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Re: Gold in them thar Bills...



Alexander Reynolds <[email protected]> writes
>
> 	Since the topic of backing seems to go towards gold, what about
> the purity of the bullion and who (which government) presses it?  Gold
> pressed by the Canadian government at .999 troy oz might not be worth a
> whole lot as backing if that government collapses tommorow. 

Gold is gold.  As a jewelers son I can assure you that it is quite easy
with a touchstone and a few chemicals to assay the gold.  This is what
makes gold such an easily convertable currency, you can easily determine
the purity and weight of the bullion.  I have seen coins pressed by the
17th century spanish empire (from the Atocha, mostly silver, but a few of
the gold ones as well) that one could still negotiate today.  The value of
the coin or bullion is not that it has the backing of a particular
government, it comes from the material used.  

This very fact is what distinguishes gold and other scare materials from
paper currency.  If the U.S. government collapses your dollars are going to
be just paper, but your gold coins will always be gold and can always be
used for negotiation.  This is why gold increases in value as governments
and economies become unstable (e.g. the recent problems in Russia caused a
slight increase in the price of gold as more people bought it, just in
case...) because it will always have a value regardless of which government
happened to package it.  In fact, it need not even be packaged/minted by a
government; I could just as easily melt down some jewelry and package it as
bullion myself and anyone else who I wish to negotiate my gold with could
easily verify the weight and purity of the gold themselves.

jim