Value of gold grossly overestimated

Gold has little value of its own. There were good reasons to abandon the harmful gold standard at the time. And gold is also unnecessary for protecting the euro.

Gold is very popular with citizens and the central bank

There is hardly anything that appeals more to the imagination of the Dutch than gold, and not only in the client safes at the bank but also in the vaults of De Nederlandsche Bank (DNB). Masses of gold coins and gold bars are kept in it. And even then, conspiracy theory specialists are concerned about the precious metal, especially the part that the central bank keeps abroad. As if the American Federal Reserve, like the first available thief, pushes back a few bars every week and cashes them in.

Value of gold is overestimated

Gold is indeed grossly overestimated, both as a gold investment for private individuals and as a hedge against the euro. Gold has no value in itself. No good has value in itself, its value always only arises as a result of supply and demand.

Gold, a speculative investment

Gold is considered by many to be a safe haven in uncertain times. And it is considered an extremely speculative investment. Because it does not generate any interest. Anyone who invests their money in gold must hope for higher prices in the future. A risky gamble.

Gold standard long outdated

All things considered, banks don’t need gold to hedge their currencies. Countries have long since given up on the so-called gold standard. In the old days, the number of notes printed was related to the amount of gold that central bankers had in their cellars. The right to exchange paper money for gold at any time was supposed to provide confidence in the currency.

The 1930s crisis exposes the role of gold

But as early as 1923, the British economist John Maynard Keynes called the gold standard a “barbaric relic.” And already during the global economic crisis in the 1930s, Keynes’s fears became reality. In fact, after the stock market crash of had to flood the markets with money in 1929 to reassure consumers and investors. But for this, the monetary authorities did not have enough gold in their vaults and too little crisis experience in their heads. The world economy slid into years of depression. During the monetary consultations in 1944 the American city of Bretton Woods, the gold standard was officially buried.

Money supply no longer related to gold reserves

Today, the European Central Bank (ECB) can theoretically print as much money as it wants. Simply put, it increases the disposition space it reserves for savings banks and commercial banks with a single mouse click. The gold supply is not relevant. Today, laws ensure that their central banks do not abuse their privilege of printing money. Laws only oblige the ECB to create only so much money that inflation does not exceed two percent. Instead of hedging currencies by a mythical metal, hedging has been replaced by democratically established laws. That is why it is completely equal how many tons of gold the Dutch Bank has lying around anywhere. And there is no need to count those bars stored abroad from time to time or to melt them down to check their authenticity.