Bill Gates argues that the only reason someone would own gold is because of the greater fool theory. And if the governments wanted to take advantage of the opportunity to get cash for gold, there’s no telling how low the price of gold could go.
Perhaps Bill Gates doesn’t remember that central banks were selling gold. And now they are buying it back.
Gordon Brown traded England’s gold reserves for cash in 1999. When sold at 1999 levels Gordon Brown got £2.3bn for 400 tons of gold. Today he would have got £12.95bn.
Becky Quick: gold today was something that both charlie and warren made pretty clear they’re not a big fan of. what about you?
Bill Gates: i’m search in thatcamp. historically i did have some silver investments that at a time warren actually had some silver. he got out fairly quickly. i stayed in and did very well on silver. but gold is a tough one because it’s so psychological. and if central banks or the IMF ever decided to take advantage and i think countries need liquidity, hey, there’s an asset that’s not doing anything for the citizens. and then because it’s purely psychological, it’s not like people say when it gets to $800 an ounce, people buy four times as much jewelry. there is nothing that steps in as a buyer at any price. it’s just purely other people in the future will think items he more than it’s worth today. if you think the world is scary and people will panic, i’m not saying that theory doesn’t exist, but there is no floor if ever people got that view.
What investment has a floor? None. That would imply a risk-less investment. One that can only win. That cannot exist. There are no free lunches.
He goes on to talk about how there could be a huge increase in supply of gold over the next 10 or 20 years, because of “digital mining techniques”. Or some new technology. Buzzwords!
Bill Gates: we had an invention session with people recently. as this price gets high and you’re looking at a 10, 20 year time frame, the supply equation will change. so the bulls have to offset the fact that there will be quite a bit, not in the near term, but over a period of time and these people are claiming this that they can predict gold prices out into the future, but certainly with equity, you can feel like you you can. well, there you have to understand the innovations in digital mining techniques or some new extraction techniques which actually i think are pretty interesting. and i doubt many people factor that in.
The gold standard is certainly not a perfect or ideal standard. There is no such thing as perfection in human things. But nobody is in a position to tell us how something more satisfactory could be put in place of the gold standard. The purchasing power of gold is not stable. But the very notions of stability and unchangeability of purchasing power are absurd.
The reason to own gold, according to Kyle Bass, is that it is buying a put against the idiocy of the political cycle. He says, “the pattern is set. Put any acronym you want on it, but central banks are going to continue to monetize debt by expanding their balance sheets.”
People fight the gold standard because they want to substitute national autarky for free trade, war for peace, totalitarian government omnipotence for liberty.
Bill Gates is a technocrat. He believes in the power of his money and his ideas and his foundation to solve the world’s problems. Bill Gates argues that in 10 to 20 years new technology will increase the supply of gold. More than the supply of dollars and euros and yen that the Keynesians are printing?
Mises argues that “the significance of the fact that the gold standard makes the increase in the supply of gold depend upon the profitability of producing gold is, of course, that it limits the government’s power to resort to inflation.”
What Austrians have called for is not a “gold standard” but the end of currency monopoly, that is, re-introduction of currency competition. And if gold was no longer a suitable store of value and medium of exchange, the free market in currency would simply choose another asset as money. There is nothing holy about the United States Dollar or gold, but the supply of one of the two can be increased with a keystroke.
The section starts at 24:12 and ends at 26:14.