KFLCC Kingdom Economics

F INANCIAL S ECURITY IN THE L AST D AYS

confidence that people have in the American government—sometimes referred to as the full faith and credit of the United States government. The dollar is backed by the goods and services in the economy. The advantage to being on the gold standard is that it forces fiscal discipline and gives the government less power to manage the economy. The drawback to the gold standard is that a fixed money supply that depends on the backing of gold reserves limits economic growth. Businesses suffer from a lack of capital for growth and expansion. Also, unless the rest of the world’s currency is on a gold standard, every nation on earth could demand that America replace their dollars with our gold. Most financial experts understand that we are unlikely to see America return to a gold standard unless all countries do likewise and return to the gold standard. T HE G OLD P RICE I NCREASE From the years 2002 to 2009, there was a steady yearly increase in the price of gold, from $271 an ounce to well over $1,000 an ounce in 2008. The price per ounce has jumped to as high as $1,900 an ounce, and the price of certain coins in gem mint condition was over $2,000 an ounce. Individuals who are bold with stock investments often state that the high gold prices are a bubble set to burst when the economy recovers, while others point out that the global uncertainties are a sure sign that precious metals will continue to fluctuate in value, but remain relatively high throughout the future. What has caused gold prices to spike as they have over the past years? The progressive price increase began with demand. When other nations such as India and China began to prosper, their demand for gold increased. Central banks in certain nations began to purchase tons of gold as a security measure and a hedge against inflation. Gold also has become a popular investment tool for individual investors. The U.S. dollar is still considered the world’s reserve currency, although it is perilously close to losing that status. Nations are now beginning to extend credit to each other based on their own or other currencies. Historically, when the value of the dollar increases, precious metal values tend to decline. When the dollar value decreases, gold and silver instantly rise along with economic fears. As America remains stuck in what is being termed “a great recession,” the value of the dollar continues to decline, the government prints more money, and people look for something to invest in besides the dollar. When economies are on

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