Money as Opportunity Cost

Opportunity cost is the name given to the fact that any action taken is at the cost of another action that could have be taken, and anything bought is at the expense of some other thing that could have been bought. Opportunity cost is what we could have done, but didn't.

When it comes to assets, money has a special place in that it is the thing that we hold onto in anticipation of opportunity. As long as we hold onto money, we forego all other possible investments. Money must therefore have qualities that minimizes this cost, otherwise people will choose something else as money. Anything that deteriorates or inflates over time will be rejected.

This is why gold is and always will be money. It does not deteriorate, and it inflates by less than one percent per year due to mining. Gold is the rational thing to hold onto in anticipation of opportunity, and the cost of doing this has been negative over the last few decades. There's hardly a thing that has outperformed gold in terms of nominal dollar return. Very few investments have yielded a better nominal return than gold.

This will become all the more apparent once we enter the final stages of the current monetary system. Central banks are going into hyper-drive, debasing their currencies in the process. The opportunity cost of hanging onto dollars or other fiat currencies, relative to gold, will become even more obvious than it already is, and everyone will flock to gold as the ultimate money.

Only when all assets have been fully re-prized relative to gold will the world economy crawl out from the mess created by central banks. In the meantime, we're better off hanging onto gold than trying our luck in real-estate, stocks, bonds, land or commodities. Gold will outperform all, and those owning it will find plenty of bargains and opportunities once the collapse is complete. Only then will it again make sense to forego some gold for other types of assets.

Sovereign

By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link