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brian

This perspective is commonly held and longly defended. However, its a bit like saying the reason newspapers are failing is because it involves reading. You can't have one without the other.

Savings or capital formation is the basis from which investment is initiated. Typically, when individuals or businesses believe there's a bigger payoff for speculation over savings/production, bubbles form. When compounded with ease of debt, those same bubbles are fueled to extraordinary heights.

Those that benefit from the bubble rush to stimulate spending when it pops.

Naturally, markets self-correct and find balance to the extent their not coerced by intervening forces. Forces such as over abundance of credit or price fixing - typically exacted by governmental entities trying to control market shifts.

The fact that the US savings rate deteriorated reflects a few conditions. For example, abundance of unsustainable credit, nominal inflation (which is and has been conveniently denied by the government), speculative rewards, and an imbalance in foreign production.

This is not to say that permanent saving is a virtue. Far from it, but the reward for saving is consumption/investment. Far too many people have grown up in an environment that didn't observe that social/economic fact - and consequently couldn't see any of this coming.

Now about gold. It has only a modest intrinsic value, but is observed as form of money as a exchange currency. While it doesn't create value, it does act as a counter balance to well-intentioned, but economically blind policy makers responsible for currency. As the dollar continues to reach new lows as its buying power diminishes, gold will be exchangeable well after the dollars nominal demise. To that extent, it is a useful store of value.

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