This is a currency/store-of-value, reductio ad absurdum joke by Barry Ritholtz, but you have to know the background. People who think that gold is the only REAL money like to run charts pricing various assets (often stocks) expressed not in dollars but in gold. (More precisely, the dollar/gold conversion price.) Of course this looks goofy/Alice-in-Wonderlandy next to the nominal charts, which is the intended effect.

Ritholtz takes a step further into the 14th dimension by saying, bah, SILVER is the only real money. Next to silver, gold (which keeps setting record highs) is trash. And he has the chart to prove it. The point, of course, is that pricing everything in gold is kind of loony.

Barry concludes:

 Forget QE, the Gold Miners are doing QM  Quantitative Mining. These irresponsible Miners are “printing gold” by scraping it out of the ground as fast as they can. They are debasing it as a store of value, and are no better than central bankers with their fiat currencies and printing presses. 

Posted by Jay Hancock at 10:29 AM | Permalink | Comments (1)
Categories: Currencies
        

One macro benefit (to the U.S.) of quantitative easing (lowering long-term interest rates) is a weaker dollar. The Fed's $600 billion "QE2" campaign is being spent on dollar-denominated assets such as Treasury paper. These new dollars in theory lower their price against other currencies, which makes imports more expensive and exports more competitive. Paul Krugman is all for this:

The case for a more expansionary policy by the Fed is overwhelming. Unemployment is disastrously high, while U.S. inflation data over the past few years almost perfectly match the early stages of Japan’s relentless slide into corrosive deflation.

But he is very much against China's policy of suppressing its yuan by having ITS central bank buy dollars to raise their value in that country's highly controlled international exchange regime.

This time, much of the noise is coming from foreign governments, many of which are complaining vociferously that the Fed’s actions have weakened the dollar. All I can say about this line of criticism is that the hypocrisy is so thick you could cut it with a knife.

After all, you have China, which is engaged in currency manipulation on a scale unprecedented in world history — and hurting the rest of the world by doing so — attacking America for trying to put its own house in order.

How is what the U.S. is doing putting "its house in order" while what China is doing is currency manipulation? Neither policy is close to a classical free market. Yes, the ultimate scale of China's interventions surpasses QE2. And China's arrangement makes its currency policy very unfree indeed. One could argue that a weaker dollar is merely a side effect of a U.S. monetary policy focused on domestic interest rates and demand, while China's currency regime is blatantly mercantilist in intent and effect. Still, there are "manipulations," of one sort or another, and in varying degrees, on both sides.

Posted by Jay Hancock at 9:03 AM | Permalink | Comments (4)
Categories: Currencies
        

From the NYT:

Inside the box, opened in 2003, he found an incredibly rare coin, wrapped in a delicate paper sleeve. It was a gold $20 piece with Lady Liberty on one side, a bald eagle flying across the other and, at Liberty’s left, the four digits that made it so valuable: 1933.

The famous “double eagles” from that year were never officially released by the government. Only a few had ever made their way out of federal vaults, and only one had ever been sold publicly, in 2002. The price: $7.6 million.

And there were nine more of them in the safe-deposit box.

The family turned the coins over to the government for authentication, but Washington held onto them, claiming they never should have been held by the public. Now the family is trying to get a judge's order to release them.

Here is my review from The Sun from five years ago of David Tripp's "Illegal Tender: Gold, Greed and the Mystery of the Lost 1933 Double Eagle." Tripp knew there were other, unaccounted-for 1933 coins, but he couldn't find where they were. Now we know. The review, from the Sept. 5, 2004 edition of The Sun:

On March 6, 1933, President Franklin D. Roosevelt took the United States off the gold standard, banned new gold coins and condemned to the melting pot nearly a half-million $20 gold pieces struck with a 1933 date but not issued.

A few escaped. David Tripp tracks the fugitives across six decades and several continents, through a king's palace and a Secret Service sting operation and into bright day at a Sotheby's auction two years ago.

It is an evocative trip. Per-haps no other metallurgical product emits the symbolic and informational wattage of coins. The little hunks cater to greed, aestheticism, patriotism and probably a few other vices. What we know about Hellenic South Asia and some other ancient cultures is based almost solely on numismatic evidence.

Coins betray 20th-century American secrets, as well. No one could imagine the events of 1933 happening today.

To combat a worsening Depression and plunging prices, Roosevelt and Congress not only stopped minting gold but called on the country to surrender privately held gold in exchange for government paper. The idea was to stabilize the money supply by reversing overseas gold flight.

In a way that will horrify the libertarian and thrill the communitarian, Americans obeyed, trading tons of lustrous yellow metal for Roosevelt's IOUs, for the good of the nation. Eventually it became illegal for people to own almost any kind of gold.

Continue reading "Family tries to reclaim fugitive gold coins " »

Posted by Jay Hancock at 11:46 AM | Permalink | Comments (2)
Categories: Currencies
        

The latest Forbes column from Johns Hopkins econ prof Steve Hanke:

WANT TO KNOW WHERE THE REAL ACTION will be over the coming months? Forget stocks, think foreign exchange. There are tectonic moves afoot in the currency markets these days. During the past year the Polish zloty has fallen by 23% against the euro and 11% the Hungarian forint. Now both countries are talking about replacing their currencies with the euro.

The International Monetary Fund likes this idea and wants other
European countries to “euroize” as fast as possible.

The Chinese are wringing their hands over the U.S. Federal
Reserve’s ballooning balance sheet. Beijing is threatening to halt
its Treasury buying if the dollar slides and has suggested that
IMF Special Drawing Rights (SDR) replace the greenback as the
world’s premier reserve currency. A United Nations panel has
seconded China’s motion, but just in case it doesn’t happen,
China is buying gold.

Posted by Jay Hancock at 4:12 PM | Permalink | Comments (0)
Categories: Currencies