Showing posts with label twang money. Show all posts
Showing posts with label twang money. Show all posts

Tuesday, November 13, 2007

Measuring relative value

Fiat currency is elastic - it stetches and contracts according to the demand for, and supply of, credit. So it is an unreliable tool to measure the value of anything.

George Kleinman addresses this problem and suggests a relativistic approach: compare the historical price ratios of different asset types. He admits that you can play this game forever, but it's not his fault that governments have corrupted our traditional yardstick. All you can hope for is some sense of trend, which is what all this rune-reading is for, anyway.

His conclusions: gold looks undervalued against oil, and not overvalued against either the Dow or silver. His trend feeling: a coming economic and stockmarket downturn.

Financial Sense may be run by investment advisers, but I feel their commitment to public education goes well beyond self-interest. It's a sort of University of the Air.

Friday, November 02, 2007

Twang money - again


Fiat currency can be expanded at will, but in a credit crunch can contract as easily, so I've previously nicknamed it "twang money". But it turns out there actually once was a medium of exchange known as "twang money" - the Hungarian pengo. It ended up as the worst case of inflation in history: someone writes in to today's Daily Mail (page 77) to say that by 1946, all the Hungarian banknotes in circulation, taken together, were worth one-thousandth of a US cent.

However, consider the potential uses of many tons of durable paper with run-resistant colours: wallpaper, sweet wrappers, firelighters... So for me, the story is about the buying opportunity when pessimism ignores intrinsic value.