“Do you have any gold jewelry just lying around the house collecting dust?  Then you can convert it to cash!”

I can’t remember if that’s the exact phrasing for sure, but it’s close.  It’s hard for my Forebrain to etch the words into memory when my Primitive Monkey Brain is suppressing the gag reflex.  And it’s all because my Simple Economics Brain can’t fathom how far we’ve slipped such that an ad like this would be effective.  Do we really know so little about how investments work?

Maybe it’s the culture.  Speed kills.  Life in the Fast Lane.  Get rich quick.  Yet anyone with a lick of financial success (i.e. people with money) will tell you that you don’t slay the market dragons with by being clever — you bore them to death.  Bulls and bears are the real fictional beasts, and you beat them with a lullabye.

The way to win is make periodic investments and let them sit.  Leave them alone.  ADHD-fueled day-trading and stock-flipping is a great investment… if you’re a stockbroker paid by the transaction.  Regular schmoes get rich by picking smart stocks and watching them gather dust.  In fact, you don’t have to pick anything at all.  Just invest in a broad index fund and keep tossing in a few bucks along the way.

Creating a golden market

The idea that “gold that collects dust is worthless” is… well… worthless.  Worse, it’s dangerous.  It reinforces an ill-informed stereotype that money is made by “doing something.”  That notion is half right. You might be sitting back doing nothing with it, but the entity you’ve invested in is putting that money through its paces.  Investment is simply a way of making your money work so you don’t have to.  And I have a pretty glum sense that the same people who would smelt down Gran-Gran’s old dusty golden necklace are the same ones that would flip stocks like burgers, assuming they were forward-thinking enough to invest in the first place.

Of course, I am not forgetting the motive here.  There are some who believe we’re on the brink of an economic collapse of civilization-ending proportions.  They feel strongly that we’re headed back to gold as currency, although I’m not so sure why it’s in their best interests to create more competition for the neo-Gold Rush. Certainly there is a segment that wants to profit from the expected rise in relative gold prices, so it makes sense to scare the bejeesus out of seniors to get them to sell that “dusty old gold” at a low price, and sell it later at a markup.

At some point, one wonders if we’re digging ourselves a greater economic hole by acting in direct opposition to our best interests.  Andrew Wright summed it up yesterday:

“As the economy gets worse, so does economic literacy. There’s gotta be a curve in there somewhere.”

No if you’ll excuse me, I have some silver to polish.  I’d hate for it to tarnish and get dusty, then I’d have to sell it…

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