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Dylan Grice may think buying commodities is a bad bet against human ingenuity, but he’s willing to make an exception to his rule for gold.That’s because while Grice thinks humans are getting more and more creative in terms of science, technology, and production, they are doomed to repeat the same mistakes as always in terms of politics, economics, and finance.
Grice cites the example of Rome’s own credit crisis, which he compares to our own current fate.
From Dylan Grice:
Tacitus refers to what may be the first recorded credit crunch in 33AD. An edict on usury from the Emperor Tiberius forced money lenders to call in loans and borrowers to sell property at distressed prices, during a “great scarcity of money.” Only when the emperor advanced 100m sisterces to distressed debtors to borrow for three years without interest (the world’s first ZIRP) did the crisis pass. So the credit crunch of 2008 wasn’t the first, and it won’t be the last.
Right now central bankers around the world claim we will not experience another inflationary crisis, but Grice argues we’ve been here before, and there’s no reason to suspect it can’t happen again.
Today our central bankers are as confident in their ability to control inflation (Mr. Bernanke claims 100% confidence) as they were in the soundness of the financial system in 2006. Yet history suggests they shouldn’t be, for inflation goes back almost as far as we do. In the ancient Greek comedy, The Frogs, written in 405BC, Aristophanes writes that “the full-bodied coins that are the pride of Athens are never used while the mean brass coins pass hand to hand”. His reference to Gresham’s law predates Sir Thomas Gresham’s first observation during the medieval inflation of Henry VIII’s England by around two thousand years. As the play was written during the closing years of the epic Peloponnesian Wars which would have stretched the government’s budget, we can assume that Aristophanes and his audience witnessed inflation first hand.
As such, he’s buying gold, not as a play against human ingenuity, but rather a play against our ability to take on wisdom from past events.