of an ideologically based misunderstanding of debt.  When everyone is saving at the same time, we have a depression. 

          We are where we are largely because of how we allocate resources- particularly human resources.  Your point about the rich by and large not being “job creators” is correct, but consider looking at causality- how did they get rich, if they don’t produce anything?  We have evolved a system that, particularly over the last 40 years, rewards non-productive speculation- gambling, really- far in excess of how it rewards actual building and creating. We encourage and reward zero-sum activities that don’t grow the larger economy at all, even though they make a small number of individuals extremely rich.  Hedge fund managers make 100’s of millions and are taxed at a low rate, while entrepreneurs wanting to build things, or scientists, or engineers, or other actual makers, receive much less and are taxed at higher rates. A bloated financial sector sucks up resources that should be allocated to the non zero-sum part of the economy. And the more you feed the monster, the bigger and harder to control it gets and the more resources it swallows. 

          Over the same time, the people who run our businesses- corporate governance- have changed from being those who came up through the ranks of engineering, production, or sales, and shifted entirely to those who came from finance. Short term manipulation of assets to show paper profits has come to trump long term investment in the ever increasing pursuit of short term returns. Formerly great R&D companies, like Hewlett -Packard, have become hollow shells defined by financial manipulation. You can’t base an economy on casino gambling or musical chairs- at some point someone needs to produce something tangible. 

          The net result of these trends, and others, is greater concentration of wealth, less economic activity than there should be, and reduced opportunity for the majority of people. Since about the 80’s we in the US have failed to invest enough in our future, and have rewarded the wrong kind of things. 

          Lack of investment is at the core. I am an entrepreneur who started a business in technology, one that designs and manufactures sophisticated electronics in the US, creating jobs.  Nearly everything that makes my business possible- the microprocessor, the internet, the GPS system, and the universities that educated me and developed all these technologies, are the result of vast, mostly public/ government investment made by past generations- who were more heavily taxed to pay for it. Allowing great accumulations of wealth in a few hands has decreased the resources available to make those long term, generation spanning investments. 

          Bitcoin has most of the same problems gold has- it wastes resources to create, and the supply is inelastic- it can’t respond to the needs of the real economy for transactions  by increasing or decreasing supply, so if it every became significant (which won’t happen) it would create wild swings in prices, because it is itself just a speculative commodity. We have been there before, and it’s not fun. 

      4.  “Since 1913 the Dollar has lost over 95% of its value…”

        Maybe.  But that really only matters if you are someone who put a bunch of dollars under a mattress in 1913, and are taking them out in 2013, without having done anything with them — even put them in a low-yield savings account — in the interim. 

        No one actually does that.  Real people save their money in various investment vehicles that pay them something.  In other words, inflation can benefit people as much as it can harm them.  (Also, real people do not save money over 100-year periods.)

        People who obsess about a decline in the absolute value of the dollar over the course of a century are caught up in abstractions, and have lost sight of how money is actually used.

        1. Yes, as long as the inflation rate is relatively stable or predictable, every can account for it in contracts and prices and wages and interest rates and so on. 

    2. Thomas Moore had the same kind of idea (from Utopia http://en.wikipedia.org/wiki/Utopia_(book) )

      Slavery is a feature of Utopian life and it is reported that every household has two slaves. The slaves are either from other countries or are the Utopian criminals. These criminals are weighed down with chains made out of gold. The gold is part of the community wealth of the country, and fettering criminals with it or using it for shameful things like chamber pots gives the citizens a healthy dislike of it. It also makes it difficult to steal as it is in plain view. The wealth, though, is of little importance and is only good for buying commodities from foreign nations or bribing these nations to fight each other. Slaves are periodically released for good behaviour. Jewels are worn by children, who finally give them up as they mature.

    3. It is actually a real shame.  If no one used gold as an “investment”, and it had no value for being pretty, it would be as cheap as dirt, which would be AWESOME.  Why would it be awesome?  Gold has some epic industrial uses, especially in electronics. 

  4. Gold’s value is what it is not because it’s rare or useful.  It’s because it’s shiny.   

    1. It’s because it always has been valued, and for no other reason.  People who think that will last when it is a choice between food and gold are wrong (or will be short-lived in the end-time scenario).

      The only bigger scam is diamonds. Once scarce, now only scarce because DeBeers keeps them that way. Rarely useful.

