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Devaluation

Devaluation

Devaluation is a reduction in the value of a currency. Typically it refers to the value of the currency relative to some specific baseline, such as foreign currencies or gold, rather than prevailing wages and prices. The term inflation is generally used differently from the term currency devaluation. The former applies to the value of the currency within the national region of use, whereas the latter applies to the external value on international markets. The extent to which these two phenomena are related is open to economic debate. The term is most often used when a currency has a defined value relative to the baseline. Historically, early currencies were typically coins stamped from gold or silver by an issuing authority which certified the weight and purity of the precious metal. A government in need of money and short on precious metal might abruptly lower the weight or purity of the coins without announcing this, or else decree that the new coins had equal value to the old, thus devaluing the currency. This gave rise to Gresham's Law, which stated that "bad money drives out good", i.e., if pure gold coins and false coins are decreed to have equal value, people will use the false coins for currency and hide the good coins or melt them down into gold. Later, paper currencies were issued, and governments decreed them to be redeemable for gold or silver (a gold standard). Again, a government short on gold or silver might devalue by abruptly decreeing a reduction in the currency's redemption value, reducing the value of everyone's holdings. Naturally, a government which made a habit of doing this would lead its citizens to hold gold or silver in place of the government's notes, so such governments would often outlaw private hoarding of precious metal in order to prevent Gresham's Law from taking effect. Present day currencies are usually fiat currencies with insignificant inherent value. The value of currency is determined by the interplay of money supply and money demand. As some countries hold floating exchange rates, others maintain fixed exchange rate policy against the United States dollar or other major currencies. These fixed rates are usually maintained by a combination of legally enforced capital controls or through government trading of foreign currency reserves to manipulate the money supply. Under fixed exchange rates, persistent capital outflows or trade deficits may lead countries to lower or abandon their fixed rate policy, resulting in a devaluation (as persistent surpluses and capital inflows may lead them towards revaluation). However, that a devaluation would reduce trade deficits depends on fulfilling the Marshall-Lerner Condition: the sum of exports and imports elasticities (in absolute value) must be greater than 1. In an open market, the perception that a devaluation is imminent may lead speculators to sell the currency in exchange for the country's foreign reserves, increasing pressure on the issuing country to make an actual devaluation. When speculators buy out all of the foreign reserves, a balance of payments crisis occurs. Economists Paul Krugman and Maurice Obstfeld present a theoretical model in which they state that the balance of payments crisis occurs when the real exchange rate (exchange rate adjusted for relative price differences between countries) is equal to the nominal exchange rate (the stated rate) (Krugman, Paul and Maurice Obstfeld. International Economics (2000), Chapter 17 [Appendix II]). In practice, the onset of crisis has typically occurred after the real exchange rate has depreciated below the nominal rate. The reason for this is that speculators do not have perfect information; they sometimes find out that a country is low on foreign reserves well after the real exchange rate has fallen. In these circumstances, the currency value will fall very far very rapidily. This is what occurred during the Mexican Peso Crisis. Generally, a steady process of inflation is not considered a devaluation, although if a currency has a high level of inflation, its value will naturally fall against gold or foreign currencies. Especially where a country deliberately prints money (a usual cause of hyperinflation) to cover a persistent budget deficit without borrowing, this may be considered a devaluation. In some cases, a country may revalue its currency higher (the opposite of devaluation) in response to positive economic conditions, to lower inflation, or to please investors and trading partners. This would imply that existing currency increased in value, as opposed to the case where a country issues a new currency to replace an old currency that had declined excessively in value. (such as Romania in 2005, Argentina in 2002, Russia in 1997, or Germany in 1923)

External links

- [http://www.economist.com/research/Economics/alphabetic.cfm?LETTER=D#DEVALUATION Economist.com | Economics A-Z] Category:Currency

