While doing some reading and research about Warren Buffett, I came across a letter that I found very interesting from Howard Buffett, father of Warren Buffett. As you know, Howard played a major part in Warren Buffett’s life and had a huge impact on the billionaire investor. That’s why it was so surprising to learn his stance about gold. The truth is that Howard Buffett was a strong believer in gold. He even went so far to state that “paper systems end in collapse” and he believed that the government debt that began in World War II is spiraling out of control and it is a massive problem for the US. He also believes that the fiat system is the same as surrendering “your children and your country to galloping inflation.”
The reason this information is so interesting is because more than any other person in the world, Warren Buffett has experienced major benefits from the fiat money system. There’s no question that inflation has substantially gone up since 1948 when Howard Buffett first pen the letter. American living standards have also improved tremendously since inflation has gone on the rise. Also, Howard Buffett’s children and grandchildren have benefited more from the fiat money system than any other individuals in the world.
Another very interesting tidbit is that Warren Buffett has outright rejected his father’s beliefs. He would never have become the biggest beneficiary of the fiat money system if this weren’t so. Warren Buffett believes that it is silly to build a portfolio based around commodities. He also recognizes that the country’s national debt does not create some major solvency issue in the same way that a household or business is constrained by.
Here’s three quotes to help you recognize Warren Buffett’s take on gold…
“The problem with commodities is that you are betting on what someone else would pay for them in six months. The commodity itself isn’t going to do anything for you….it is an entirely different game to buy a lump of something and hope that somebody else pays you more for that lump two years from now than it is to buy something that you expect to produce income for you over time.”
“I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion…you could have all the farmland in the United States, you could have about seven Exxon Mobils (XOM) and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils.”
“What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As ‘bandwagon’ investors join any party, they create their own truth — for a while.”