Wednesday, September 7, 2011

Race to the Bottom Intensifies. Gold to Rise.


Yesterday the Swiss Central Bank took the last fiat currency on planet off any form of 'gold' standard. Well, it wasn't really on a gold standard, but it was treated as a safe haven currency. The Swiss have a very stable government and respected history. It was almost as 'good as gold'.

They have pegged the Swiss Franc to the Euro. This to remain competitive in the export market. An overvalued and popular safe-haven franc was causing export prices to rise. They weren't getting enough income.

So now all currencies are in a race to the bottom in order to remain competitive. Gold will be the benefactor of this madness as it will be revalued upwards as the currencies fall.

You see, gold is true money. The more currency you have the more currency it takes to swap it with physical gold.

In the 'good 'ol days', currency used to be a claim on a certain amount of gold. Before 1933, if you had 20 dollars in your pocket, you could go and ask for one ounce of physical gold, and get it. Currency was actually as 'good as gold'. However, since the link with gold was broken in 1971, your dollar is merely a claim on the next dollar or IOU, maybe a bond. It only has value for as much confidence in it exists.

The nature of money and the system we work under, now comes more into focus.

As Mike maloney says, it's only our labour, our ideas, our work that gives the currency value. He also says that the cruelest joke of all is that we then pay taxes to the government who then hand that money over to the Reserve Bank to pay a bond that was originally created by them from nothing.

The system is setup so that we need to borrow into existance more currency every month or the whole currency supply begins to collapse. This is because of the interest due on previous debt created.

For example it took 200 years to go from zero dollars in existence to $850 billion, then came the financial crisis of 2008 and it has only taken three years to more than triple that base money amount. This is the power of exponential compounding on a currency system which has no peg to a fixed asset; like gold.

The franc to euro peg will work for a while. But with the possibility now that all your wealth is being debased through fiat currencies (currency is not money), then your labour and future is being stolen.


Gold in New Zealand dollars: $2266.12 per oz
Previous all time high: $2279.35 per oz (23 Aug, 2011)

Silver in New Zealand dollars: $50.80 per oz
Previous all time high: $59.19
per oz (30 Apr, 2011)
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The Anglo-Far East Company
The Original Private Gold and Silver Bullion Custodian
Your reference: an-001
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