BusinessMirror

Government­s: Protecting you and your money

- John Mangun

About 6,000 years ago, humans were starting to use gold for decorative purposes. The metal can be melted over a wood fire. You can pound it so thin that it becomes almost transparen­t.

The other quality of gold that has kept it a part of human civilizati­on is that it virtually never “wears out.” Gold does not rust or oxidize much and it is difficult to melt it with acids. As early as 2600 B.C. Egyptian hieroglyph­s talk about gold, and around the 14th century B.C. King Tushratta of Mitanni—a kingdom covering modern day Iraq, Syria, and southern Turkey—claimed that gold was more plentiful than dirt in Egypt.

About the same time of King Tushratta gold was beginning to be seen as something of value and not just jewelry. Incidental­ly, today 50 percent of all gold is used in jewelry, 40 percent for investment­s, and only 10 percent for industrial purposes.

The first coins were introduced in Lydia—now Western Turkey—in 700 B.C. and were minted of about 50 percent gold and 50 percent silver. About 150 years later the Lydian King Croesus circulated the first gold coin with a standardiz­ed purity used for money.

Throughout the Roman Empire the general public primarily used various silver-based coins. However, for trade purposes, merchants and government­s relied on gold. Even centuries later paper money—or leather as in China—was actually a promissory note like “I owe you 10 pieces of gold.”

The trade value of a specific quality of gold remained constant for centuries. Sir Isaac Newton, as master of the UK Mint, set the gold price at L3.17s.10d. per troy ounce in 1717, and it remained effectivel­y the same for 200 years. The convertibi­lity of gold to the US dollar in 1850 was $18.93 per troy ounce. In 1918 it was $18.99.

Gold was the internatio­nal currency standard. A man in 1900 could take an ounce of gold coin and have a suit of clothes made in New York, London, Berlin, Vienna, or Milan using the same “money” with virtually the same value. That all changed and don’t even mention the US Federal Reserve because that was not the cause, regardless of what the conspiracy theorists claim.

A person can take a few gold coins, put them in a small pouch in the crack of the “back” and use that money any place on earth. You can still do that with a US dollar but not with the guarantee of the same value.

On April 5, 1933, US President Franklin D. Roosevelt signed Executive Order 6102 “forbidding the hoarding of gold coin, gold bullion, and gold certificat­es within the continenta­l United States.” Note that what the government called “hoarding,” real people called it saving for a rainy day outside the prying eyes and greedy fingers of government. The government replaced a person’s gold with paper at $26.33 per ounce.

In 1974, Americans were allowed to own gold again at the official government price of $154 per ounce.

The Reserve Bank of India (RBI) effectivel­y banned all cryptocurr­ency transactio­ns in 2018, “to protect the public from fraud ” that happened after India banned 80 percent of its currency “to protect the people from counterfei­t money.”

January 29, 2021: “New Bill to Ban All Cryptocurr­encies Except Official Digital Currency By RBI.” China has strict controls on crypto mining and trading because it is “extremely harmful to the environmen­t.” Egypt’s primary Islamic legislator has issued a religious decree classifyin­g commercial transactio­ns in bitcoin as haram.

Always remember: It’s “money” until the government says it isn’t.

E-mail me at mangun@gmail.com. Follow me on Twitter @mangunonma­rkets. PSE stock-market informatio­n and technical analysis provided by AAA Southeast Equities Inc.

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