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Tuesday, February 1st, 2011



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VAT in the USA?

Tuesday, December 7th, 2010

The subject has been around for a while but the Obama administration is running out of options to tackle the spiralling National Debt. There is some high profile support for the idea notably from Fed chief Bernanke. This is understandable given the potential revenue such a tax could generate for the Government coffers.There is obviously genuine opposition to the imposition of such a tax and even last May a motion in the US Senate was defeated 85 to 13.
However, as with all politicians faced with a dwindling number of alternatives the idea eventually focuses the minds otherwise.
It also has something to do with the sheer scale of the problems facing the administration.

The American Dream is being replaced by the American Nightmare!

The current US National debt is $13.86 Trillion, which is equivalent to $45,000 per person and the total is rising by $4.16 Billion a day.
At what point does the US go bust?
How long can it sustain such levels of Debt?
How long can it afford to pay the level of interest due on a debt that size?
Has the US mortgaged its future prosperity and for how many generations?
The US needs to find an ongoing reliable source of income to erode the Debt down and an obvious if unpopular option is to tax more.

So what is VAT?

VAT is a national sales tax on goods and services
First adopted by France in the 1950s VAT or Value Added Tax is calculated as a percentage of the selling price. VAT is applied to most purchases including cars, petrol, electrical goods, furnishings, any luxury items, clothing etc and on any service activities. Businesses trade off VAT they pay for purchases of goods or services with the VAT they must charge for their products. The money goes to the Government but there is a mechanism to offset one against the other and businesses that are VAT registered only pay the net difference between VAT charged and VAT paid.
VAT is commonly shown separately on invoices and receipts so that businesses can claim against any VAT they have paid out.
Consumers just notice the increased prices and cannot claim VAT back.
There are usually exemptions such as baby products and sometimes different rates are applied such as take away food being levied at a lower rate than sit-in restaurant meals.

One interesting exemption from VAT in Europe is Investment Gold.

This is an EU wide agreement that applies to all Gold Bullion which is not less than 995 thousandths pure.
It also includes Gold Coins minted after 1800 that :

* are of a purity not less than 900 thousandths
* are or have been legal tender in the country of origin
* are normally sold at a price not exceeding 180% of the open market value of gold contained in the coin.

Hopefully the USA may follow this trend or investors will turn to European suppliers who sell VAT free Gold.

There are 139 countries, including most major economies except the US, that levy a VAT style tax. It is thought that VAT is a better alternative of increasing tax revenues because is does not discourage investment in the way that higher income tax can.

Typically, rates of VAT are between 15 to 20 % in Europe.
The UK is due to raise its VAT from 17.5% to 20% in January 2011 as part of its deficit reduction measures.
Here are some actual rates in developed economies – Italy 20%, France 19.6%, Germany 19%, Australia 10% and Japan 5%.

What will be the rate in the US?

No-one can be quite sure exactly where they are hoping to pitch the level of VAT but the numbers involved are quite tempting.
Various estimates exist including:

* a level of 5%VAT will raise $161 Billion in 2012
* for each 1% VAT levied in USA, $70 Billion will be raised. Therefore 10% VAT would harvest an extra $700 Billion which is quite an attractive offer for the Obama administration.

Concerns have been raised for the less wealthy who will find a disproportionate increase in taxation compared to their salaries. This is true and is the case in other countries but whilst Governments express concern and promise to “evaluate” the impact, the cold facts (hard cash) tend to provide a compelling argument.

So will President Obama opt for “Change” and start clawing back some cash to repay the National Debt. Some commentators dismiss the issue saying he couldn’t possibly get away with it.
Well, I’ve got news for them, in his own words “Yes We Can!”

