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Jan 01, 2014| Courtesy by : businessinsider.com
The above chart shows the year-over-year change in the price of an ounce in gold. As you can see, this was the first year in over a decade that gold was down for the year. Not only did it fall, but it fell big.
Everyone in the world should be happy about this development.
There’s a few reasons for this:
— The most obvious reason to be happy is one simply of direct observation: Gold crashed because the economy is returning to normal. People no longer feel as though everything is going to collapse. The US is doing okay, the European crisis is over, and there aren’t major fears of a hard landing in China. For now there’s no strong reason to think the global financial system could collapse.
— A secondary effect of lower gold prices is that there’s less urgency to spend labor and energy digging up gold from the ground. Watching people spend lots of resources to dig up useless rocks is a sad thing for the world, so lower prices has a nice knock-on benefits.
— But the real reason we should be happy with the gold crash is that it proves the worth of the corpus of economic knowledge we’ve built up over all these years. If large government deficits and QE had resulted in hyperinflation and gold going to $10,000 then we’d pretty much have to do the drawing board in terms of what we know about the economy, and how we can prevent future crisis. The fact that the gold fever popped is a demonstrate that contra the angry-Austrian, hard-money cranks, the conventional view of the economy is more-or-less correct. And that knowledge is worth trillions (as evidenced by the fact that that knowledge quickly got the US out of the worst slowdown since the Great Depression).
Gold’s crashing represents an exit from the crisis mentality, and it vindicates the value of thousands of human-years worth of economic understanding, which may be incalculable. This is something everyone can be happy about.
Read more: http://www.businessinsider.com/gold-crash-2013-12#ixzz2p8eGOGba