        1.  I think rocket is only talking about gemstones. Are industrial diamonds kept in scarcity? I doubt it.

          1.  Yes, gemstones.  I have no idea what the utility of the big rock on the ring my grannie left for my sister would be in an industrial environment.  It would leave a helluva scar in a fistfight though.

            (Said inheritance being a classic white elephant – too valuable to just keep about the house or use, too sentimental to sell, so in effect she was willed a safety deposit bill for the rest of her life).

          2. Well, if it is big but also old there is a good chance it would not stay large long in industrial use. I think they have good conductivity too, actually. 

            Diamonds are really useful things, unless you just plan on spending a fortune on wearing one around.

            By the way, tell your sis to wear it. Eventually no one will care where it came from and sell it, or it will just get lost and some antique dealer will get what they can out of it.

          3.  Larger diamonds are useful for drawing wire if you can laser a hole through them. I honestly don’t know of any other uses.

          4.  See if you can get the stone reset into a setting where it is encased rather than jutting out….it will seem much smaller and therefore not be as interesting to thieves.  Also, you could put it into a necklace setting instead of a ring, if you think that would be more likely worn (for special occasions).

          5. It has tremendous value to the kind of person who would want to show it off.

            That is all.

      1. Especially when we have machines that can replicate the natural pressures that create diamonds, thus, creating diamonds. Not artificial diamonds. Diamonds that are exactly the same as blood diamonds, but without the blood. Strangely this has not decimated the market for digging diamonds out of the ground. I don’t get it. I suspect mass collusion by the diamond industry. Mostly when I mention this people suggest industrial uses, but that’s what the low grade diamonds are for. These are gems of the highest calibre. 

        1. As I understand it, we don’t yet have the technology to create a hunk of diamond that is indistinguishable from the hunk of diamond you might dig up. They contain different impurities, different internal structures, etc. So in that sense, no, they’re not exactly the same. Of course, you and I would never be able to tell the difference, but then you and I would be fooled by cubic zirconium or glass or paste, too. 

          For whatever reason, people value the dug-up kind. Yeah, it’s silly and irrational, but then so is virtually everything else humans do, including wearing rocks on our fingers in the first place. I know the diamond-mining industry wants to force synthetic diamonds to be labeled as such, but that’s not exactly collusion. In fact, it’s probably the least evil thing the diamond industry has done in years.

        2. > I suspect mass collusion by the diamond industry

          This article from The Atlantic is the best read I’ve ever seen on how De Beers created the diamond market. It’s an oldie, but an excellent read:


        3. Part of the charm of natural diamonds is their individual flaws and colors and so on – and crucially, those things only have value because they’re natural and (relatively) unique variations, and not concocted in a lab somewhere.

          I am a geologist, but I don’t particularly care about gems, fancy minerals, etc. (or even rocks, if I’m honest). They’re interesting and valuable scientifically, but shiny stuff just isn’t inherently attractive to me. 

          However… a real, large-sized, good-quality diamond is a sight to behold like no other. It’s transfixing. I always make sure to check them out in the rock and mineral hall in natural history museums, which often have absolutely spectacular examples. If you’ve only seen small ones, it’s worth your while to check them out.

          Cubic zirconia and synthetic diamonds and so on can actually give you the transfixing effect even better  – but it’s shallow and short-lived. The essence is missing, and they’re boring – they are mildly interesting scientific demonstrations, nothing more. 

          Without the natural flaws and variations, you may as well just buy the cubic zirconia ones from Forever 21. 

          I just don’t see synthetic diamonds replacing real ones, because diamonds are supposed to be something special. They’ll certainly be popular among people who just want the bling, and I think that’s a very good thing as it reduces the demand for shadily-sourced real ones. But synthetic diamonds will not be popular for engagement rings and heirlooms and whatever because they won’t be special.

          I’m pretty sure I’ll never buy a diamond, myself, because to me synthetic ones aren’t special and real ones are too problematically sourced to even consider buying (not to mention outrageously overpriced). I also have the excuse, of course, that as a geologist I can choose a different mineral that’s more meaningful (or some crap like that) – and anyway I wouldn’t marry someone who would be disappointed if they didn’t get a diamond ring.

  5. Yeah I could never get the argument why “gold backed currency” was better since gold is worth what other people agree on what it is worth which is fiat currency like every other bit of money out there.
    It is a highly portable currency though. If you have to up and move it is easier to bring some gold coins with you that can be converted to local money easily rather than a suitcase of  cash.

