Greek Gold: The New Normal

Mohammed El Erian of Pimco coined the phrase "the New Normal" to describe the economic environment that will likely persist for quite some time. This is an environment of very low to minimal real economic growth, very high persisting structural deficits, high structural unemployment, and tremendous money creation by central governments to fight the debt overhang.

While most serious economists debate whether this will end in a bout of deflation or hyperinflation I believe that at the moment we are experiencing a new style of stagflation.

What is that? Stagflation is traditionally an environment of high interest rates and low economic growth. What we have now is an environment of rapidly rising commodity prices (which acts as the same sort of tax on personal and corporate finances) and low economic growth. (I know, the government has been able to coax out a 3 percent growth rate figure with a variety of accounting tricks that would land you in jail if you used them in your private business.)

So what does this all have to do with Greek Gold coins?

The coin pictured above, a Distater (double weight stater) of Alexander the Great in excellent condition (though I think some tooling is evident in the hair) just sold at the NAC auction yesterday for 100,000 dollars. The same coin two years ago sold routinely for 20,000 dollars. This coin, though rare, like all top quality Greek gold, is what used to be considered "generic Greek gold," in that it is readily available at most major auctions. The same coin with a few minor defects has been selling routinely for 30,000 dollars.

What I'm seeing here is that whereas most casual observers of both the economy at large as well as the economy for high end art-commodities are waiting for the artificial boom to end in order to get in. Meanwhile market pros who are driving both markets are realizing that the prevailing conditions are exactly those that are likely to persist much farther into the future than most would like to believe.

These seemingly extraordinary conditions have become the New Normal. If you want to play in these markets you have to get used to them.