A lot of investors have become gold bugs recently. This is understandable given the instability in global financial markets and with the risk of inflation as the US and other G20 countries take on massive debt. Smart friends of mine are buying gold as a hedge against inflation while the US prints money. The US national debt is about 13 trillion dollars, more info here.

After the housing meltdown and recent stock market volatility it’s natural for capital to go to safe places like gold and treasuries. However, there are some cogent counter points to this strategy that I feel aren’t being voiced enough by the media nor by people who manage money.

Some reasons not to buy gold: Gold will hedge against inflation but won’t pay a premium to it. It will track inflation, but won’t give you a premium over it. Gold is a shiny metal with limited industrial uses. Its value is based on history, civilizations have valued it for millennia based on a primitive attraction to the material itself. Gold is atomic, and you know what it is, but therein lies the rub: Gold doesn’t represent any kind of innovation, it doesn’t represent imagination, it doesn’t help health, nor productivity, nor innovation. It’s bad for the environment. Mercury, arsenic, acid water, and deforestation are some by-products of mining for gold. I flew over the Amazon rainforest in Peru recently and looked at the destruction from large scale gold mining and even artisanal mines that dot the landscape.

Take a look at all the innovation happening today — Tesla has produced a beautiful 100% electric car. The cost of mapping the human genome has gone from $3 billion ten years ago to thousands today. Moore’s Law continues unabated and the rate of innovation in smart phones is staggering. The computer has moved from the desktop to the pocket, this trend alone reminds me of the World Wide Web in 1994. Social networking is in its infancy, and Twitter and Facebook are growing explosively. IP traffic is growing so fast that it has stunned the pioneering people who helped create it.

Ray Kurzweil maps out an optimistic view of the future with a tremendous amount of data supporting his main thesis — that the rate of innovation is increasing on a geometric scale. This means that innovation is happening faster every day. So yes, there are macro-level concerns about the economy, but there is also a staggering amount of data that supports the case for being an optimist. The data supports the fact that we’ll see more innovation in the next ten years than we’ve seen in the last one hundred years.

If you are an investor or entrepreneur, this is the best time in history to make a fortune and create a better world. There are more opportunities now than there have ever been. Information and data are being democratized in a way that present opportunities for anyone with a computer and an internet connection. Markets are global. You can reach the world with your blog. You can influence politics, voice your opinion. You can even email people like Steve Jobs directly.

There is no time in history like now. So if you’ve run out of ideas, buy gold. But I argue this is the best time to find innovators and invest in the future. Fortune favors the bold.

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