No, I’m not talking about the $15K you’ll shell out at your Chrysler dealer to buy a Mexican-made Son of Mini.
I’m talking about a reader comment on the Correlation Curse post. Trent wrote the following:
It could be helpful to express the article in terms of purchasing power of bullion vs fiat money; Fiat dollars will lose purchasing power as they are created without limit by government. Bullion may lose some purchasing power relative to things you want to get, but it’s likely to be the ‘cash’ demanded preferentially over fiat for exchange for goods and services– Unless you are talking about returning to a barter economy. All bets off in that case!
Trent — here’s where we differ. I see all currency, including bullion, as means of transacting barter. To me, there’s no difference between trading a Krugerand or a check, or a Puka shell necklace, for something I want, or for someone’s labor. The same for trading my labor or things to someone else. Usually I won’t be needing exactly what they may have in surfeit, so we both use currency as our means of transaction.
The Dollar, bank checks, Puka shells and bullion all depend on the joint agreement among us that the “currency” represents purchasing power.
You ask me to guess what sort of purchasing power a gold coin might have after the Apocalypse, and I say “I don’t know.” I also say that a box of 22 Long cartridges a can of gasoline or a bottle of Doxycycline might be worth more, and so might a stack of $20 bills.
Certainly the stack of twenties and the gold bullion both rely on the belief of the transactors that the means of exchange is actually worth anything.
At least paper money is easier to hide and carry than bullion, and there’s enough of it in circulation to provide the means of executing trades for the size of our economy.
Maybe you can tell me — are there enough gold coins in the world for each person to own at least one? I suspect there aren’t, and for that reason alone, I don’t see them serving as a basis for a post-meltdown economy. You need enough units of exchange to float the volume of transactions that go on.
That said, I’ve been doing quite well lately with a small gold miner Moriarty of 123Gold mentioned months ago. I’m fully aware that if everything melts down, my shares can only be sold for dollars, and some people may not be willing to trade anything of value for those dollars.
I’ll take that chance.
FWIW, I did own both Krugerands and No Motto Ste. Gaudin Walking Liberties in the past.
They’re gone now, and you could say that I traded them for an inventory of classic McIntosh amps and JBL speakers. But that’s for another post.