Gold, Infinite Debt, and the Problem of Capital Storage: Has The Hotelling Moment Arrived?

(OilDrum) The following is a guest post from Gregor Macdonald, adapted from his website Gregor.us.

One of the reasons that gold retains its competitiveness as a capital-storage unit is the rather slow and plodding rate at which supply is brought to market. Since 1900, compound annual growth of world gold production comes in at 1.163%. That particular rate is below the growth rate for a number of other natural resources. But in particular: it’s well below the rate of credit production–the “resource” which now plagues the developed world. Indeed, the over-production of credit the past twenty-five years has once again driven capital back into hard assets such as gold. This brings up an intriguing subject: the conversion of resources into financial capital, and the conversion of financial capital back into resources. First, let’s take a look at a century of gold production. | see: World Gold Production in Metric Tons 1900 – 2009.

Read more: http://www.theoildrum.com/node/7603

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