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Gold: A Modern Investment Framework For An Ancient Asset
Gold: A Modern Investment Framework For An Ancient Asset
Gold no longer serves as an official money in the modern financial system, yet it is still considered an important asset due to its established diversification and store of value properties. But what framework(s) should we use to understand the role that gold should play in investment processes and policies? In Part I of this series, I present one useful framework which implies that gold is significantly ‘under-owned’ and, consequently, undervalued at present.
A Brief History of Gold’s Monetary Role
Most investors are familiar with the ancient use of gold and silver as money, and that gold still provided the monetary base for economies well into the 20th century. Indeed, less than a century ago, in the aftermath of WWI and associated large currency devaluations and hyperinflations in Europe, there were several international conferences held to try and strengthen gold’s role as a source of monetary and economic stability. 75 years ago the famous Bretton-Woods conference was held, formally re-establishing gold’s role at the centre of the international monetary system.
For investors of that time, gold held a central role in investment processes. It was the bedrock collateral of the financial system – the ‘risk-free’ asset – and the benchmark for measuring investment performance. Gold was also an instrument that the central banks of the day could use to help contain financial crises. In the event of a run on deposits or an interbank collateral squeeze, central banks could lend out their reserves (normally at penalty rates of interest) in order to buy time for the system to restructure and reorganise. For example, gold lending was one of the actions taken by JP Morgan to help contain the US Banking Panic of 1907. This provided a model for how the Federal Reserve was subsequently designed to act as a lender of last resort.[1]
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Who Rules the World?
Who Rules the World?
Elites. They’re all over the news these days. But who are they and what do we know about them? An excellent new study, Who Rules the World? A Portrait of the Global Leadership Class, takes a systematic approach to answer these questions. At its heart lies a new database, the Global Leadership Project (GLP), which covers 145 nation-states and 38,085 ‘leaders’, each of whom is given biographical information. In total, the database has approximately 1.1 million data points. Academics at several leading institutions, John Gerring, Erzen Oncel, the late Kevin Morrison, and Daniel Pemstein, then sliced and diced this data to arrive at a compelling picture of today’s leadership elite.
Who Are Counted As The Global Elite?
They look at the country’s top political leader, the political executives, cabinet ministers, executive staff, party leaders, assembly leaders, supreme court justices, and members of parliaments. They also include unelected leaders such as monarchs, religious leaders, military leaders, junta leaders, CEOs of important companies, and NGO leaders.
So What Does the Typical Member of the Elite Look Like?
Male (81% of the total), married (91%), and on average 55 years old. They speak roughly two languages, with over one third speaking English. They are normally university educated with almost half educated in the West. Their most common degrees were in Economics/Business/Management or Law. The majority had white collar jobs or political backgrounds before entering the leadership elite. Typically, they earn thirteen times more than national average.
Chart 1: Education of Political Elites
What About the Leader at the Top?
The top political leaders tended to be older (on average 61), and more of them were male (92%) and could speak English (59%). They tend to be educated abroad, rather than domestically. Also, they are likely to have studied Economics/Business/Management (35%) more than any other subject (next is law at 17%). They are as likely to have political backgrounds as white collar backgrounds.
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