Seeking Alpha Article Shows Nouriel Roubini Is Gold Bulls' "The Man To Beat"

Life is sometimes unfair, particularly for those who've stuck their neck out. It's becoming clear that Nouriel Roubini, despite his judiciousness about the gold market, is becoming Goldbug Enemy #1. That's because the followers in his wake tend to seize upon his contention that "gold has no intrinsic value;" in their glee, they chuck out the nuance in his own analyses.

Gold, in fact, does have an intrinsic value (in the ordinary sense of the term.) It's a status good. The gold-is-money argumenters, who often follow in the wake of Aristotle, presuppose this intrinsic value. That explains why gold's been a precious metal for about as long as there's been war.

In a calmer world, Roubini would just be kidded about his contention. But not in this world. Case in point, courtesy of J.S. Kim at Seeking Alpha:

Roubini claims that gold has no intrinsic value. If we look up the definition for intrinsic, this is what we find: “Of or relating to the essential nature of a thing.” The fact that people are willing to pay more than $1,000 an ounce for gold, by definition, grants gold intrinsic value. The fact that people value gold as an attractive adornment in the form of jewelry and are willing to pay top dollar for gold jewelry, by definition, grants gold an intrinsic value. If gold had no intrinsic value then why do people offer top dollar for it?

I wonder if Roubini is married, and if he is, if he bought his then fiancée a diamond ring? Using the flawed “intrinsic value” argument, if gold has no intrinsic value, then surely diamonds have zero intrinsic value as well. And if so, then why do so many people that accept the flawed “gold has no intrinsic value” argument willingly buy diamonds? Of course, the answer is that both gold and diamonds DO have intrinsic value as indicated by the willingness of people to pay loads of money for these commodities, whether in raw or processed form.

There it is, although Kim doesn't explicitly mention "status good."


If gold does go into an all-out bubble, Roubini may be turned on. Permabears like he are only loved by other permabears. In the middle of a crisis, they get their moment in the sun and are often idolized for being right when almost no-one else is. When crisis hits, the "stopped clock" is the only clock to tell the time accurately. As the crisis fades, though, the adulation also fades and people begin to ask, "what have you done for me lately?" Later, "Mr. Bull's put my portfolio up X%. Why haven't you?"

In Roubini's case, his competition is Peter Schiff. Both forewarned, and both proved to be right when few others were. The fate of gold is going to determine which of the two will be "the last permabear standing," as Schiff is a gold bull and Roubini (of course) isn't.

Will Schiff wind up being "so last year," or will Roubini? We'll see in 2010, and it will be gold that tells us.