Beware the Bubble—Or Just Misinformation?

Investing is often as much an exercise in discipline as it is an exercise in research, analysis, and study. Half the battle is ignoring the talking heads rattling off disinformation day after day on television, radio, and the newspapers. In Is Gold in a Bubble, we wrote this:

“The jury is divided. Some pundits are stepping all over themselves to jump on the golden bandwagon, while others continue to deride gold and its investors. Clueless central bankers seem incapable of understanding why printing billions of pieces of colorful paper (currency) might affect the price of gold. But regardless of viewpoint, the run-up in gold has captured everyone’s attention, many of whom feel an obligation to share their two cents worth.”

The top chart shows global financial assets and gold’s nearly miniscule role. While many have called gold’s early bull run a bubble, they fail to note the bubble levels still present in stocks (equity securities on the chart) and debt (private and government debt on the chart).  The second chart below shows gold’s role in the global financial system as a percent of the total. Ten straight years of increases in the price of gold and gold is still hardly past half of one percent of all the paper assets floating around. The world really is awash in a flood of paper assets, and these charts prove that fact today.

Total global financial assets and gold’s nearly miniscule role.
The world really is awash in a flood of paper assets.

Race to Debase Q1 – 2011

Race to Debase

Take a moment to examine how gold and silver have performed against their fiat currency competition in the first quarter of 2011.

Silver has continued running hot, over the past three months silver has enjoyed a 20.3% appreciation against 75 fiat paper currencies around the globe!


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