I just realized that I didn't include guns (or other weapons) anywhere in the previous post.  This is a serious oversight, as gun valuation and gold valuation are linked in many ways, yet ultimately completely uncorrelated.

Gun valuation is extremely interesting.  In a perfectly stable society, they're only worth whatever recreational value people might place on them.  This is similar to gold: in a society with a stable fiat currency, gold only has industrial and ornamentation value.

In a more realistic society, guns have the additional value of self-defense.  This won't increase the worth of guns much, as crime is relatively low and military needs are limited, but it adds some value.  This added value is extremely important however, as when one needs a gun, one is likely to really really need a gun.  Again, this is similar to gold, in that it's a form of insurance.  Just as I believe one should always have some gold, one should also have some guns.

As we get further away from a stable society, however, guns become increasingly more important.  The value of gold will spike into a fiat devaluation event, but at the far margin (the Mad Max / Zombie Apocalypse scenario) it becomes completely worthless.  A gun, however, is at its highest value on the far margin.

The gold to gun valuation relationship is at a very odd point right now.  Essentially, the current valuations are telling us that, while a fiat currency breakdown is increasingly likely, a major societal disruption is still highly unlikely.  I think these events are much more correlated than the market is currently assuming.  On a relative basis, guns are unbelievably inexpensive.  Go buy one.

Addendum:  Veeshir's comment made me think a bit more.  The rise in gun prices may be slowing down if the market for them is becoming saturated.  One can't use more than a few at a time.  Therefore ammo is really the factor to consider when looking at the pricing of gold vs. weapons.  As Veeshir notes, ammo prices have gone up a lot more than gun prices in the last few years.  I don't know if the relationship is at a sensible level though, as it's hard to find historical data on ammo prices.

Posted by: Hermit Dave at 11:31 AM | Comments (2) | Add Comment
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