In the world of baseball cards, the most valuable is Honus Wagner’s rookie card that sold at auction for $6.6 million in August 2021. Known as the “Flying Dutchman,” Wagner played for the Louisville Cardinals and Pittsburgh Pirates from 1897-1917. His 3,420 career hits put him 1,000 hits behind Pete Rose.
It is not immediately clear why Wagner’s card is so valuable. Wagner’s picture is not rare. Anyone can find it online. The cardboard and ink used to make the card are not rare. The card itself is rare, as there is only one of them. That by itself does not make the card valuable. The card is valuable because baseball card collectors collectively believe it is, meaning a collector is confident that if he buys it, he can later sell it to someone else.
A mansion on Mackinac Island is currently listed for $4.7 million dollars, or 0.7 Honus Wagner rookie cards. This means that if you were lucky enough to possess this card, you could trade it for a beautiful house on Mackinac Island. Suppose you are walking along the beach on Mackinac and find a bottle with a genie inside. Rather than granting you a wish, the genie creates one million perfect replicas of Wagner’s rookie card, indistinguishable from the original. The value of a single rookie card would fall from $6.6 million to about $6. It would now take 783,333 rookie cards to purchase the Mackinac Island mansion, rather than 0.7 of them. People are confident that this is impossible, so the card holds its $6.6 million value. If this confidence was lost, the value of the card would plummet.
The U.S. dollar is fiat currency, meaning it is not backed by a precious commodity like gold. As is the case with baseball cards, the paper, ink and images printed on the bills are not valuable. The dollar is valuable because it is limited in supply and more importantly, people are confident that it has value. Like with baseball cards, people are confident that if they accept a dollar, someone in the future will accept it from them. Also, people are confident that the supply of dollars will not suddenly increase. If this confidence was lost, the value of the individual dollar would instantly fall.
A mansion on Mackinac Island is currently listed for $4.7 million dollars, or 0.7 Honus Wagner rookie cards.
The Honus Wagner card is analogous to the U.S. dollar while the genie is the Federal Reserve. If you understand why the price of the Mackinac Island house in terms of baseball cards increased when the supply of baseball cards increased, now you know why an increase in the money supply increases prices across the board in the economy – which is called inflation.
Since the pandemic began, the Federal Reserve has more than doubled the money supply. Since the dollar is not backed by anything, there was nothing stopping the Fed from doing this. In addition to 40-year high inflation, it threatens the trust and confidence people place in the dollar. It is hard to overstate how irresponsible this is.
