Stocks for the Long Run : the Definitive Guide to Financial Market Returns and Long-term Investment Strategies

11

CHAPTER

GOLD, MONETARY POLICY,

AND INFLATION

In the stock market, as with horse racing, money makes the mare go.

Monetary conditions exert an enormous influence on stock prices.

MARTINZWEIG, 1990^1

If Fed Chairman Alan Greenspan were to whisper to me what his

monetary policy was going to be over the next two years, it wouldn’t

change one thing I do.

WARRENBUFFETT, 1994^2

On September 20, 1931, the British government announced that England

was going off the gold standard. It would no longer exchange gold for

an account at the Bank of England or for British currency, the pound ster-

ling. The government insisted that this action was only “temporary,”

that it had no intention of forever abolishing its commitment to ex-

change its money for gold. Nevertheless, it was to mark the beginning of

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(^1) Martin Zweig, Winning on Wall Street, updated ed., New York: Warner Books, 1990, p. 43.
(^2) Linda Grant, “Striking Out at Wall Street,” U.S. News & World Report, June 30, 1994, p. 59.
Copyright © 2008, 2002, 1998, 1994 by Jeremy J. Siegel. Click here for terms of use.