Pokemon Currency Trumps Dollar

You know that I like to try to keep you on top and ahead of the new trends that are developing in the currency world. This is the best way to profit early and well (although sometimes the timing isn’t exactly perfect!).

Today I have something new for you that I heard over the weekend. It may not be news to everyone, but its implications could be staggering.

As a father of seven whose children are all grown, I look to get frequent doses of youth from my grandchildren. They are a perpetual delight! This week’s insight comes to us courtesy of my grandson, Jack.

It started when my son-in-law, John (Jack’s Dad), celebrated a birthday recently. One of his gifts was a greatly needed new wallet.

In the spirit of kind giving, John passed his old wallet down to his son Jack.

“Here, Jack,” he said. “You can be like daddy and use this to put your allowance in and keep it safe.” He slipped his $1 allowance into the billfold. (I’ll let you guess Jack’s age based on the size of his allowance!)

Jack smiled warmly as he thanked his dad for his new present. He then proceeded to throw the dollar bill on the floor (where he left it in worthless shame) and began stuffing his new wallet with his sizeable Pokemon card collection. “This will be just right for holding all my cards!” he exclaimed.

There you have it. In the eyes of the next generation, the Almighty USD shall be replaced with the Japanese Pokemon currency. (And I’ll bet you thought it was going to be something Chinese!)

OK, maybe not Pokemon cards… but the story does represent what is happening to the dollar in a childlike way.  Jack may not know yet the “value of a dollar” (a phrase likely to perish as meaningless in years to come), but he does realize that there are things of value in his community… his community being the other little boys in his school class.

The fact of the matter is this: the USD is the world’s reserve currency by default. It is simply so by the function which it currently serves. It was not made the “World’s Reserve Currency” by some multinational edict out of the G-8, G-20, UN or IMF.

Nor do they have the ability to do so in the future. They may make such statements, and they may indeed produce a currency, but that does not guarantee its place as the premier money of the world.

Such statements are like a prisoner who is locked away for life saying, “I think I will choose to stay in jail.” He’s made a decision. He’s made his decision known. He acts on his decision. But it doesn’t change anything.

In the end, a currency only works if it is a real store of value.

Let’s say Jack takes his new wallet full of Pokemon treasure into school. But as a good capitalist, he also takes his allowance. Assuming the boys in his class also share the same mentality, how many of his friends’ cards can he buy for a buck? Zero.

In their “community,” cards are more valuable than cash. He is only going to get a coveted card from a friend, if he can offer him something that the friend perceives is of greater value. Perhaps a single card, or a whole slew of them together.

Such is the essence of the barter system, or any new currency system. If it is not a store of value, then you might as well try buying something with dirt!

At any rate, I hope I don’t live long enough to see the day that Pokemon becomes the new currency. If it does, Jack may have to take over the weekly wrap-up to explain the difference between a Pikachu and a Jigglypuff (who comes up with these names?).

Bill Jenkins

July 28, 2009

The Daily Reckoning