Paul McGowan

Cantona’s Revolution goes International and has a date! World Exclusive

Tuesday, November 23rd, 2010
First revealed here as a World Exclusive in English “Eric Cantona’s French Revolution”  (Oct 22) explains the views of the ex-Manchester United player on the French strikes and his suggestion for “another way” of attracting the attention of President Sarkozy and his Government. His suggestion was that the 3  Million or more demonstrators would have a bigger impact on the “System” which is “built on the Banks” by quietly withdrawing all their money from their bank accounts. This, he suggested, would encourage the President and his cohorts to “listen to us differently”.
Word has spread like wild fire
His idea has found thousands of supporters and word has been spreading like wild fire around the social networks Facebook and Twitter. His interview for a small regional station has now created a  huge movement  on the internet with the buzz increasing everyday. The talk of action is real and now a date has been set to put his idea into practice.
The on line revolutionaries have decided that 7th December 2010 is THE date for action and they are planning to empty their accounts.
The Revolution goes International!
The Buzz is so strong on the net that the idea has gone international and momentum is building. People everywhere are angry and especially in countries where the banks have failed their customers like the UK, USA, Greece and very recently Ireland. There is a very real chance of international action on the same day by ordinary people to show their distrust and displeasure with Government and Banks.
This is not surprising given the power of social networking and it could be the first popular revolution organised via this medium.
Be careful with the cash!
A word of warning to those who take their cash out – keep it safe. The problem also these days is what currency your cash is in. Euros, Dollars – both are volatile and could lose significant value during these troubled times.
Anyone looking for a safe haven for their cash should think of the real currency of the 21st Century which is tangible in value, not linked to debt and a personal asset that keeps it purchasing power through the ages – physical Gold.
It can’t be printed (by the Fed) and it’s a precious, extremely useful, rare metal in high demand and limited supply.
Find a good deal, buy some and lock it up!
The Banks have all made fortunes with our money and never shown remorse for their failings.
Soon they will feel the natural justice of their victims and the people are getting ready for Judgement day.

First revealed here as a World Exclusive in English “Eric Cantona’s French Revolution”  (Oct 22) explains the views of the ex-Manchester United player on the French strikes and his suggestion for “another way” of attracting the attention of President Sarkozy and his Government. His suggestion was that the 3  Million or more demonstrators would have a bigger impact on the “System” which is “built on the Banks” by quietly withdrawing all their money from their bank accounts. This, he suggested, would encourage the President and his cohorts to “listen to us differently”.

Word has spread like wild fire

His idea has found thousands of supporters and word has been spreading like wild fire around the social networks Facebook and Twitter. His interview for a small regional station has now created a  huge movement  on the internet with the buzz increasing everyday. The talk of action is real and now a date has been set to put his idea into practice.

The on line revolutionaries have decided that 7th December 2010 is THE date for action and they are planning to empty their accounts.

The Revolution goes International!

The Buzz is so strong on the net that the idea has gone international and momentum is building. People everywhere are angry and especially in countries where the banks have failed their customers like the UK, USA, Greece and very recently Ireland. There is a very real chance of international action on the same day by ordinary people to show their distrust and displeasure with Government and Banks.

This is not surprising given the power of social networking and it could be the first popular revolution organised via this medium.

Be careful with the cash!

A word of warning to those who take their cash out – keep it safe. The problem also these days is what currency your cash is in. Euros, Dollars – both are volatile and could lose significant value during these troubled times.

Anyone looking for a safe haven for their cash should think of the real currency of the 21st Century which is tangible in value, not linked to debt and a personal asset that keeps it purchasing power through the ages – physical Gold.

It can’t be printed (by the Fed) and it’s a precious, extremely useful, rare metal in high demand and limited supply.

Find a good deal, buy some and lock it up!

The Banks have all made fortunes with our money and never shown remorse for their failings.

Soon they will feel the natural justice of their victims and the people are getting ready for Judgement day.

China, QE2 and the rising price of Gold of Gold

Wednesday, November 10th, 2010

China is set to buy and continue to buy Gold in the coming years as its excess of Forex reserves spiral upwards. At present 1.7% of this is invested in Gold but as they are due to run a further surplus of $2.7 Trillion over the next five years they will have to buy between 1,000 and 1,500 tonnes just to match the current ratio. There is a strong possibility that they will buy even more to avoid exposure to further dollar devaluations.

Introducing QE2!

How strange that Bernanke’s QE2 will inevitably continue this cycle of dollar devaluation. The only reason he introduced QE2 is because he has no other ideas or measures in his locker. He did it for something to do as doing nothing looks bad. Well time will be the judge but the short term effects won’t last long and ultimately will solve nothing. His hopes are that he survives office before the “Bubble” bursts but the legacy of QE2 will not be good. Hyperinflation may just be around the corner followed by a total devaluation of the Dollar, leading to it losing its role as a reference currency.

No gold left in India!

All of these factors are contributing to the increasing world demand for gold. The Indian market ran dry of gold coins recently as the “season of lights” demand outstripped supply. The Chinese private investment market has all but doubled demand in the last year to 143 tonnes (from 73 tonnes 2009 and 17 tonnes 2008). Predictions are that this will rise but at what rate? One can guess that it will be significant.

