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The True Intrinsic Value of Euro ‘Money’
Posted By admin On November 8, 2011 @ 7:52 am In Money Watch | Comments Disabled
The Prudent Investor
November 8, 2011
Prudent Investor blog reader Kurt Lindlgruber from Austria sent me this pragmatic approach, pulling up the calorific value of such notes once they have lost their purchasing power as did all fiat currencies in history.
Lindlgruber’s calculations contradict French philosopher Voltaire’s famous quote that
‘Paper money will always return to its intrinsic value. Nothing.’
It is not all that bad. Your soon-to-be worthless Euros will at least keep you warm for a few minutes.
Here is his calculation:
The minimum value of paper money after the Euro crash corresponds with its calorific value.
A €5 banknote weighs 0.6 grams. The calorific value of one kilogram European fiat money (= 1,667 €5 notes) is 5 kilowatt hours (kWh).
You can fare much better with gold:
Based on Monday’s Euro gold price of €1,260/oz one ounce will buy you 21 metric tons of wastepaper (current price €60/ton) which has a calorific value of 105,000 kilowatt hours.
The average heat energy consumption of a single family detached house is around 5 kWh. So 21 tons will heat a house for 21,000 hours or 2.4 years.
If you hold on to your Euros instead of gold, 252 €5 notes (=€1,260), they will deliver a calorific value of 0.76 kWh
(252 x 0.6 x 5 / 1000 = 0.76 kWh)
If you happen to be a wealthy money bag, drug dealer or tax evader, who all tend to stash the handy €500 notes, you will likely be much worse off despite their higher weight of 1.1 grams per banknote.
Rounding up the Euro gold price to €1,500 (I expect to see this price within a few weeks) your wealth will make you long for a thick blanket much sooner. Here is the calculation based on €500 notes:
3 x 1.1 x 5 / 1000 = 0,016 kWh
that will keep your house inhabitable for only 10.8 seconds.
To sum it up, here are your choices after the Euro crash:
Hold the monetary equivalent of one ounce gold
I haven’t come across a more specious argument pro gold for the coming hard times in Europe.
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URL to article: http://www.prisonplanet.com/the-true-intrinsic-value-of-euro-money.html
URLs in this post:
 Pay Me In Gold: Lawmaker Requests Compensation In “Money That Has Intrinsic Value”: http://www.prisonplanet.com/pay-me-in-gold-lawmaker-requests-compensation-in-%e2%80%9cmoney-that-has-intrinsic-value%e2%80%9d.html
 Draghi Rescue the Euro by Printing More of Them?: http://www.prisonplanet.com/draghi-rescue-the-euro-by-printing-more-of-them.html
 Gold in euro terms hits record high 816.33 euro/oz: http://www.prisonplanet.com/gold-in-euro-terms-hits-record-high-816-33-eurooz.html
 Gold shoots to new high on euro worries: http://www.prisonplanet.com/gold-shoots-to-new-high-on-euro-worries.html
 Gold hits 2-1/2 week high on euro zone jitters: http://www.prisonplanet.com/gold-hits-2-12-week-high-on-euro-zone-jitters.html
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