You have probably seen the commercial below for Merit Gold. I am not putting this ad here because I think you should invest in gold. For the normal investor, gold is always a stupid investment. It is just one bubble after another. You would be as smart to invest in some ponzi scheme. It isn’t because gold is necessarily a bad investment. The problem is all the nutjobs who invest in it. You start with really ignorant but popular people like Glenn Beck and Ron Paul and you end up with a lot of irrational exuberance.
This ad is interesting in a couple of ways. The first is how it pushes fear. It seems like a trailer for a disaster film. “What’s a billion dollars look lie? What about a trillion? What about our national debt? It’s massive!” This is especially funny if you have seen the skit from That Mitchell & Webb Look about the guys giving away massive yachts. But even still, it is completely over the top. We see the stacks of money piling up until they overwhelm us. Run!
The second part is the false but common belief that government debt causes inflation. “Whereas the national debt has tripled in the last ten years, gold has gone up more than 600%.” The implication is that if the national debt has tripled, the value of the dollar must have gone down. This isn’t the case, but even more so, it doesn’t really make sense as a blanket concept. The value of the dollar is only relative to other currencies. The dollar is up compared to the Euro, for example. But more than this, one could have made similar claims about real estate in 2006. If gold has gone up more than 600% in the last decade, we know one thing: now is not the time to buy it.
But this is a perfect ad for the kind of people who buy gold. It cleverly feeds the conceits and exploits the ignorance of the Tea Party crowd. And you can hardly blame these people for falling for the line. Stacks of gold look so much more impressive in your bomb shelter than piles of cash.
I have some advice for those survivalists out there. If you’re serious, don’t stockpile gold; it will be worthless in the post-society dystopia. Stockpile drugs: opioids and antibiotics. Those will be worth a fortune.