Friday, February 4, 2011

Banknote of the Month, February 2011

A "Merchants Daily Savings Club" check apparently backed by the "Calmer Savings Bank - or - Wiinesheik County Bank" in Calmar, Iowa. The stated value on the check is five mills, or one half of one cent. This was given as a reward on a 25-cent purchase. This is essentially the old-school equivalent of a 2% "cash back bonus" on credit cards. Five mills may seem trivial, but if you look at real purchasing power, it is more like 20 cents today. I came to this number by dividing $35 (one dollar in gold) by $0.005 (five mills) and got 7,000. I then divided the current price of gold ($1,350) by 7,000 and got $0.1928, or about 20 cents.

Quote of the Week 2/4/2011

"Inflation is a wealth transfer from helpless poor to rich who can hedge. But in a globalized world, the poorest of the poor pay the most."

-James G. Rickards

The riots in Egypt are partly due to surging food costs caused by global QE.