Thursday, 24 January 2008

US Paper Money, Gold , and The Credit Crunch

At the moment the world economic and financial disasters make it impossible for me not to make consistent inferences about the relationship of paper money and world economy.

My friends are amazed at the amount of knowledge that I have gained in the past five months since I started collecting and learning about world paper currencies.

Gold was a valuable currency, paper money on the other hand isn't. Instead paper money's value depends on the trust and confidence the society has in the issuing body, which is usually the state government. Why we trust the governments though is a mystery when you consider that the government of the UK decided to sell off its gold reserves when gold's price was plumenting and got to an all time low of $260 per ounce. Well its current value even with the credit crunch is over $900!

The problem is state governments usually get it wrong, more paper money is issued and circulated than should be which leads to inflation. No world government could redem their paper money in gold, silver or any other precious metal. So our economies are based on a lie anyway,
So here is my take on the economies of our society and how to co-exist with the continuous mismanagement of the economy.

  • Don't spend more than you have coming in.
  • Don't buy on credit/credit cards if you can't afford to pay back the money in a couple of months.
  • Don't get a mortgage on a house way beyond your means, in the hope that things will get better, because if they don't you'll be out of a house and on the streets.
  • Do look for ways to augment your income, so that the current credit crunch will not get the better of you.
The value of the dollar is in such an unstable state that apart from the interest rate cuts, the rouge trader who lost $7 billion and the vast sell-offs witnessed this week on the stock markets, we also have a model who is insisting that she doesn't want to be paid in US dollars.

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