30 May 2010

Niall Ferguson on gold

Sharelynx drew my attention to this 13 May 2010 lecture by Niall Ferguson at the Peterson Institute for International Economics titled Fiscal Crises and Imperial Collapses: Historical Perspective on Current Predicaments. The following is on the last page of the transcript:

Finally, I guess one just has to ask oneself what’s going to happen in the world of dodgy paper currencies, of fiat monies, because you could quite easily get burned if ultimately we do get a crisis not just of the euro but of fiat currencies generally. And I keep thinking that maybe I should be valuing my portfolio not in terms of this or that currency but in terms of the barrel or the ounce—in terms of commodities like oil and gold.

Maybe one of the lessons of history is that periodically paper currency loses credibility so much that we have to revert to commodity standards, and I think that may well be happening. When you look at what’s happening in the gold market, it’s not so much fundamentals that are driving gold up from a $1,000 towards $2,000. It’s a fact that more and more people feel that they should hold gold as perhaps 10 percent of their portfolios. If everybody thinks that, if that becomes a standard investment strategy, then gold is going to go a lot further than its present price. So I’ve really re-thought my attitude towards gold almost on that momentum basis.

Note that this is a presentation made to the "elites", mentioning ideas that were once considered crazy goldbug talk.


  1. It says something about the professor admitting he's wrong.

  2. Troy Ounce,

    One of the qualities I most admire in Ferguson is his unflinching commitment to telling the truth as he sees it.


    Keep those coin presses (is that the right term?) fired up I think you are going to be busy.

    If you have time I suggest you listen to the interview with Felix Zulauf over at King World News. It is one of the best I have heard.

    BTW if I haven't mentioned this before I wanted to let you know that one of the reasons we started to put our savings into gold was something you said in one of your earliest posts here. You spoke about the "moral dimension" of holding physical gold.

    Quite apart from the insurance value of gold, we felt we couldn't support this banking and monetary system any longer. You helped to clarify our thinking on ways to "opt out". Many thanks.

  3. For another perspective on Niall Ferguson see;


  4. Just read your link to Mish, "No good currency choice except gold". Is he changing his tune? next he'll be reporting on the basis!

    Who's next, Steve 'I like government bonds' Keen?

  5. Justin,
    Keen wondered out loud about gold on his blog a couple of years ago. It came up in discussion, and I suggested that he should consider getting some. I checked whether he had bought any some months later, but he hadn't.
    I don't know how Keen reconciles his views on probable future debt forgiveness with holding bonds. Even government debt might need the jubilee treatment. Bonds would suddenly be cents on the dollar, I would think.

  6. To be honest Keith, I don't pay an awful lot of attention to Keen. I just heard an interview with him where he stated he "liked government bonds" & gave the same tired old response about gold, "people will sell it to raise dollars, so its price will fall".

    He seems to understand the mechanics of credit creation (& default) but then assumes the dollar as being the standard.

  7. Agreed, Keen has a very strong academic knowledge and invaluable insights into the current state of affairs, especially in the aussie housing market, but to me he doesn't 'get it' when it comes to gold, and I cannot agree with his proposed 'solutions' to the debt crisis ie., just intervene more by forgiving debt, in a frankenmarket that has basically been caused by misplaced interventions in the first place.