EDITOR'S LETTERMerryn Somerset Webb
Why I’m still backing gold
I’m still holding gold. Bill Bonner is still holding gold. So are Tim Price, John Stepek and most of the sensible people we know.
But does it still make sense? A recent convert to the idea is Financial Times star columnist Gillian Tett. She recently spoke to former Federal Reserve chairman Alan Greenspan. He carefully avoided talking about gold while he was running the global monetary system – but these days he is a little more open about his views. There is a reason, he says, why investors and central banks “put money into an asset that has no rate of return”. It is that gold is “by all evidence a premier currency. No fiat currency, including the dollar, can match it.”
Gillian gets this idea. She sees how the “sheer scale of recent monetary policy experiments has raised concerns about a future outbreak of inflation” and she understands that for ordinary people who “have no idea what central banks are really doing (or) how money works in a bottomless cyber space”, gold seems “tangible clear and finite… creating an impression of permanent intrinsic value”.
But she also sees something very important that others tend to miss in the argument about gold. It might be useless in practical terms (another FT columnist called it “basically pointless” this week). But global social convention and culture give it huge value: in times of stress people rush to gold.
This is a subject I brought up with this week’s interviewee, Russell Napier (watch the video here).
• Read the full editor’s letter here: Why I’m still backing gold