psteinx wrote: ↑Thu Jun 08, 2023 5:52 pm
Holding significant gold was banned after 1933 (I think that's the right year)
In September 1931 the British Parliament passed a law (hastily) to have banks only return paper Pound Notes when money was withdrawn, where previously you could draw your money either in pound notes paper money or as a gold coin (one Pound gold sovereigns worth their weight in gold). Money was gold (Sovereigns), where paper notes were previously directly convertible to/from gold coins currency. Basically the treasury were running low on gold, too many were importing paper money, converting it to gold and removing the gold from the country such that that flow had to be stopped.
In 1933 the US passed a Executive order that in effect nationalised all gold, compulsory purchased it (money) and likewise transitioned the population away from using metallic value coins/currency (gold) over to paper currency, and the nationalised gold was locked up in Fort Knox.
Silver coins were continued as currency (silver shillings/silver dollars) however, but progressively devalued (coins not worth their weight of silver). Nowadays metallic coins tend to be inexpensive to manufacture, nothing like their worth-their-weight metallic value. Copper prices spiked some years back and formerly copper pennies were changed to predominately be manufactured using inexpensive/common metals.
After WW2 and the US secured international agreement to adopt the US dollars as the primary reserve/trade currency, where prior to 1930 that was gold/Pounds, on the basis that the US dollar would peg to gold. Which held for decades, but where the US repeatedly re-set that.
Savers prior to the 1930's would be inclined to just hold bonds/cash (gold). Deposit gold coins for safe keeping and interest, and where inflation broadly tended to average 0% (finite gold) such that the interest was a real rate of return. Across the 1900's and into the 2000's prior broad 0% inflation and a real return from bonds (gold) changed to predominately being inflation only, decline of the purchase power of paper money. A large chunk of the global population are now looking to break away from using the US dollar for international trade, TINA (there is no alternative (to the US dollar)) is seeing a rise of TARA (there are reasonable alternatives). Russia, China, India, S America, Africa, Arabia etc. are in a current transition to such alternative(s), and where collectively that body represents over two-thirds of the global population. Such that where previously the US could sanction (international trade transactions clearance traversing through the US - that could be blocked) others, but under TARA such sanctioning wont be possible. It will also mean that the US can't simply export inflation, print $1Tn to perhaps increase the military, and will lose a competitive advantage, have to be more accountable for its spending.
Investment wise and prior pre 1930's holding money (gold) deposited and earning interest (bonds) was generally good-enough. Thereafter and stocks that were previously seen as only being for speculators became the more normal asset. Helped by the Roaring 1920's when even shoe shine boys started buying stocks and where they made many rich overnight, until that bubble burst (1930's Wall Street Crash).
Bonds became more of a 0% real expectancy. Previously crowns/states paid real rates of return in order to borrow gold (money). After gold/paper notes were disconnected the crown/state no longer needed to borrow gold, instead paper money could just be printed/spent. Nowadays that 0% broad return on bonds/gold arises out of inflation and taxation drag factors.
Generally states are greedy, tend to find ever new ways to tax more. Are great at spending other-peoples-money. Where previously savers could save and get real rates of returns even just from gold/bonds, so that was negated, leaving just more speculative stocks as the only real rate of return assets. So back-testing should really look at bonds pre 1930's, stocks since the 1930's, and with it in mind that states might find ways to tax stocks to levels where even they risk averaging 0% real returns. By lowering SWR to 3.33% you're better prepared IMO. 30 year return of your inflation adjusted money via yearly instalments. With individual variability around that - that's more a case of good/bad individualistic luck. if you assume each/all assets tending to broadly average 0% real total returns, but individually are volatile, then a reasonable approach is to diversify across multiple assets, as when one has swung-low (failed to match inflation) another will tend to have swung-high (beat inflation). and where the gains in the better performer offset and more then bad case (-25% lag requires a +33.33% recovery to get back to break even, geometric 0%, simple average +4.15%). Diversification is a means to capture some of that arithmetic benefit whereas single assets just reward the geometric.
General rewards have always tended to arise out of a lower left-tail, taller right-tail combination. Single assets might transition through -25%, +33% alternations (simple model) where diversification captures a positive overall real compared to 0% real for a compounded single asset alone. That's fractal, applies at the small scale/short time period, and large scale/time. And will continue to persist, the only way for that to end is if volatility disappeared. Hence the likes of the Permanent Portfolio, Golden Butterfly ... type asset allocation choices, equal weight four of five different assets, a inclined expectancy that each year one of those will do well, another poorly, but where the overall average is positive and where you can't reliably predict which will be the best or worst asset(s).