Tags: Gold | standard | skeptics | wrong

Money Manager Lewis: Gold Standard Skeptics Have It All Wrong

Money Manager Lewis: Gold Standard Skeptics Have It All Wrong

By    |   Friday, 11 September 2015 06:00 AM

The United States economy did pretty well while we were under the gold standard from 1789 until 1971, notes money manager Nathan Lewis.

"During this time, from the humblest beginnings, the United States became the world’s wealthiest and most powerful state," he writes on Forbes.com.

So what does that tell us about the present?

"From that alone, you might think that a similar monetary approach today might be a good idea. Instead, it is often regarded as 'impossible,'" Lewis says. But the doubters have it all wrong, he argues.

"The Bretton Woods gold standard arrangement was not abandoned in 1971 because it was causing problems," Lewis writes. "This was after 20 years of worldwide prosperity, in the 1950s and 1960s."

As for the gold market, the precious metal has taken it on the chin since hitting a record high of $1,923 an ounce in September 2011. It has since slid 42 percent to $1,110 Thursday morning and hit a five-year low last month. That has led some experts to question whether gold still represents a viable asset class.

"The case has weakened for gold as a notable part of a diversified investment portfolio," Mohamed El-Erian, chief economic adviser at Allianz, told Institutional Investor.

Among the events that have failed to bolster the precious metal are Russia's invasion of Ukraine, military conflict throughout the Mideast, debt crises in Greece and Puerto Rico, China's devaluation of the yuan and rampant volatility in financial markets around the world in recent weeks.

Gold has traditionally served as a safe haven to escape financial, economic, political and military turbulence. But now investors seemed to have found a new vehicle to accomplish that: Treasurys.

"In times of turmoil you used to buy gold, now it's Treasurys," Robert Sinche, global strategist at Amherst Pierpont Securities, told Institutional Investor. "Unlike gold, Treasurys pay a yield, why wouldn't you go for that?" Investors have bought Treasuries heavily in the last few years in times of financial and political/military turmoil.

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The United States economy did pretty well while we were under the gold standard from 1789 until 1971, notes money manager Nathan Lewis.
Gold, standard, skeptics, wrong
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2015-00-11
Friday, 11 September 2015 06:00 AM
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