Currency

:For current exchange rates, see Exchange links. A currency is a unit of exchange, facilitating the transfer of goods and services. It is a form of money, where money is defined as a medium of exchange (rather than e.g. a store of value). A currency zone is a country or region in which a specific currency is the dominant medium of exchange. To facilitate trade between currency zones, there are exchange rates i.e. prices at which currencies (and the goods and services of individual currency zones) can be exchanged against each other. Currencies can be classified as either floating currencies or fixed currencies based on their exchange rate regime. In common usage, currency sometimes refers to only paper money, as in "coins and currency", but this is incorrect. Coins and paper money are both forms of currency. In most cases, each country has monopoly control over its own currency. Member countries of the European Monetary Union are a notable exception to this rule, as they have ceded control of monetary policy to the European Central Bank. In cases where a country does have control of its own currency, that control is exercised either by a Central Bank or by a Ministry of Finance. In either case, the institution that has control of monetary policy is referred to as the monetary authority. Monetary authorities have varying degrees of autonomy from the governments that create them. In the United States, the Federal Reserve operates with full independence from the government. It is important to note that a monetary authority is created and supported by its sponsoring government, so independence can be reduced or revoked by the legislative or executive authority that creates it. In almost all Western countries, the monetary authority is largely independent from the government. Several countries can use the same name, each for their own currency (e.g. Canadian dollars and US dollars), several countries can use the same currency (e.g. the euro), or a country can declare the currency of another country to be legal tender. For example, Panama and El Salvador have declared US currency to be legal tender, and from 1791-1857, Spanish silver coins were legal tender in the United States. At various times countries have either restamped foreign coins, or used currency board issuing one note of currency for each note of a foreign government held, as Ecuador currently does. Each currency typically has one fractional currency, often valued at 1/100 of the main currency: 100 cents = 1 dollar, 100 centimes = 1 franc, 100 pence = 1 pound. Units of 1/10 or 1/1000 are also common, but some currencies do not have any smaller units. Mauritania and Madagascar are the only remaining countries that do not use the decimal system; instead, the Mauritanian ouguiya is divided into 5 khoum, while the Malagasy ariary is divided into 5 iraimbilanja. However, due to inflation, both fractional units have in practice fallen into disuse. See Non-decimal currencies for other (mostly historic) currencies with non-decimal divisions.

History

Early Currency

The origin of currency is the creation of a circulating medium of exchange based on a store of value. Currency evolved from two basic innovations: the use of counters to assure that shipments arrived with the same goods that were shipped, and the use of silver ingots to represent stored value in the form of grain. Both of these developments had occurred by 2000 BC. This first stage of currency, where metals were used to represent stored value, and symbols to represent commodities, formed the basis of trade in the Fertile Crescent for over 1500 years. However, the collapse of the Near Eastern trading system pointed to a flaw: in an era where there was no place that was safe to store value, the value of a circulating medium could only be as sound as the forces that defended that store. Trade could only reach as far as the credibility of that military.

Coinage

These factors led to the shift of the store of value being the metal itself: at first silver, then both silver and gold. Metals were mined, weighed, and stamped into coins. This was to assure the individual taking the coin that he was getting a certain known weight of precious metal. Coins could be counterfeited, but they also created a new unit of account, which helped lead to banking. It was with Archimedes' principle that the next link in currency occurred: coins could now be easily tested for their fine weight of metal, and thus the value of a coin could be determined, even if it had been shaved, debased or otherwise tampered with. (See Coinage). In most major economies using coinage, copper, silver and gold formed three tiers of coins. Gold coins were used for large purchases, payment of the military and backing of state activities. Silver coins were used for large, but common, transactions, and as a unit of account for taxes, dues, contracts and fealty, while copper coins represented the coinage of common transaction. In Europe this system worked through the medieval period because there was virtually no new gold, silver or copper introduced through mining or conquest. Thus the overall ratios of the three coinages remained roughly equivalent. In China, however, the need for credit and for circulating medium led to the introduction of paper money. In Europe paper money was first introduced in Sweden 1661. Sweden was rich on copper but because of copper's low value extraordinarily big coins had to be made. It was probably more convenient to have a note stating your possession of such a coin.

The Era of Hard and Credit Money

Paper money was, in one sense, a return to the oldest form of currency: it represented a store of value backed by the credibility of the issuing authority. Drafts and checks issued privately had been in intermittent use for centuries, however, it was with the rise of global trade that paper money would find a permanent place in currency. The advantages of paper currency were numerous: it reduced transport of gold and silver, and thus lowered the risks; it made loaning gold or silver at interest easier, since the specie (gold or silver) never left the possession of the lender until someone else redeemed the note; and it allowed for a division of currency into credit and specie backed forms. It enabled the sale of stock in joint stock companies, and the redemption of those shares in paper. However, these advantages held within them disadvantages. First, since a note has no intrinsic value, there was nothing to stop issuing authorities from printing more of it than they had specie to back it with. Second, because it created money that did not exist, it was subject to Gresham's Law: people would exchange money rather than coins of the same value, and this increased the velocity of money and therefore increased inflationary pressures, a fact observed by David Hume in the 18th century. The result is that paper money would often lead to an inflationary bubble, which would then collapse when the demand for paper notes fell to zero, and people began demanding hard money. The printing of paper money was also associated with wars, and financing of wars, and therefore regarded as part of maintaining a standing army. For these reasons, paper currency was held in suspicion and hostility in Europe and America. It was also addictive, since the speculative profits of trade and capital creation were quite large. Major nations established mints to print money and mint coins, and branches of their treasury to collect taxes and hold gold and silver stock.