So what will happen to gold prices?

Well today spot prices have broken another record by passing the $1400 an ounce ($1404.90). A weak dollar, increasing demand from central banks and expanding private markets will push the price through record levels to $1500 an ounce by spring break at the latest and even $2000 by Q4 next year.
Whenever the credit, currency or debt “Bubbles” burst the sky will be the limit for gold – literally!
If you believe this is fiction check the facts on gold prices for yourself on the links below and remember that since 2008 the rules have changed ……….. and any so called correction for Gold is likely to be up!

Paul McGowan

Investing in World Debt? …..or a real, tangible, physical asset?

Monday, October 25th, 2010

Invest with trepidation because most traditional ways like savings accounts, property, government bonds, shares, hedge funds etc are inevitably taking a risk by sharing someone else’s debt. Your investment helps them create even more credit and therefore fictitious money. This credit enters a worldwide cycle that continues to spiral upwards. World debt is out of control and nobody has an answer to “if” it can ever be paid. The so-called strongest economy in the world, the US, currently has an annual budget requirement of $3.5 Trillion. US Government income is $2 Trillion annually and this could decrease with decreasing tax revenues caused by unemployment. It therefore borrows $1.5 Trillion just to stand still.
Who is lending them this money?
What is it guaranteed against? (is it guaranteed?)
How much interest are they paying?
Can they afford the interest?
Can they ever afford to repay it all back?

Writing the questions is the easy part but finding coherent answers, well…
Truth is the US is fabricating at least $1.5 Trillion a year to balance their books and the money markets are complicit in this deceit as it’s also in their interest to carry on fictitious “credit trading” which is still making them money. One has to also imagine the amount of interest being paid for this level of debt and not forget that this significant amount has to be added to the annual deficit, therefore compounding it’s enormity.

There is not enough money in the world to cover current World debt and it’s increasing daily (as is the interest due on all of it).

World annually budget deficits are estimated at $6 Trillion a year.
Where is or who has this amount of money available to lend?
Historically paper money is created in line with National Gold reserves so all money should have a gold equivalent. This is no longer the case because the world needs $6 Trillion a year to stand still and cover it’s deficits but annual world production of gold only equals $100 Billion.
Every time we “invest”, pay our mortgage or simply put our salaries in the bank we are encouraging this cycle and allowing more debt to be created to apparently pay off the current debt. This is like paying off a credit card bill including interest with another credit card that has even higher interest. The first debt is paid by creating a second even bigger and more costly one.

Why would anyone want to invest in this?

Probably because their choice of options is limited to traditional methods by the very people creating the debt.
What they don’t want you to do is withdraw your money from the cycle because that hurts them. They don’t really care if your investment makes money eventually, just like pensions are eroded with excessive management fees & middle men commissions.
BBC’s Panorama recently revealed how HSBC took £99,900 from a £120,000 pension pot ie. 80%. Obviously their only interest is getting your money now and making excessive amounts themselves. We’ve seen too many examples of their excuses when honest folk realise a lifetime of paying in = heartbreak and “sorry” at term because their investment has evaporated in the system of debt.

Everyone except the Brits are doing it!

So where is the sanctuary for my money?
Well plenty of Central Banks, Corporate investors, Private fortunes and populations across Europe are turning to Gold. Why? Because it’s real, physical gold and at term will still be there and worth something. It is also NOT somebody else’s debt and therefore NOT reliant on some fund or company staying in business for however long. Gold is a real, tangible asset that has been valued by humans for over 6000 years. We can’t invent gold we have to mine it. There is a limited world supply and increasing demand year on year. Industry needs it, Dentists need it, Jewellers need it and Bankers need it to guarantee their currency and circulating money supply.

The truth is the World is bankrupt but nobody wants to admit it!
It’s time to hold on to your valuables to survive the next crisis and Gold has and will always be valuable.

Strangely enough the US has a big problem here because there is $15 Trillion in the banking system and only $0.35 Trillion of gold reserves to back it up.Technically there should obviously be $15 Trillion of gold. This means that if every dollar was taken back to the bank to be cashed in against it’s value in gold $14.65 Trillion would be worthless!!! Do you now see the problem? Even the less mathematically proficient can see this problem is so big it’s maybe impossible to fix – ever!
The economic model for this is simple and is based on GREED.

