The history of finance and economics is full of utterly wrong predictions. This should, but doesn’t, teach us intellectual humility when it comes to pontificating about the future. Here is a memorable one, worthy of special mention in the all-time worst financial predictions list:
When the U.S. government stops wasting our resources by trying to maintain the price of gold, its price will sink…to $6 an ounce rather than the current $35 an ounce.
–Henry Ruess, chairman of the Joint Economic Committee of the U.S. Congress, 1967*
In the 1960s, pace Chairman Ruess, the U.S. government was not trying to hold up the price of gold, but to hold up the price of its dollar; that is, to hold down the price of gold. In this effort, it admitted complete defeat in 1971 by reneging on its Bretton-Woods commitments.
The price of gold today is $1,291 an ounce. It is equally true to say that the price of the dollar is 1/1,291 of an ounce of gold, as compared to the official price in Ruess’ day of 1/35 of an ounce.
*Thanks to investor-philosopher David Kotok of Cumberland Advisors for this instructive quotation.
Image by Watchara Ritjan