April 1, 2005 Leave a comment
I got email today from a long lost pal, Angela Galindo, who was my most reliable friend for the longest stretch of schooling I’ve had — 7 years at the Cathedral School — “an Episcopal school for children of all faiths”. Angela and I walked home from school together every day, then spent hours on the phone. She knew me the longest, with the fewest gaps.
When I showed up in 2nd grade, the school had just gone co-ed. It had been a school for choir boys at the Cathedral of Saint John the Divine. Angela was one of a half-dozen girls in the second grade, where there were about 30 or 40 boys. Figuring a couple dozen is the right class size, Cathedral had two teachers for each grade. We were in Mrs Westenberg’s class — 2W. (I’ll try to come back and tell a couple of Westenberg stories.) That first year, they divided the girls up between the two teachers, so there were 3 in each class. They soon scrapped that idea, and for the remaining 6 years, there was always one all-boys class and one co-ed class. Needless to say, the girls got a lot of attention.
Toward the end of our time at Cathedral, Angela expressed an opinion that Caitlin Murray would marry Lawrence Hitchens. I was confident that she would not. Angela suggested we bet. I accepted the bet but pointed out two problems:
- There had to be a time limit on the bet. If Angela was right and they did get married, then the bet was settled and I’d have to pay her. But at what point would we decide that they hadn’t gotten married? What if they were engaged at 30? What if they broke up but married at 70?
- Since we were pre-teens making a bet for years in the future, we could afford to bet big, but how big was big? With rampant inflation, how could we now know what would count as big when it came time to settle the bet? I didn’t want to say $1000 now and find out later that that amount wouldn’t get me into a movie matinee.
The solution to the first problem was straight-forward. Angela was confident that they would marry when they were 18.
The solution I suggested for the second problem was that we bet an ounce of gold. I enjoy remembering this because it means I was a goldbug before I was even in high school. I wouldn’t know what caused inflation for another 20 years, but I did understand that gold was valuable, marketable, and was a good hedge against inflation. I didn’t yet know the words, but I understood the concepts. Money wasn’t safe. Gold was safe. (Which is really to say that fiat dollars aren’t safe and that gold would make better money.)
As it turned out, Caitlin and Lawrence did not get married, and I did happen to see Angela when we were 18. I brought up the bet not to collect, but to get to say I told you so! and forgive her the debt. But before I could do either of those things, she just laughed at me and said, “You don’t expect me to pay a bet we made as kids!”
One irony I wouldn’t know until later is that an ounce of gold was priced at about $600 when we made the bet, and at only about $300 when we’d reached the bet’s time limit. I didn’t know the history of American gold — that FDR had made it illegal to own monetary gold for almost 4 decades — or that inflation had accelerated so drastically when Nixon cut the last vestigial tie to the old gold standard or how the “oil crisis” of the 1970s (the result of Carter’s price fixing) would affect the rest of the economy and therefore the demand for safe hedges.
A lot of people got burned in that market and it gave gold a bad reputation it’s still not completely recovered from. You can’t necessarily trust a goldbug’s timing. But longterm, we know what we’re talking about.
The Continuing Bull Market in Gold: How High Can It Go?
Recorded at the Austrian Economics and Financial Markets conference at The Venetian Hotel Resort Casino, Las Vegas, 02-19-2005 [15:55] — Mark Thornton