Gold is not somebody else’s debt!

If you really want to preserve personal wealth in a durable form for the future then the choice is simple:

1. Invest into the Black Hole of World debt?
2. Invest into a debt free, real, physical asset that you control and can manage how you wish?

Don’t be fooled by thinking that you can’t do something because you’ve never done it before or because the option is made difficult by those who wish to profit from you.

Gold is Good
Debt is Bad
Gold will still be real
When the paper debt’s been had!

It is true that the value of Gold can go up and down but remember we live in a different world since the sub-prime and Banking crises. Observe the trends in Gold prices over the last ten years at http://www.kitco.com/charts/livegold.html and judge for yourself!

References:
Thanks to Jason Hommel at

http://www.24hgold.com/english/news-gold-silver-low-inflation–massive-gold-rise-.aspx?article=3160143892G10020&redirect=false&contributor=Jason+Hommel#Commentaires1_tableCom

BBC Panorama “Who took my pension?” 04Oct 2010

http://www.smartmoney.com/compoundcalc/

Eric Cantona’s French Revolution!

Friday, October 22nd, 2010

It’s worth a thought – a revolution without a drop of blood, a shot, any forms of arms and not even a mass gathering or peaceful march on Parliament. Then how I hear you ask. Well according to our well-loved french sage Eric Cantona nothing could be simpler or more powerful. In a recent interview now viewed widely on youtube Eric suggests a novel yet ultimately effective and poignant way for the French to draw the attention of their unfeeling and uncaring President Sarkozy. He suggests that people should quietly go to their bank and withdraw all their cash. He reckons that this may be the best way to get the establishments attention by bringing down the banks who are at the heart of the system and he may just have a point. The only language that the politocrats understand is money and plenty of it for themselves. At a time when Sarkozys pushing through crushing reforms of the average pension he is currently due to net at least a cool €18,000 a month (and rising) from the state when he decides to retire. He has absolutely no concept of the reality of everyday existence for most of his “subjects” yet he expects them to always pay the price. Remember how having gained the presidency he immediately gave himself a huge pay rise. Is it just a case of “Well I’m alright Jack!”? – I think so. Maybe Eric has got a point. Maybe we should all take ownership of our cash so the banks can no longer use it for their own profiteering ends. Maybe it’s about time they realised enough is enough and maybe it’s about time real people took back control of their own destiny.
Vive Eric, Vive La Révolution!!

Ps.What do the French do with all this money? – probably what they’ve always done when a crisis looms they buy Gold coins to preserve the value of their wealth. Their favourite is the beloved Napoleon and there are signs recently that these are in high demand and the prices are rising. Their rationale is that Gold has and always will see them through the hard times because it has always been the reference we use to value currencies or when they fail commodities.

Transcription and translation
Nantes 8th October 2010

I don’t believe that we can …. I don’t believe that we can be completely happy when we see poverty all around us. Or we’re living in a cocoon, sealed off from everything … but there is a possibility and something we can do Well, it annoys me a little that there going … oh it doesn’t really annoy me at all Today it’s important to defend ourselves
But today to go out into the streets, what’s that? Today to go out protesting in the streets – what’s that? They turn everything back against you.
Today it’s no longer the way we have to do things.
It’s great to speak of Revolution and taking up arms but you can’t go around killing people

The revolution is really simple to make. The System , what’s the System’s , the System’s built around the Banks …The System is built on the banks
So if you want to destroy the System you do it by taking down the banks
So instead of 3 Million people being in the street waving their thingys, these 3 million people should go to their bank and take their money out, then the banks collapse!

3 Million, 10 Million, 10 Million People, everyone, and then there’s a true threat, and then there’s a true revolution, a revolution should be against the banks, it’s not complicated. Instead of going on the street and doing kilometres in the car to get there, go to the bank, in your village and take your money out – and if loads of people take their money out the banks collapse – no weapons no blood nothing at all, just like Spadgeri (a guy who robbed a large bank through the tunnels one night), it’s not complicated , and then, they’re going have to listen to us differently, Unions… you have to help them with ideas sometimes!!!!

Gold, an alternative Currency of Confidence?

