In Gold We Trust?

I’ve been reading the mania about gold. In the last couple years, gold stocks, funds and the real stuff have rocketed upward. Gold now trades at a 25-year high. Now what?

When some of us were musing about a new rush for gold in the year or so after 9/11, I wondered why anyone would buy it. Can’t eat it and can’t burn it for fuel. I saw the relatively self-sufficient farmers I knew as really having things figured out. They knew where food came from. And heat. With those two things come health and hearth, family, neighbors, and the rest of what sustains life. Buy farmland, and learn to use it. Now that’s real security, or so it seemed to me then.

Now, in one of these gold newsletters, I catch this as justification for the meteoric rise of metals prices: “…people still need something to trust.” Isn’t that interesting? So I understand all the economics of these markets. I understand why the dollar will decline, why Saudis and Chinese and others will buy gold instead of some other fiat currency. I understand the history of gold as money. But how do we know that this isn’t just the next big inflationary mania, except that the supply of gold grows slower than the supply of paper money, dot.com stock options, and two-bedroom condos. Can we ever find real security?

No matter if the dollar crashes, gold is still worth something. It’s more real than other fiat (faith-based) currencies. But there’s just not enough of it to go back to the gold standard is there? And no way to go back further to gold coins in the marketplace. How will I use gold to buy bread?

Looking ahead then, it seems gold can only be another mania. And then, what to trust? Perhaps if we finally discredit the ultimate stock of wealth, we can get on with focusing more clearly on the flows of wealth. What will each of us do in the next several years, for the people right here in our own neighborhoods, that will secure our retirements in human-scale and personal ways?

Might these bubbles in tech stocks, bigger emptier houses, dollars, gold, pension plans and the rest of wealth accumulation make some sort of opening to trust in the flow of energy, rather than the stocks? Might we rediscover how to move in local community markets, and trade that in for what we have learned to grab in global financial markets?

One of the things feeding global gold prices are exchange traded funds, which allow small investors to buy gold bullion in lots of 100 shares, like we already buy stocks. So what would a similar investment vehicle look like at the community level? What would make precious, but hard-to-deliver, stuff like healthcare and education, more easy to invest in? How might we structure a mania in community assets and investment?