Monday, April 16, 2007

The Real Value of Money

A couple weeks ago I sold old coins and bills to a collector. I don't know a thing about money collecting and I thought the oversized US dollar bill from the 1920s would fetch more money than any of the 1¢ coins – after all, the dollar bill started off 100x the value of a penny and it was backed by silver.

It turns out that coins made of precious metals are bought by investors and kept in vaults as they await the next run up like we saw in gold and silver in 1979 – the investors don't even bother melting down the coins. A penny, made of silver, clearly has more intrinsic value than a $1 bill back by silver.

From precious metal to paper and, now, to electrons, money has literally lost its value.

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