Monday, October 18th, 2010

Where would we turn to if the known currencies of the world suddenly devalued and became worthless in real terms?
Throughout history there have been instances when all faith has been lost in the official currency usually because it has become worthless and therefore all confidence has been lost. However, people have always looked for an alternative to maintain commerce and everyday survival. This has sometimes taken the form of bartering but its limitations are often in the assignement of some recognisable value to a wide range of goods and services. There has to be some common denominator and unit value that is commonly recognised and therefore allows the cycle of trade to turn.
During the French revolution the state coffers were completely empty and so the emerging Constitutuional Assembly created a system based on “assignats” which gained their value through selling off assets of the church. These “assignats” would be guarenteed by the state and the objective was to reconstruct a functioning economy. However, they became greatly over subscribed to the tune of 47 billion causing inflation, zero rates of interest and ultimately ended in collapse.

Alternative Currencies are not new!

Around the world there are numerous examples of local currencies which have been introduced to promote local business, local produce, customer loyalty and awareness to trade issues and climate control. They all tend to be run in parallel to the national currency but are based on creating a thriving local, fully functioning economy incentivised by promotions and discounts. In recent years they have been launched in the UK as part of the Transitions Towns initiative and these include the Totnes Pound, The Brixton Pound, The Stroud Pound and the Lewes Pound. Lewes had previously had introduced its own currency in 1789 which lasted until 1895. These pounds are obtained by exchanging pounds sterling for equivalent face value “local” pounds. Various denominations have evolved such as th 5, 10 and 21 Lewes pounds issued in 2009. There have also been schemes in the US such as the BerksShares in Massachusets which are bought for 95 cents yet worth $1. These are available in 1,5,10,20 &50 denominations. Similarly there have been examples in Canada with the Toronto Dollar, the Calgary Dollar and also in Australia with the Baroon Dollar. Most of these initiatives have been launched since 2006 or later and may well be a local solution in the fightback against the worldwide economic problems. They are viewed as trustworthy currency with real value to the local economy and in certain cases well-meaning because of the positive impact they have on local services and properity. Although these models function locally they do demonstrate a widening appeal for taking control of currency and introducing stability to the functioning of an economy.

Are National Economies really functioning?

If they are then for who are they functioning- surely not the majority?
What’s happened to the Utopia of Globalisation?
One has to ask where we are heading with the daily drivel of mixed messages to suit the medias demand for sound bites and politicians short term ambitions for themselves far outweighing the long term requirements of the National interest (daily or decades of proof – take your pick!).

What can be said of today’s global currencies which are currently being prostituted by their governments in a global exchange war to meet their “protectionism” objectives by stealth. Who is controlling their value and to what end?

The “trust” in these currencies is gradually being eroded to the point that Central Banks and the big ”clever” money of investors are seeking sanctuary in what may be the only true trustworthy currency – physical gold.
This is fine for the multi-billionaires of this world like George Soros who can afford vaults of the stuff but what about the smaller investor.
A clue may be in Switzerland where Faude & Hauguenin, celebrated goldsmiths, have recently produced 2,000 Goldhans for a private customer who is a swiss businessman with specialist expertise in the gold market. These beautiful pîeces are 99.99%, 31.1g of pure gold with an individual value of 1,400 swiss francs ( £915 ). Was this really his own idea? He is in negotiations with several banks about the purchase of Goldhans and he’s even considering a move to make them official currency and legal tender. Is this a statement of intent regarding the lack of confidence in the Euros, Dollars or Swiss Francs he would normally use – obviously for him the value of Gold is a sure one. Is it a statement of intent regarding the destiny of any paper currency that has lost the market confidence its value is based on?

Is it time to think that Gold may well become the only currency we can truly rely on?

It may also be time to consider exactly what is a trustworthy currency for the future and will it be issued by central banks or entrepeneurs we can trust?
For the moment it’s not possible and the Swiss National Bank forbids the circulation of all “new” money. These Goldhans are not yet ready to take the place of the Vreneli and in legal terms they are merely round ingots with serial numbers in a limited edition.
So why raise this example? Well it demonstrates the interest that some may have in creating a “private” money or currency of confidence at a time when traditional currency is losing its appeal on a daily basis in the unpredictability of ever fluctuating foreign exchanges around the world.

So, could this Swiss busineesman’s Goldhans one day become a type of alternative to the so called real currencies? A Currency of Confidence with ongoing real lasting and meaningful value? A dream or reality? We shall see……. when the austerity measures around Europe are judged, deficits reduced or not and belief in the status quo of currency and its current custodians is ultimately maintained or evaporated.

