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November 18th, 2022

Brine Again

Brine again.  This is not a new Rihanna song, but instead a reference to one of the earlier mediums of exchange, salt.  In ancient Rome, legionnaires were often paid in salt as the production of salt was tightly restricted which made it a valuable commodity.  Today’s cliché “not worth his salt”, which means you are not performing well at your task, originates from these payments as does the word salary which traces its roots to salarium, the Roman term for the soldiers’ monthly allowance.  Salt’s nickname in that era was “white gold” due to its important role in preserving food and meat.  Salt enjoyed primacy as a currency for hundreds of years due to both its inherent value and people’s confidence in its intrinsic value.

Recent events at FTX where a gang of ten Bahama roommates managed to make $10 Billion disappear like Atlantis, the isle – not the casino, reminds me of the currency scams of the 1800’s.  The crypto currency fantasy league that led to the enormous valuation of crypto currencies and their related exchanges was rooted solely in blind faith as unlike salt, they have no inherent value nor are they widely accepted as a medium of exchange.  In the 1800’s, states and banks issued their own currency and hoped people would accept it.  Jay Gould’s first industrial employer, Zadock Pratt, ran a successful tannery in the Catskill Mountains.  He started his own bank, Prattsville Bank, which provided its own currency that featured Zadock’s picture.   His bank, like many others, collapsed before it was ten years old.  If his currency were accepted today, athletes might seek Zadocks instead of Benjamins.   Pratt bills took a swift pratfall in value, but their inherent value was comparable to today’s crypto-zero.  Each new investment fad has its fans, but it was surprising how quickly institutions decided to seek a crypto position as a portion of their asset allocation.  Certainly, the multiple disasters in crypto exchanges and currencies this year raise the question of a fiduciary’s obligation to distinguish investing from speculating.  The SEC has been issuing regulations this year like a Soviet five year plan, yet none have concerned crypto.  We look forward to attention being paid to crypto by the SEC.

I’m Rob Morris and I approved this blog.

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