This Trend is Strong
I’ve found it quite difficult to focus on my app development work lately.
That is because I have become mesmerized by the financial markets. When the market is open, I am here at my desk watching the price movements, transfixed as if watching exotic fish in an aquarium.
I know this isn’t healthy but I expect the level of fascination to wane over time, so I’m not too concerned.
I am educating myself about the nature of money in the US and around the world; particularly how fiat currency works and how it is eroding society. I’m coming to appreciate gold and I’ve finally taken a position in it.
I never really understood gold and why, in a technological society, people still cling to it as if its magical shiny qualities will protect them from all manor of socio-economic calamity. As a child of the internet age, I understand technology. So Bitcoin makes sense to me. Although technically, it is worthless, it makes sense to have a decentralized form of money that is incorruptible by governments and the fallibility of man. Gold also has an incorruptible quality but it is still a physical object that requires threat of force to secure. And we’re never going back to swapping physical coins with each other. And barring some sort of apocalypse, money exchange will only become more digital as time goes on. So a technological currency makes sense in an increasingly technological world. That is my intuition.
But alas, markets couldn’t care less about my intuition. As I write this, gold has been appreciating at a breakneck rate, leaving crypto in the dust (although crypto has been doing alright vs the equity markets). People are clinging to gold stronger than ever. The trend is so strong that I finally took a position in gold. I mentioned in my last blog post that I hate to chase, and that is definitely true. I really do fucking hate it. A value investor at heart, I like to buy things when they’re down. Buying something that is not only much more expensive than it has ever been but continues to get more expensive every day makes me wince. I can’t help but think that I might be buying at the top of a bubble and that I’ll look like a fool in the end. And maybe I will.
But the fundamentals behind the gold rally appear to be strong. I am an amateur when it comes to this stuff, but from what I understand, the macro forces driving gold prices higher appear to be quite strong and valid. Generally, from what I understand, central banks not only in the US, but around the world, unconstrained by anything material (like the natural rarity of gold) or technological (like blockchain), have and will continue to flood the world with their paper, driving inflation, higher prices for goods and services, and a reduction in wealth for anyone holding cash.
There is absolutely no evidence that governments and their central banks will begin to constrain themselves any time soon. If fact, I think reckless spending and monetary expansion will continue until something breaks. Therefore, I think the flight to gold will continue for a while. But, like I said, I’m just an amateur. I could be wrong.
Perhaps big injections of money are a necessary evil to keep the economy from falling into another great depression. It is widely believed, after all, that it was breaking from the gold standard that got us out of the depression. So it seems evident that some sort of control over the money supply is needed to keep the economy on its feet. But you can’t escape the inevitable government bloat and distortionary spending that comes with it. Governments cannot be trusted to practice fiscal responsibility, especially in democracies where the populace will inevitably vote themselves more benefits.