    1. People get excited when they realize that money is a social construct!  & then sometimes they aren’t smart enough to realize that the value of gold is a social construct too.

    2.  I wonder what U.S. Customs would say if you showed up for an international flight with a cache of gold coins in your carry-on bag.  You can only bring $10,000 in cash without some kind of special permission, but gold bullion coins?

      I think if I were leaving for good, I would leave my money in my U.S. bank and bring my ATM card.  It was issued by VISA and functions as such.  I can go to any ATM machine in the world, and it will spit out as much local currency as I need as long as I still have money in my account.  I could easily exceed that $10,000 max in about a week or so.

  6. “Fondle the cube” needs to be a slang term for something. Maybe for the act of hoarding material wealth in anticipation of some catastrophe?

    “Man, that guy’s really fondling the cube.”

    1. my best friend’s step-mother makes $74 every hour on the laptop. She has been out of a job for 10 months but last month her paycheck was $15434 just working on the laptop for a few hours. Read more on  Jive8.c­om

  7. Our valuing of gold is a ridiculous left-over from our barely-civilized days when ‘Oooo! Shiny!!’ could be the basis of our entire economy.  It amazes me that something incredibly useful like a smartphone or a tablet is worth a lot less than a shiny hunk of fairly useless metal.  Same with diamonds/precious metals in general (although yes, I’m aware that diamonds’ scarcity and preciousness are both made up)

  8. If we intend to have a discussion about the most useless and nauseating of all currencies, let’s please include XBOX points on that list.

      1. Yeah, I tried to use real money to buy that game and it made Microsoft so mad they froze my computer with a 890 megabyte Service Pack update. Taught me who is boss.

  9. The biggest scam I see happening, is the bet that global warming is a myth, and that the earth’s life support is infinite and thus has no economic value. Tar sands pipelines, coal ports, arctic drilling, deep wells… Everything is premised on energy demand going up, but not demand for breathable air, UV-safe sunshine, or un-submerged lowlands.

    On the supply side, what would it look like to more humanely value a productive human life? Besides a living wage, we’d see real investment in schools, interracial busing become a moot point, and more doctors per capita.

     (oh, but that might hurt liqueur sales, private prisons, and the gun industry, so I guess it’s out of the question)

  10. If you look at things in the short run, say, less than Buffet’s 100 years, you know that to be here in 100 years you have to make it through the intervening time. I believe that’s the basis for not putting all your eggs in one basket.

    Gold has always been one of the many possible baskets, for people who don’t have infinite amounts of money, as Buffet does. Buffet does not understand this?

    Or perhaps he just has so much money that real life considerations don’t enter into the equation for him, like the recent Republican candidate who thought that a “middle class” income is $200,000 a year, plus or minus.

    One good real world piece of advice is not to take advice from people who don’t live in the real world.

    1.  You’ve picked the wrong guy to play “wealthy people are ignorant about real life” with.

      Investing in gold is a lot like investing in lottery tickets.

      How many middle class people do you know can afford to buy and then safely store gold as an investment?  As opposed to, say, a stock or bond paying quarterly dividends?….either of which are much easier to offload if their value starts going south.

    2. He understands the real world perfectly, you simply choose to miss the point because you want him to be wrong.  
      That farmland will produce food each and every year during that 100 years,  feeding you and a whole bunch of other people.  The companies you bought will produce not only money, but widgets – and if you were smart, useful widgets that will help keep you alive for that 100 years.  If well chosen, and well run, those companies will also provide livings for many workers, and advance the cause of humanity. Gold will, instead, simply remain a lump of inert metal wherever you leave it.  It will sit there and not corrode for 100 years and be no more or less than it was before.  It will not feed anyone, will not create anything.  It will not, in fact, change anything at all unless someone happens to trip over it and hurt themselves. 

      Even if you think that fiat currencies are bound to crash and burn, gold is still not an investment.  Sugar, medicine, spices and luxuries would be investments.  These will be scarce in your brave new world, and will command high prices and bring you great wealth. 

      Gold would be a burnt offering to the economic gods.  A ritual sacrifice of no intrinsic value that you hope against hope will give you power and influence in the new world.

    3.  Many people were wiped out by investing in precious metal before the depression because the gold dealers are running Ponzi schemes.  Mostly they aren’t selling gold, they are selling the promise of gold, the idea of gold.    It’s not clear if there is enough gold in the market to cover these promises or how much physical gold has been replaced with gold plated tungsten ingots.