Paul McGOWAN

The extraordinary properties of gold explained by Ian Fleming.

Thursday, November 5th, 2009

There are no Swiss banks in Goldfinger although “Goldfinger, in ready money, is the richest man in England. In Zürich, in Naussau, in Panama, in New York, he has twenty million pounds’ worth of gold bars on safe deposit.” But Goldfinger uses Switzerland as the hub of his gold trafficking (which was illegal at the time in some European countries). There he has a discreet plant where he melts down car parts made of solid gold to then discreetly bank them or ship them on. Switzerland never had capital controls that prevented the free flow of gold or other precious metals, and this makes it even today the world’s first market for gold. In the movie, Goldfinger uses this Swiss freedoom to his advantage.


Colonel Smithers explains the British secret service’s interest for Mr Goldfinger operations during the dinner at the Bank of England:

‘The great thing to remember about gold is that it’s the most valuable and most easily marketable commodity in the world. You can go to any town in the world, almost to any village, and hand over a piece of gold and get goods or services in exchange. Right?’ Colonel Smithers’s voice had taken on a new briskness. His eyes were alight. He had his lecture pat. Bond sat back. He was prepared to listen to anyone who was master of his subject, any subject. ‘And the next thing to remember,’ Colonel Smithers held up his pipe in warning, ‘is that gold is virtually untraceable. Sovereigns have no serial numbers. If gold bars have Mint marks stamped on them the marks can be shaved off or the bar can be melted down and made into a new bar. That makes it almost impossible to check on the whereabouts of gold, or its origins, or its movements round the world. In England, for instance, we at the Bank can only count the gold in our own vaults, in the vaults of others banks and at the Mint, and make a rough guess at the amounts held by the jewellery trade and the pawn-roking fraternity.’

‘Why are you so anxious to know how much gold there is in England?’ [How much gold is there in England today?]

‘Because gold and currencies backed by gold are the foundation of our international credit. We can only tell what the true strength of the pound is, and other countries can only tell it, by knowing the amount of valuta we have behind our currency [valuta = the value of a currency expressed in terms of its rate of exchange with gold (or some other currency)]. And my main job, Mr Bond-‘Colonel Smithers’s bland eyes had become unexpectedly sharp – ‘is to watch for any leakage of gold out of England – out of anywhere in the sterling area. And when I spot a leakage, an escape of gold towards some country where it can be exchanged more profitably than at our official buying price, it is my job to put the CID Gold Squad on to the fugitive gold and try get it back into our vaults, plug the leak and arrest the people responsible. And the trouble is, Mr Bond-‘Colonel Smithers gave a forlorn shrug of the shoulders-‘that gold attracts the biggest, the most ingenious criminals. They are very hard, very hard indeed, to catch.’

‘Isn’t all this only a temporary phase? Why should this shortage of gold go on? They seem to be digging it out of Africa fast enough. Isn’t there enough to go round? Isn’t it just like any other black market that disappears when the supplies are stepped up, like the penicillin traffic after the war?’

‘I’m afraid not, Mr Bond. It isn’t quite as easy as that. The population of the world is increasing at the rate of five thousand four hundred every hour of the day. A small percentage of those people become gold hoarders, people who are frightened of currencies, who like to bury some sovereigns in the garden or under the bed. Another percentage needs gold fillings for their teeth. Others need gold-rimmed spectacles, jewellery, engagement rings. All these new people will be taking tons of gold off the market every year. New industries need gold wire, gold plating, amalgams of gold. Gold has extraordinary properties which are being put to new uses every day. It is brilliant, malleable, ductile, almost unalterable and more dense than any of the common metals except platinum. There’s no end to its uses. But it has two defects. It isn’t hard enough. It wears out quickly, leaves itself on the linings of our pockets and in the sweat of our skins. Every year, the world’s stock is invisibly reduced by friction. I said that gold has two defects.’ Colonel Smithers looked sad. ‘The other and by far the major defect is that it is the talisman of fear. Fear, Mr Bond, takes gold out of circulation and hoards it against the evil day. In a period of history when every tomorrow may be the evil day, it is fair enough to say that a fat proportion of the gold that is dug out of one corner of the earth is at once buried again in another corner.’

