I used to listen to Dave Ramsey a lot. He actually inadvertently led to my reading Austrian Economics. Dave seems to adhere to the Subjective Theory of Value in saying that gold has no inherent value despite common belief. As he says here, "Gold is only as good to you as someone else is willing to take it as payment," which is accurate. He has great advice on budgeting, and I like the debt snowball as it really seems to appeal to people's behavior, and he's helped quite a bit of people get out of debt, which is certainly admirable. However, he always made the case that "gold is crap" and that people should never invest in it.
In this article, Ramsey's stance seems to be a consequence of Gresham's Law in that fiat money is viewed to be more valuable--at least it initially was viewed to be as valuable--as gold in that it apparently was supposed to act as a bank note. Of course, it's clear that this is not the case today as the dollar isn't even backed by gold anymore.
Regarding Ramsey, any thoughts?
Ramsey is a tool - pure entertainment, although he's a sage for people who actually take him seriously. I might be a little biased though, as my parents used to sell an anti-mortgage program that he blatantly spoke out against "just because." I forgot exactly how it went.
Dave seems to adhere to the Subjective Theory of Value in saying that a dollar has no inherent value despite common belief. As he says here, "A Dollar is only as good to you as someone else is willing to take it as payment," which is accurate.
In other words, what he says is true of everything. He makes it sound like it some flaw inherent in gold.
Gresham's Law is not related to this topic at all.
The big mistake in his analysis is assuming that all the years from 1833 to now are the same. The big divide, however, is 1971, when the world went off the gold standard, allowing unprecedented money printing with nothing to rein it in. Since then gold has gone from $35 to $1,600 an ounce. A bit more than 1.5% compounded. The dollar, in contrast, has dropped like a stone since then.
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Smiling Dave: Dave seems to adhere to the Subjective Theory of Value in saying that a dollar has no inherent value despite common belief. As he says here, "A Dollar is only as good to you as someone else is willing to take it as payment," which is accurate. In other words, what he says is true of everything. He makes it sound like it some flaw inherent in gold. Gresham's Law is not related to this topic at all. The big mistake in his analysis is assuming that all the years from 1833 to now are the same. The big divide, however, is 1971, when the world went off the gold standard, allowing unprecedented money printing with nothing to rein it in. Since then gold has gone from $35 to $1,600 an ounce. A bit more than 1.5% compounded. The dollar, in contrast, has dropped like a stone since then.
I thought I might have been inferring too broadly with the connection to Gresham's Law. So, in fact, he's really just looking at half the equation.
Previous poster's got it.
1) He's an idiot.
2) He's not saying anything profound.
Ramsey is working with the fallacy that gold is an investment. It isn't. Gold and other precious metals ARE MONEY as it is they are among the only assets that are not someone elses liability. In fact other than precious gems and metals the only other thing that fits into that category is Bit-Coin, but you can not hold that in your hand and it has no other use other than as money. And if you have 1/2 + 1 bit coin holders decide to increase the number of coins then they can restart mining more accurately called counterfeiting as it costs very little to produe new bit coins.
So when you ask if you should hold money that central banks have limited means to create then I would argue that it suddenly makes sense to hold gold or silver.
No, no, no. You see, we Austrians have a lot to learn from an economic master like Dave Ramsey. See when one's only qualification as an economic/financial expert is that one has declared bankruptcy, this gives one a unique ability to dole out plenty of money-making advice over the radio:
1) He has discovered a new economic law: price is driven not just by supply and demand, but by speculation as well. Duh! It's so obvious now he says it!
Today, like most commodities, the price of gold is driven by supply and demand, as well as speculation
2) Dave has the invented the Subjective Theory of Value OF the Subjective Theory of Value. In other words, things that Dave finds bad are "only as good to you as someone else is willing to take it as payment". Everything Dave likes has intrinsic value... like bacon.
3) Dave makes us all see the reality of what I call "The Godly ownership of the means of production". In other words, Dave shows us that you don't own your stuff or your money - God does. And handling God's stuff badly is second only to messing with his stereo - he hates that.
Ok, on a serious note: Gresham's Law is not that fiat money is viewed to be more valuable by people. It's that it's overvalued by the state - it's value is maintained by mandate. The law shows that people value hard-money more so they horde it and don't spend it. The easiest example is when governments used to progressively reduce the amount of gold in a coin. The older gold coins will be horded and not spent over the newer ones - people will try to spend the debased coins as quickly as possible.
Gold: "Dave Ramsey is Crap."