  11. Gold is a great electrical conductor that doesn’t tarnish, so it is the #1 choice for electrical contacts- if you can afford it. It is also an excellent reflector of infrared radiation, which is why a thin layer of it lined the visor of Neil Armstrong’s moon suit.

  12. Buffet can mock gold all he wants, that is his prerogative. What the article doesn’t mention or the MSM is that Uncle Warren was bailed out in 2008 by  Uncle Ben Bernanke. (Wells Fargo, Bank of America, Amex) Ever wonder why the DOJ has never charged Moody’s for fraud during the housing crisis? 

    1. And you didn’t bother to mention he only actively increased his holdings on those mentioned companies *AFTER* the GFC.

      And I constantly wonder why there are no sufficent mass attention on rating companies and SECs and other regulation bodies that failed in the GFC in the first place.

  13. I think it’s not gold that the goldbugs are interested in but the nature of fiat currency and the history of fiat currency. What exactly is money? Where does it come from? … and what is it’s nature? These seem like basic questions but somehow rarely get asked let alone answered.
    Historically there was the gold standard… actually it’s a lot more complicated than that, there were a lot of different kinds of gold standards. Then there was the dollar standard where the world pegged their currencies to a stable dollar. But now since 2010 we are in a entirely new era, the ramifications of which are not known. In order to manage a ballooning debt and in a so far failing effort to kickstart an ailing economy, tens of billions of dollars are being created every month out of thin air. It’s interesting to look at the history of wild money printing. Did it ever turn out well for the non Warren Buffet’s of this world? I wonder who benefits when those in power control the money supply… one could hazard a guess. It doesn’t seem the poor folks here in Cambodia, who are suffering inflation on basic foods, are benefiting. How deep is this rabbit hole called money?

    1. But we know exactly the failures of gold-based money. Deflation is far worse than inflation, and if you stay on gold it is impossible to get out of. There is a reason we went to fiat money.

    2. Currency has no more value than people are willing to put into it. This is why market crashes happen, everybody freaks out and no longer have faith in the market. Now people  can argue that gold has some inherent value because its soooo pretty all day long, that doesnt make it any more true. In fact, people only give a shit about gold when their basic needs are already met. Come at me with some gold when everyone is starving and seeking shelter and I will promptly laugh at you.

  14. Yet in January of this year the Basel III agreement came in, elevating gold to a bank asset on a par with sovereign bonds and mortgages.


    And at about the same time the French rediscover their fraternal commitment to democracy in their former colony of Mali, the third-biggest gold producing nation in Africa (and source of 80% of France’s uranium).

    So who are you going to believe: Warren Buffett, or the lying evidence of your lying eyes?

    1.  I can’t be the only one who imagined Buffet’s cube of gold having big knobby corners and an embossed heart on each side.

      1. I imagine it in the shape of one of those outdoor corporate Turds in the Plaza sculptures.

  15. It seems Warren Buffet has read Terry Pratchett’s ‘Making money’, where Moist von Lipwig (former con-man, now respectable head of the Post Office and the Ankh-Morpork bank) decides to shift the gold based currency to a golem based currency, as gold only has value because society has decided it should be so, whereas anything capable to “work” (growing food, build things) it’s essential and perdurable whatever the society may become.

  16. Any economist would agree on that.  Even historically, when your money actually is gold or in the case I’m thinking, silver.

    Take Niall Ferguson’s book The Acent of Money, he notes when the Spanish  Conquistadors brought back gold and silver from the Americas, they did not necessary got richer in the long run.  Rather they got poorer.

    1. Wealth in an economy is created by making things that are useful in real terms, not by pursuit of money itself.   Goto Dengo, in Cryptonomicon, by Neal Stephenson, said it:
       “The leaders of Nippon were stupid. They took all the gold out of Tokyo and buried it in holes in the ground in the Philippines! Because they thought that The General would march into Tokyo and steal it. But The General didn’t care about the gold. he understood that the real gold is here”— he points to his head— “in the intelligence of the people, and here”— “he holds out his hands— in the work they do. Getting rid of our gold was the best thing that ever happened to Nippon. It made us rich. Receiving that gold was the worst thing that ever happened to the Philippines. It made them poor.”  

