The Future Of Gold And Fiat Currencies

The reason that gold has remained a valuable commodity is that in all the centuries that have passed and the different monetary systems that were introduced and abandoned and then reimagined, gold has been constant. When it comes to currencies, nothing beats gold. However, it cannot be used a common fiat currency because of the following reasons

#1. It is rare

There are large portions of the earth’s crust that contain gold but cannot be mined because it would be difficult and expensive beneath the levels we have already mined. This is why Gold buyers Melbourne buy scrap gold because there is less gold in the earth than there is in the world. Without these buyers, we would have run out, inevitable.

#2. It is indestructible

Gold does not corrode. Although it is a soft metal if it does get damaged, it can be sold for a good price and recycled to make new products. 

#3. It is compact

It is said that if the gold that was mined was collected and melted into one solid block it would have a base the size of a football field and be 1.5 meters high. 

# 4. Gold is malleable and it can be easily divided into smaller pieces. 

Gold is so soft, it is easy to reshape and divided into small pieces.

#5. Gold is hard to find

Gold is hard to find. There have only been a few major finds of gold in the world, notably in South Africa, Australia. So far, the amount of gold that is mined every year has only increased by no more than 2%. 

Governments used gold to back their currencies. This means that you could exchange a unit of any currency for gold. Currency notes were really more like certificates for different weights of gold. You could exchange $35 for an ounce of gold. 

Governments withdrew their rights to exchange currencies for gold. The gold standard was restrictive for other major currencies. If you wanted to buy something in the US using U.S currency you needed to exchange it to US dollars but you would have to go to America to exchange your currency because only the U.S government could exchange your foreign currency for dollars because they were the ones that held the gold. 

In 1971, US president changed all that. The world government currencies have been ‘fiat’ currencies. They do not represent anything tangible only what the government decree to be legal tender. All the world’s currencies are fiat currencies however, the value of gold is independent of government decrees. Fiat currencies float against each other with values relatively going up and down in response to the economic trends. Gold is valuable not because the government says it is or isn’t. 

Gold is used as investment, a store of value. This includes gold coins, gold bars and gold jewellery. Having gold jewellery is like storing something valuable personally. Gold is also used for non-investment uses like electronics and dental products. 

Gold is reusable. Almost all the gold has been mined is still being used today, silver on the other hand has been lost because it is much harder to recover. Gold on the other hand can be recovered. It is sold to gold buyers Melbourne who in turn sell it to gold recycling companies.

Fiat currencies aren’t as reliable as gold. Governments have either created more collapsing the economy into hyperinflation. They create more fiat currencies due to some economic or political crisis. Various countries have had various currencies at various times. Some were abandoned because of the economic collapse and failure of the currency. 

– The oldest currency is the Chinese bark currency that was used 1350-1360. It ended in hyperinflation.

– Banque Royale’s Notes were issued in 1716 only to collapse in 1720.

– After the American Revolution, the US Congress issued Continental bills in 1775 but it became worthless by 1780. 

– In Weimar, the Germans issued Marks after WWl from 1919 but by 1924, the had lost the value.

The US dollar we have come to know is relatively new and it has not yet fallen into the hyperinflation trap. However, experts don’t ask the question of whether this will happen but if the dollar keeps getting weaker the question of when can be answered quickly.

 

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