Ian Fleming – “Goldfinger”

The last country to still use gold as a currency

Monday, November 2nd, 2009

The local shop is run by two Chinese who get by in Taki-Taki, the local language. They sell almost everything; food of course but also tools, shovels, generator spare parts, big hoses, a sort of thick plastic carpet, like a hair mat. The prices are displayed: 0.2 or 0.5 or 0.8. I ask Dwight what currency it is in Euros, Surinam or US Dollars and Dwight looks at me as if I was an idiot, laughs again, as is his way when he has not eaten and a Parbo beer is just a miserable starter, irrespective of whether it is a Sissi (250 ml), Decent (500 ml) or Olson Beast (1,5 l), and starts tapping his thigh; “good grief, you don’t know, it’s gold, we pay for everything with gold here!”

Extraction from the book: J’Aurai de l’Or by Olivier Weber, taken from the film: La Fièvre de l’Or

The virtues of a reliable currency when all the others have disappeared

Monday, November 2nd, 2009

Could eggs be a useful currency?

Let’s imagine it’s 2018. The western world has gone through years of deflation then the flame returns as massive inflation repeating what happened in Germany in 1923.

John was still selling luxury yachts on the Côte d’Azur in 2008. Following the financial crash and the economic crisis that followed it, he now rears a few chickens on a farm on the outskirts of a small town in the Auvergne. In this article, he talks to us about his most recent discovery in a world where every day brings its new rules. He explains to us the characteristics of a good currency.

I arrive in the village square which is already full of people and a lay out my farm produce at my feet: pairs of chickens with their feet tied together and baskets of pats of butter wrapped in leaves, lying on a base of fresh and smooth eggs. I have some concerns because the Euros, which we usually use in the country, they have been refused by everyone since the State started issuing them willy-nilly. The screens where you enter the amount for a credit card transaction are no longer big enough to display the amounts that have to be paid for our everyday requirements. We are now a country without currency. What’s going to happen?

I have set up next to a pottery stall because I want a few of the multicoloured bowls that he has lined up on a wooden trestle. A neighbour joins us carrying shawls and scarves on his shoulders and I would like to choose one or two of them for my wife. We start talking. We realise that each of us wants something that the other owns. This is a good thing. However, after only a few moments of negotiation, we are completely engrossed on our butter-pottery, chicken-shawl, shawl-pottery, shawl-eggs, etc. exchanges that we don’t know where we are. It is at this point that I suggest we use an egg as a unit. Everything becomes clear: we agree on an estimated value for my butter, my chickens, their shawls and their bowls expressed in eggs. We negotiate a bit more but eventually the deals are struck.

My eggs have not been touched but they served as a common denominator as the retired London trader, who now rears snails, explained, they satisfied the first requirement of a currency: that of measuring value. They have become an accounting currency and I started looking at them differently.

An osteopath that I know comes by: he’s a good man and had quickly replaced my shoulder when it became dislocated the previous week. “I am not ungrateful” I said to him, “and every service merits its reward. Take something from my wares that you think is appropriate.” He thanks me but hesitates because he already has plenty of what I have available. “Give me some of your eggs anyway” he says, “Eggs can always be swapped for other things.” This means my eggs have now obtained a new quality, they have become a trading currency, they satisfy a second requirement of a currency: they are an instrument of exchange; They are really being honoured.

An hour later, as I left the Café du Commerce where I had ended the morning, I met the osteopath. “I’ve kept a dozen of your eggs” he told me, “I am going to use them to buy some pasta tomorrow; the store has sold out today.” My eggs are going to satisfy a third requirement of a currency, that of being a reserve of value, an investment instrument. They have become a true currency.

Would it not be helpful given this if I gave my eggs a higher value than I had up until now? Does this flattering choice not justify that I increase their price? They have acquired a monetary value that is in addition to their commercial value and I am delighted. However, two days later, my neighbour visits me and inadvertently provides the answers to the questions I have been asking myself: “I have heard that the osteopath, even though a careful man, has tripped on a stone and fallen, his basket overturned and his eggs have become an omelette – to the great pleasure of the children who were watching all of this.” I concluded from this that my arguments are correct for a good currency but unfortunately eggs are not a good currency and all their glory disappears before my eyes…

I think I will get the old Sovereigns out from their hiding place behind the bookcase, tomorrow…

FRANCAIS ESPANOL ITALIANO CHINESE

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Thoughts
"For a mountaineer, the important things are the effort, the posture and the muscles. The rope that holds him serves no purpose when everything works but it gives him a sense of security. In the same way, all gold does is ensure confidence; it's a safe haven."