Salt and pepper. Photo: Jon Sullivan and it is public domain
- Talent is cheaper than table salt. What separates the talented individual from the successful one is a lot of hard work.
Stephen King
Why can't you trade salt in the financial markets? And if you could - would you?
Salt is one of those curious things that seem to just exist, yet it's incredibly important in history and was once a insanely valuable commodity.
EVERY FEW DAYS, @SARDONICAX AND @FINANSAKROBAT (HEY, THAT'S ME!) DO A PODCAST ON FINANCE. WE CALL IT AFP - A FINANCE PODCAST. TUNE IN.
At a time when people trade weather futures, worthless Cynk shares and bitcoins, it's kind of odd that it's not possible for a trader to speculate in the price of salt.
The answer to this is real simple; it's everywhere and it's expensive to ship.
But be that as it may, let's look a little bit at the economics of it, and why selling gold to buy salt might not be a terrible investment.
Worth its weight in gold
The history of salt is a history of the global economics. Much like coffee, sugar and spices, the trade of salt was a important part in the creation of the modern economy.
It's referenced in the bible (The Book of Ezra), roads were built in ancient Rome to transport it and it was used in slave trading - salt for slaves. PST, don't tell anyone, but I got this from Wikipedia.
In China, revenue from salt production and sale, known as salt gabelle, was a key source of revenue for the Chinese state.
And the price?
Well, it was literally worth its weight in gold.
The ancient kingdom of Ghana was a key player in the salt-trade in Africa, and grew rich from this trade. The Ghana Empire was situated right smack in the middle between the gold-producers in the south and the salt-producers in the north.
Ghana was de facto a salt-exchange. It offered traders protection for a fee. It set up the rules. The most important of these rules were the prices. 1 ounce of gold for 1 ounce of salt. Just like in the modern day, the traders may have made some money off of these trades, but the middlemen - The Ghana Empire - grew rich from it.
Ghana were the ancient Goldman Sachs.
Gold to salt
The gold-to-salt ratio is a little known - and little used - indicator of prices in the economy, yet it in my opinion pinpoints how the perception of value can greatly shift with economic progress, and skew prices completely out of whack.
Around the year 1000 the ratio between gold and salt was 1 - 1.
And now, it's not:
How to trade it
There's no Bloomberg og Reuters code for salt (I checked), there's no exchange trading it and there's no real OTC trading on a global scale.
What there is, is local trading.
So if you want to try your hand at this old-school style trading, you should think about moving to Japan. Its industry uses a lot of salt and it imports it from Australia, while China uses all of its 60 million tonne production domestically.
So it's really, really hard to trade it - at least if you're used to futures and stocks.
So the question from the headline is still a question. Should you buy gold - which has almost no real world use-cases - or should you buy salt - which has so many use cases they are too many to list.