Finance > Currency Trading > Gold is Money
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Article rating : 0.00, 0 votes. Author : Al Thomas
Gold always has been and always will be wealth, but using it as money has been a problem. Today there are articles in the financial press that certain countries (usually small ones) are going to go on the gold standard. That means you may turn in your paper certificates for a specified amount of gold.
Nixon finally killed off the U.S. gold
standard in 1971. 99.9% of the public had no
idea what this meant – and still doesn’t. As
long as their paper dollars were redeemable for
goods and services who cares. The Federal
Reserve continues to print more and more dollar
bills backed by – NOTHING. Pardon me, “By the
full faith and integrity of the government”. It
is still hot air.
Is there any solution to a manufacturer,
producer or service company that will protect
it from the continued watering down of paper
currencies? Not just the U.S., but every
country in the world has its printing presses
working to capacity.
If a manufacturer wanted to protect his
sales from the depreciating currency of his country
he could price his product in ounces of gold.
ABC Company sells widgets and has a contract
to deliver 10,000 widgets per month for the
next 5 years at a fixed price of $10 each. He
has a guaranteed sale of $100,000 per month,
but over the next 5 years inflation will
depreciate the currency a minimum of 2%
annually (stated guideline of the Federal
Reserve) slowly removing $2,000 per month and
in the fifth year removing $10,000 per month in
purchasing power.
ABC decides to write the contract not in
local currency (dollars, yen, euros, etc.), but
in ounces of gold per unit of widget. At today’s
gold price of approximately $500/ounce each
widget amounts to .02/ounce or 200 ounces of
gold per month. The payout does not have to be
in metal, but may be converted back into the
local currency. No physical gold transfer takes
place.
There has been talk of converting oil payments
to gold, but there isn’t enough gold to do that
for more than a few days. Imagine gold priced
at 8.333 ounces per barrel?
If this type of transaction becomes common
place (and it might) there will be a boiler
plate paragraph explaining contract settlement
terms. It isn’t there yet.
Both the buyer and seller may be leery of
this procedure as gold has no fixed price which
makes it a speculation for each party. The
longer term to a contract the more likely the
seller will choose this idea to protect his
income base. All central banks will hate it as
it exposes the lie of fiat currency.
As the public becomes aware of the declining
value of fiat currency they will also become
aware that the only real money is gold.
Copyright 2005
Al Thomas' best selling book, "If It Doesn't
Go Up, Don't Buy It!" has helped thousands
of people make money and keep their profits
with his simple 2-step method. Read the first
chapter and receive his market letter for 3
months at no charge at
www.mutualfundmagic.com and discover why
he's the man that Wall Street does not want
you to know.
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