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Gold's Intrinsic Value

By Kevin McElroy

NEW YORK (TheStreet) - The past two days I've discussed some ways you can protect yourself from the effects of a currency crisis, as well as higher food and energy prices.

But let's face it, the whole subject is a major drag.

I compounded the problem on Wednesday night when my wife and I watched The Road, a very good, but uber-depressing movie about a father and son's struggle to travel through a post-apocalyptic wasteland.

If you haven't read the two pieces, I urge you to do so. (See Wednesday's article on food riots and Thursday's article on the oncoming scarcity .) For now, I'm going to focus today's issue on a slightly more entertaining, and possibly just as informative topic.

There's an important theory of valuing assets, including investments known as "intrinsic value."

Now, before I go on, we should come to a mutual understanding that all value is subjective. That is, the small differences in preference among people will always mean that a given asset will be valued differently according to whom you ask.

For instance, my wife is crazy about fresh, perfectly ripened peaches. She'll gladly pay top dollar at a roadside stand to buy more peaches than we could possibly eat.

On the other hand, my father grew up with a peach tree in his backyard. By the time he was 10 years old he had consumed a lifetime's worth of peaches, so he'd probably rather go hungry than to eat another peach.

But I think we can all agree that a peach has an intrinsic value, in that it can be eaten, it has a certain amount of calories, vitamins, fiber, sugar, and protein. It has a shelf-life, as well as pretty specific storage requirements.

So while my wife and my father may have very different ideas about what they'd pay for a peach, they can both agree on the intrinsic value of the peach. A peach is worth something -- regardless of any external factors. Even my father would agree that peaches have a value -- in that he realizes that lots of other people do enjoy eating them.

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