As a boy I remember toying a bit with solid gold. My father had a dental laboratory and occasionally the dentists for whom he did work would have a patient who wanted a gold cap on a tooth. The gold in my father’s business was in the form of little cups of gold that could be molded to fit a tooth.
I didn’t get to keep any of these bright little pieces of metal — you can be sure of that.
In the early 1930s the price of gold was set at $35 an ounce, which at that time was quite a bit of money. Then President Roosevelt pushed the country to get off the gold standard as a measure to cope with the Great Depression. People were ordered to turn in any gold coins they might have, which was not a popular step for many to take.
And today we have gold approaching $1,200 an ounce, more than 30 times the price in the 1930s.
What does all this mean to us in Delaware?
As I understand it, as the price of gold goes up, the value of our dollars is weakened and goes down. The reason for buying gold in the current economy is to “park” assets where they will be relatively safe. The assumption is that gold always will have value, even if the worth of our dollars continues to drop.
It’s not a healthy situation. One economic analyst was quoted the other day as saying that buying gold now was not “materially different from gambling.”
That’s because as confidence in our economy improves, gold’s attractiveness is bound to fall, and perhaps drastically. In the meantime it has not earned any interest.
All this is a background to the experience of President Obama in China a few days ago when the chairman of that country’s Banking Regulatory Commission said a weak dollar and low U.S interest rates had led to “massive speculation” which, in turn, was inflating asset bubbles around the world.
Unfortunately China, which held $2.273 trillion in foreign currencies as of the end of September, now feels in a position to lecture the U.S. on economic matters.
