Courtesy of 
Courtesy of Dr. Willem Buiter of the London School of Economics, and advisor to the Bank of England, has written a somewhat astonishing broadsheet attacking of all things, gold.
I have enjoyed his writing in the past. And although he does tend to cultivate and relish the aura of eccentric maverick, it is generally appealing, and his writing has been pertinent and reasoned, if unconventional. That is what makes this latest piece so unusual. It is a diatribe, more emotional than factual, with gaping holes in theoretical underpinnings and historical example.
I suspect that commodities such as oil and gold are giving many western economists with official ties to government monetary committees a stomach ache these days. Perhaps this is just another manifestation of statists and financial engineers facing the music, as illustrated by the second piece of news from Mr. Buiter on the US dollar, from earlier this year.
Here are relevant excerpts from his essay, with my own reactions in italics.
Financial Times
Gold – a six thousand year-old bubble
By Willem Buiter
November 8, 2009 6:02pm
"Gold is unlike any other commodity. It is costly to extract from the earth and to refine to a reasonable degree of purity. It is costly to store."
This is inherent to its rarity. It is desirable because it is scarce and useful, and this requires greater protection against theft or accident. Euro notes are far more costly to store than the paper and ink which is used to make them, at least for now.
"It has no remaining uses as a producer good – equivalent or superior alternatives exist for all its industrial uses."
This is an absolute howler to anyone who cares to look into industrial metallurgy. Gold is one of the most malleable and ductile of metals, with excellent conductive properties, slightly less than silver but better than copper, and it is remarkably resistant to oxidation. It does not tarnish.
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