My favorite part about this is why it's worth $10 million.
Because it's currency? Nope. Because it's gold? Nope. Because it's collectable? Yes!
Really highlights how price and value can come unstuck.
Because it's currency? Nope. Because it's gold? Nope. Because it's collectable? Yes!
Really highlights how price and value can come unstuck.
For others interested, here's some links:
NPR Article
http://www.npr.org/blogs/money/2011/02/15/131934618/the-isla...
Milton Friedman paper on the island.
http://hoohila.stanford.edu/workingpapers/getWorkingPaper.ph...
I for one had never thought about it this way.
The price of a collectable is because someone else (not necessarily you) values it. And the odds are that many other wealthy collectors would value it at the same price, allowing the buyer to hold it and then trade it later for similar value.
It's not an easy question to answer.
Yesterday morning, the London gold fix was 803.117 GBP/oz; if i took my gram of gold to my local baristas and traded it, i would get 6.59 flat whites. Yesterday morning, the gold fix was at 798.532 GBP/oz; my gram would have got me 6.55 flat whites.
Whereas if i'd gone in this morning with 4.30 GBP in ready money, i would have got 1.00 flat whites. And if i'd gone in yesterday with 4.30 GBP, i would have got 1.00 flat whites.
You can do this analysis against benchmarks other than flat whites: cappucinos, espressos, and even things that aren't coffee. You will always find that the buying power of a unit of currency remains constant from day to day, while the buying power of a unit of gold does not. It's gold that fluctuates.
eh? currency then or now? Currency then was on the gold standard so the two didn't fluctuate. Currency today, they target inflation of 2% / year by design.
re: insane price of collectibles
You are thinking like a salaryman. Think of one of great wealth with a flow of currency more than what one can sensibly spend money on - the market for these coins. The pleasure gained from owning the 20th rolls is not the same as the first. The utility gained less so. How about a rare collection of gold coins from 1850? Now that is something you can talk about over some cognac and cigars with a like minded fellow. An object of beauty, desire and a fantastic store of value for when you want to transport value across to the next generation. Alternatively, you could park $10 million into a hedge fund and swap spreadsheets around the fireside chat - debating which manager was best defending the onslaught of the fed and its money printing? Which one is less - shall we say - vulgar?
Starting in 1837, gold coins in the US had 0.48375oz of gold per $10. So $27,000 in coins would be worth $1,755,432 given a price for gold of $1344 per oz. This excludes the value of the copper with which the gold was alloyed, which would be worth roughly another $30.