The Value of Nothing

| May 20, 2022

Why don’t you invest in crypto? Recent events have made the question particularly relevant. Some cryptocurrencies that purport to be backed by “something” so as to be “stable” have been reduced to almost nothing. A reduction in value to nothing is a rare event worthy of comment.

The easy answer is that I don’t bet on currencies. I shall leave that to George Soros and others who are far more competent in that area. Another answer is that I like to invest in assets with measurable value. Philosophically, I love the stock market. It allows me to participate in a worthy communal effort. If I invest in a pharmacy chain, for example, I can go to a local retail store. I can see the people working there and touch the inventory that is for sale. I can look at their published reports and know whether their sales are up or down. I can easily know how much cash they have on hand and the amount of debt they owe to others. I can find out how much of their value is made up of physical assets, such as plant and equipment. The same is true for thousands of companies. Through the stock market, I can invest in people working together to produce the goods and services that others want and need. Even better, when markets are wobbly as they are right now, companies regularly deposit dividend checks into the accounts of my clients.

Nevertheless, it has been suggested to me that I devote a newsletter to discussing cryptocurrency. I have held off because of the lack of continuing education classes that seriously deal with this subject. The Federal Reserve Bank of St. Louis has come to my rescue with several excellent white papers and thoughtful podcasts. Our next newsletter will be devoted to my distillation of their fine work. I could claim that I read these papers so that you don’t have to, but the fact is that I like it.

In the meantime, I find myself returning to Oscar Wilde, who in The Picture of Dorian Gray wrote “nowadays people know the price of everything and the value of nothing.”* When it comes to cryptocurrencies, I cannot say it better.

*Wilde, Oscar. The Picture of Dorian Gray. Millennium Publications, 1890.