I used to be studying the thought piece Finance is different individuals once I got here throughout an intriguing finance nugget:

Suppose you assume that bitcoin will, like gold, have enduring enchantment. Throughout the reign of the Babylonian king Nebuchadnezzar, an oz of gold bought 350 loaves of bread in keeping with Erb and Harvey (2013). Right here we’re 2,700 years later, and an oz of gold will nonetheless get you round 350 loaves of bread. On the one hand, that’s a tremendous file of retaining worth. On the opposite, that’s a zero % actual return! If gold had merely crushed inflation by 30 foundation factors a 12 months, an oz of gold would get you 1,000,000 loaves of bread as we speak, as a substitute of 350.

This declare was so particular, I needed to dig additional. So I appeared up the paper by Erb and Harvey from 2013 known as The Golden Dilemma. The one reference to Nebuchadnezzar was in a footnote:

Harmston (1998) mentions that in 562 B.C., throughout the reign of the Babylonian king Nebuchadnezzar, an oz of gold bought 350 loaves of bread. On the current value of $1,600 an oz, an oz of gold might purchase 350 loaves of bread priced at $4.57 a loaf.

This led to Gold as a Retailer of Worth, revealed in November 1998 as a “research study” for the World Gold Council which states:

It’s stated that an oz of gold purchased 350 loaves of bread within the time of Nebuchadnezzar, king of Babylon, who died in 562 BC. The identical ounce of gold nonetheless buys roughly 350 loaves of bread as we speak. Throughout 2,500 years gold has in different phrases retained its buying energy, relative to bread at the very least, and has had an actual price of return of zero.

In the long run, I couldn’t discover a single piece of historic proof assist this declare. Simply lots of people repeating one another. Looks like a real factoid – an “assumption or speculation that is reported and repeated so often that it becomes accepted as fact”. Like “Humans only use 10% of their brains”.

Clearly, gold has been a retailer of worth for a really very long time, however how a lot cash do you actually wish to decide to one thing that can find yourself with a zero return above inflation? To not point out it’s so risky that it’s not a superb short-term retailer of worth. No person saves up for his or her home downpayment with gold cash.

So what’s the purpose of gold? I nonetheless fall again on a situation the place you wish to flee shortly as society collapses round you and also you need sufficient belongings to start out over some place else. Think about you lived in Ukraine. It’s a type of “insurance” you’ll be able to maintain in your hand, and really feel a bit safer on this loopy world. I don’t assume it’s utterly irrational to place apart a small little bit of your web price into it. Such comfortable ideas are echoed within the examine:

Gold has not essentially held its worth when it comes to buying energy in occasions of conflict. That is partly as a result of at such occasions the costs of different commodities, extra instantly helpful for the conflict effort, have tended to rise sooner. Nonetheless, gold’s liquidity, acceptability and portability are qualities which were significantly vital in occasions of crises corresponding to occupation by a overseas energy or collapse in a financial system. At such occasions, these qualities could be extra vital than gold’s price of trade with paper cash. Given this, and gold’s position as a wealth preserver in a number of the darkest durations of the 20th century, gold has proved to be a haven on quite a few events and in other places.

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