Wealth refuge in Gold against state capitalism

The Gold Reserve Act of 1934 prohibited private ownership of Gold and non public ownership. Gold could only be used for industrial purposes. The Gold Reserve Act of 1934 assured a fixed weight of Gold at 13.71 grains equal to one dollar or $35 an ounce. This gold standard for the dollar stuck between the years 1934-1971. In 1971, Nixon raised the price to $38 and again in 1973 to $42.22.

Gold, Oil and Inflation affects the value of the dollar. There is not enough gold in the world to serve as the medium of exchange in international trade. The most popular currency for international exchange has been the dollar. The dollar is the leading currency. The dollar is the international currency for pricing and payment of commodities.

President Nixon eliminated the 25% gold backing for Federal Reserve deposits. As soon as the dollar currency lost its gold backing, it became a commodity. The dollar as a commodity can be bought and sold on the market in response to world anxieties. The result of the dollar moving away from gold backing was a floating exchange rate that often invited over-speculation in foreign currencies. Banks could go broke from a price movement in the wrong direction. Supply and demand drove the exchange in relationship to other foreign currencies.

Inflation occurs as the money supply increases faster than the output or Gross Domestic Product, the sum of a products and services in the U.S. When government spends more than it brings in taxes is causes a budget deficit. To easy monetary pressure, the Federal Reserve increased the money supply by printing more money. The increase in money supply caused prices to elevate higher as the buying power of the dollar topples and dropped. Inflation in turn caused labor wages to go higher and corporations to raise prices as their profit margins drop. Higher oil prices cause inflationary forces on prices. High oil prices signify an energy crisis. High energy prices caused by political and global disruptions drove high oil prices and causing securities to devalue. Historically, oil money from the Middle East went into U.S Treasury Securities. However, realizing the trends caused by inflation as it related to securities valuations, Arab money managers shifted into buying Gold. Gold became the commodity to provide valuation stability. So, demand for gold increases as shortages of commodities like fuel and food become greater. In shortages and military oppression, Gold is used to buy freedom.

Inflation causes the decline of U.S currencies. Inflation increases debt as cheap money is used to pay even cheaper money in the future. Cheap credit fuels monetary growth. Both President Ford and Carter encouraged more bank credit and distained gold. Every level of debt affects the next level of debt. Failure in debt causes higher exchange floating rates. Debt failure can cause instability of International rates. Banks can go broke over heavy foreign exchange loss.

At some point prices climb to high and a recession starts. The expansive monetary policy has caused prices to climb to high for the market to support and resistance is encountered. Companies start reducing staff and disposing unprofitable subsidiaries. As inefficiencies threaten profit margins companies seek government assistance to subsidies and guarantee against debt. Government guarantees of debt provide relief for certain major corporations of national interest, municipalities, and mass transport industries. In essence govern aid becomes the state capitalism providing jobs.

Holders of wealth seek refuge from the rigors of state capitalism. The wealth buy gold as an objective tangible that continues to appreciate in value like: old antic cars, rare coins, stamps, Chinese porcelains, and jade.

As the recession proceeds it has the effect of correcting the overvaluation: money supply contracts, labor becomes cheaper, banks have more money to loan and interest rates drop, companies increase productivity, and there is an axiomatic abundance. The result is positive productivity development.

Gold maintains it's originally value against the force of inflation. The gold cover clause states that a portion of the U.S treasury amount must be covered by gold in terms of dollar amounts not ounces. Gold value increases as price increases offset the inflationary affect.

Why has gold prices climbed to over $400 and ounce? The primary force has been rich Middle East buyers of gold. The Dresner Bank took money from Middle East oil and starting buying sizable block of stock in Krupp and Mercedes. In Gold auctions, bids by Dresner, for all the gold offers demonstrated gold had become an efficient commodity. A high trade volume was needed. The International Monetary Fund introduced large volume sales of gold and made it possible for oil-rich interest from the Middle East to enter into the market.

The dollar was the internationally reserved currency for price and payment of commodities. However, in 1979 Sheik Yameni, Saudia Arabia, oil minister shocked the U.S by telling them if the dollar currency dropped 5 percent in its value they would move away from it. The theory was the Saudis were experiencing with a new currencies hold a variety of commodity securities.

Africa demonstrated gold could be used as a medium of exchange. Africa used gold to secure the exchange of oil between Saudi Arabia and United Emirates. This caused sharp surges in the price of gold. At the time the dollar remained weak but stable against other foreign currencies. Gold prices jumped from $270 an ounce to $375. If oil continues to be used as a medium of exchange price increases are expected.

Africa produced 56% percent of the world gold and is rich in energy in Angola and Nigeria.