  17. It makes sense that WB is no big fan of Au…he’s a Big Operator; moving and shaking the economy with his Wizardly Ways.  Gold just sits there; it doesn’t do anything…investing in mining companies seems more his speed.

    For for the little guy (esp the cynical/paranoid…), gold has a place as a solid asset and hedge against inflation.  It’s losing its ass lately…but it’s merely the other side of a fairly obvious bubble.  Current US fiscal policy has heretofore not created massive inflation, the market is up and there is some concern about euro-zone countries potentially off-loading reserves…so down we go.

    But that will change.  If you bought many oz’s at $1900 however…you may have to wait a long time to get your investment back.

    My Mom’s ex husband was a dope smoking tarot reading crystal selling gold bug of epic proportions, and when he died she inherited a fair crapload. Since he bought most of it in the ’80’s and 90’s, the ‘value’ increase has been significant. But the only way to realize it is to sell the damn stuff. I convinced her to sell some to help purchase the new car she wanted.  “Selling precious gold to buy an immediately depreciating asset?! Are you mad?”

    Maybe. But we got $1820 per. And she loves her -ack- Prius. So while I watch the family wealth decrease these days, I at least am gratified that some actual profit and use has been realized from the stockpiling of shiny, arbitrary metal.

    1. We bought a Prius three weeks ago.  My husband estimates  we’ll spend/save $1500 a year in gasoline, based on the mpg the car is cheerily reporting to him.  We have again the same amount of money we spent on the car, sitting in a savings account.  It will earn around $300 in interest for the year, so for now buying the (depreciating) car was actually the better return on our money. 

  18. In a state of nature, gold is worth squat.  If the balloon goes up and the world ends, you’d rather have ammo, alcohol, food and antibiotics than gold.  Plus you start talking gold and you end up discussing the political platform of Ron Paul, and God knows nobody wants to endure that.

    1. If the world actually ends all I will need is the alcohol. Let somebody else perpetuate the species.

  19. Gold has plenty of industrial uses.  It’s high work function makes it great for rectifying contacts.  We evaporate a fair bit of it in the lab I work in.  (Looks like it’s time to stock up.)

  20. Damn… I’m not a gold-bug, but it would be really fucking cool to see a 68-foot cube of solid gold. 

    Thanks for giving me an itch I’ll never be able to scratch, Warren.

  21. Warren hasn’t thought this through.  If I had a 68’x68’x68′ cube of solid gold, I would have the world’s gold market cornered and I could name my price.  Gold has lots of commercial and industrial uses, beyond the obvious desire for gold jewelry, which would quickly eclipse platinum in value due to scarcity and perception.  I could sell gold for $5000/oz and it would be a bargain to you suckers, and would take a lot less effort than farming.  And be impervious to global warming.

    Here’s a reason why gold is a bad savings vehicle.  The average American dupe socking money into gold may amass several pounds in personal assets.  Greece, Portugal, Cypress, Spain, France, and Italy all have gold assets in the tens of tons (some in the hundreds).  At any moment one of them may start selling off gold, glutting the market and wiping out small holders.  In fact, that may be what’s behind the current drop in gold values.

    Sadly, the same concept applies to your 401k.  There is no safe investment vehicle for us.

  22. Owning gold is about the same as carrying a spare tire in your car, except that prices of spare tires don’t go up and down much. 

    You don’t sell your gold. After the crash, after the riots, after peace is returned to the land, then you pull out your gold and use it to finance rebuilding.

    1. Assuming that in the reformed peaceful society anyone wants gold.  They might decide something else is valuable and gold of limited utility and value.

      1. I meant the present society, which is emphatically NOT reformed or peaceful. The USA is well on its way to collapse, and so are some other countries. For one thing, every unbacked currency in history has collapsed within forty years. The USA is now entering its 42nd year since Nixon abolished gold backing in 1971.

  23. Gold is valuable because it is scarce, it’s scarce because there’s not that much of it, people want it and have used it as currency for a long time. It’s reality. Argue with reality, but get used to it.

    It’s not an investment in itself, for the amount of gold is not growing. Anyone betting on gold and on economic apocalypse is either an idiot or a liar. You have to be able to buy something under civilized conditions with gold or any other currency.

    There might be more gold mined, an arguably difficult process. It might go down and up in price. 

    But gold does have value. One that no fiat currency has. It cannot be replicated nor copied. Granted, fiat currency can be copied, but the government is going to prosecute any copier as criminals, mainly for violating government monopoly. 

