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Rats Don't Eat Gold Bullion

Gold Bullion as wealth preserver...

THE PRICE of corn is soaring, writes Bill Bonner in the Daily Reckoning.

The UN has urged US authorities to stop using corn to power automobiles. They're worried about a worldwide food shortage. People can eat corn. They can't eat petroleum. 

Besides, ethanol is just another flimflam scheme by the feds to redistribute money from the people who earn it to the people who control government.

In America, people use corn to power automobiles not because it's cheaper energy, but because the US government requires it.

By the way, thanks to the forces of nature and venality, which is to say a record-breaking drought on the one hand and the feds' intervention in the markets on the other, corn has been the best thing you could have bought over the last five years. Better than stocks. Better than Treasuries. Better than oil. Even slightly better than gold.

This is not to say that the 'investments' are of equal value. Neither is an investment. Corn is a speculation. Gold is just a way to preserve wealth, not a way to earn more. As an investment, gold stinks. But as a way to hold wealth, it is unbeatable. Which would you rather have: a few gold bars buried in the yard or a crib full of corn on top of it? Rats don't eat gold.

Also, still sidetracked by gold, there was an article in the Financial Times last week in which Peter Tasker advised investors to sell their gold and "send their kids to college".

Tasker notices that gold is expensive in terms of other consumer goods. On that basis, he believes it is time to sell. In his mind, it is "just another financial asset", so it should be bought when cheap and sold when dear.

There is some truth to that. Gold goes up and it goes down. If you own gold, you think you are smarter when it is going up rather than down. But it is a mistake to think about it at all. Gold is merely a convenient way to store wealth, because rats don't eat it. And if you bury it well, the two legged rats won't find it either.

Fundamentally, gold is real money, not just another 'financial asset'. And it protects you from both inflation and deflation. There is no counterparty risk when you own gold. There's no one on the other side of the trade who can go broke and destroy your investment.

And gold adjusts much more quickly and surely to monetary inflation than do other consumer prices. Over the last five years or so, the world's supply of central bank assets has approximately doubled. Consumer prices have not. But gold has doubled too, probably anticipating a big rise in the CPI.

But Tasker not only advises people to sell gold, he also suggests that they should use the money to 'send their kids to college'. Good luck with that trade, Peter. You'll probably lose money on both sides. In the end, your family will have no gold and another useless piece of paper – a college diploma.

But that's a different story.

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New York Times best-selling finance author Bill Bonner founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group exposed and predicted some of the world's biggest shifts since, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and the election of President Trump (2016). Sharing his personal thoughts and opinions each day from 1999 in the globally successful Daily Reckoning and then his Diary of a Rogue Economist, Bonner now makes his views and ideas available alongside analysis from a small hand-picked team of specialists through Bonner Private Research.

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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