    Gold cannot be created in the accounts of the government and financial institutions. If anyone wants it, including the government and financial institutions, they have to actually pay for it. When the government undertakes this irresponsibly, gold becomes invaluable.

  24. Warren Buffet is one of those Capitalist Capitalists.  A lot of people claim to be Capitalists, but just use that as an excuse for being assholes to the lower classes.  He is big on investing in productive companies, and making money that way.

    Gold makes an excellent currency, (it’s rare and doesn’t corrode), but that’s all it is, currency.  The price might bounce around, but long term you wont end up with any more money then you started with.

    Also, when the economy collapses, owning farmland and energy infrastructure will probably be a lot more valueable to barter with.

  25. “Dope will get you through times of no money better than money will get you through times of no dope.” -FFFB

  26. hmmmm….hey Mr. Buffett , if gold is so useless then why do all of the big powerful central banks from around the world, including USSA, hold massive amounts of gold in super-protected storage ??          and, another thing, if YOU personally held any physical gold (for wealth storage, turmoil/inflation protection,etc), you WOULD tell us, right ?     i mean, seeing how the ‘elite’ (which includes YOU) make it a point to be so (*cough*) ‘transparent’ these days, like your buddy Barry Obama……

  27. The price might bounce around, but long term you wont end up with any more money then you started with.

    To me that´s actually the point of having a little gold, or more like “you won´t end up with any less money then you started with”. It´s more of a way to keep some value, regardless of how paper currency fares, value that won´t change a whole lot in the long term.
    I don´t think it will be of much use if the system collapses, since the system is what gives it value.

  28. Some of the current crop of goldbugs may live long enough to see the day when robotic asteroid mining of near-earth asteroids becomes feasible…this article says the near-earth asteroid “Eros” contains about 20 billion tonnes of gold, and that the asteroid contains “more aluminium, gold, silver, zinc and other base and precious metals than have ever been excavated in history or indeed, could ever be excavated from the upper layers of the Earth’s crust.” 

    1. Of course, if there’s any feasible way to economically transport it to the Earth’s  surface without bombarding the planet with an asteroid (nobody is going to allow that to happen), it would cause mass devaluation of precious metals.

      1. Yeah, that’s what I was getting at–even if you are just interested in a stable way of investing your money rather than one that has a chance to give a good return, gold may not actually be such a good idea in the long-term. As for the question of getting it back to Earth, we can already do sample return missions where the probes parachute safely into some known location in the ocean, so it seems like it’s basically an issue of scaling that up–whether that’s possible may be mostly a question of money, whether it can be done in such a way that mining the material and getting it back to Earth doesn’t cost more than the chunk of metal is actually worth.

        1.  I wonder if it would have the same effect as the masses of gold from the Americas did for Spain?  They thought they were rich, but flooded their markets with gold and silver and ultimately suffered economic collapse.

          The asteroid miners would get a boatload of gold, bring it back, then immediately collapse the price of their formerly valuable commodity.

          1. Spain had the problem that its whole economy became to dependent on gold, in this scenario a price drop might cause headaches for the people who invested in the mining but I don’t think the whole economy would be brought down in the same way. Maybe the price for a given amount would drop down to right around the cost needed to mine it and bring it back to Earth, so it could still be barely profitable? 

            Also, if you had something like a totally automated robot factory doing the job (probably the only real hope of asteroid mining being profitable, given how much more expensive it is to send humans), maybe the factory would be able to do all the mining, constructing, and assembly to create another factory–if so the number of them could increase exponentially until they’d run out of materials on the asteroid, in which case the cost of mining a given amount could become very low! A post-scarcity economy is fun to think about, let’s hope we can make it to that point without killing ourselves off first.

          2.  So if we were foolish enough to return to gold-backed currency, then flooded the market with gold, the goldbugs would have a brain malfunction.

  29. “The world is full of things worth more than gold. But we dig the damn stuff up and then bury it in a different hole. Where’s the sense in that? What are we, magpies? Is it all about the gleam? Good heavens, potatoes are worth more than gold!” “What is the worth of a gold coin compared to the dexterity of the hand that holds it?”
    ~Moist von Lipwig

  30. I personally don’t think gold is as smart of an investment that’s all hyped up to be as it is, but it IS an investment. I wonder if Warren Buffet actually knows gold is used to make many useful things, and not just jewelry.

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