Legal Tender Era

With the creation of central banks, currency underwent several significant changes. During both the coinage and credit money eras the number of entities which had the ability to coin or print money was quite large. One could, literally, have "a license to print money"; many nobles had the right of coinage. Royal colonial companies, such as the Massachusetts Bay Company or the British East India Company could issue notes of credit—money backed by the promise to pay later, or exchangeable for payments owed to the company itself. This led to continual instability of the value of money. The exposure of coins to debasement and shaving, however, presented the same problem in another form: with each pair of hands a coin passed through, its value grew less. The solution which evolved beginning in the late 18th century and through the 19th century was the creation of a central monetary authority which had a virtual monopoly on issuing currency, and whose notes had to be accepted for "all debts public and private". The creation of a truly national currency, backed by the government's store of precious metals, and enforced by their military and governmental control over an area was, in its time, extremely controversial. Advocates of the old system of Free Banking repealed central banking laws, or slowed down the adoption of restrictions on local currency. (See Gold standard for a fuller discussion of the creation of a standard gold based currency). At this time both silver and gold were considered legal tender, and accepted by governments for taxes. However, the instability in the ratio between the two grew over the course of the 19th century, with the increase both in supply of these metals, particularly silver, and of trade. This is called bimetallism and the attempt to create a bimetallic standard where both gold and silver backed currency remained in circulation occupied the efforts of inflationists. Governments at this point could use currency as an instrument of policy, printing paper currency such as the United States Greenback, to pay for military expenditures. They could also set the terms at which they would redeem notes for specie, by limiting the amount of purchase, or the minimum amount that could be redeemed. By 1900, most of the industrializing nations were on some form of gold standard, with paper notes and silver coins constituting the circulating medium. Governments too followed Gresham's Law: keeping gold and silver paid, but paying out in notes.

The Paper Money Era

See the history of paper money.

Modern currencies

To find out which currency is used in a particular country, start at the countries of the world or look at the table of historical exchange rates. Nowadays ISO have introduced a system, ISO 4217, using three-letter codes to define currency (as opposed to simple names or currency signs), in order to remove the confusion that there are dozens of currencies called the dollar and many called the franc. Even the pound is used in nearly a dozen different countries, all, of course, with wildly differing values. In general, the three-letter code uses the ISO 3166-1 country code for the first two letters and the first letter of the name of the currency (D for dollar, for instance) as the third letter. The International Monetary Fund uses a variant system when referring to national currencies. :For exchange rates, see here. See Non-decimal currencies

Currency names

Currency names of the world in alphabetic order by currency name:

Privately-issued currencies

From the earliest times token coins were issued by companies in remote parts of the world to overcome the shortage of circulating currency. Several large companies issue points to their customers, to be redeemed for products and services produced by that company. Often, a network of companies will join to share in the offering and redemption of points. While these can hardly be considered stable currency systems, they present many of the same features as "legitimate" currency: they are a store of value, issued in discrete units; they are controlled by a central issuing authority; and they have varying rates of exchange with other forms of currency. For example, frequent flyer miles can be bought using U.S. dollars.
- Frequent Flyer Miles: A type of private currency, different versions of which are issued by most major airlines to encourage customer loyalty. Other customer loyalty incentives have followed this model, including points systems offered by soft drink manufacturers such as PepsiCo. Subway tokens, issued by city transit authorities, can be considered a highly specialized form of currency.
- E-gold: Privately issued digital currency backed by gold
- Scrip: A type of private currency where a certain value is captured, and used to purchase goods from a company. Examples of scrip include gift certificates, gift cards, and Disney Dollars or Canadian Tire Money. However, scrip is not considered a currency in itself, but merely a store of value, denominated in another currency.
- Liberty Dollar: A currency backed by silver, with a one-to-one exchange rate with the U.S. Dollar.

Local currencies

In economics, a local currency is a currency not backed by a national government, and intended to trade only in a small area. Advocates such as Jane Jacobs argue that this enables an economically depressed region to pull itself up, by giving the people living there a medium of exchange that they can use to exchange services and locally-produced goods (In a broader sense, this is the original purpose of all money.) Opponents of this concept argue that local currency creates a barrier which can interfere with economies of scale and comparative advantage, and that in some cases they can serve as a means of tax evasion. Local currencies can also come into being when there is economic turmoil involving the national currency. An example of this is the Argentine economic crisis of 2002 in which IOUs issued by local governments quickly took on some of the characteristics of local currencies. see: local currency also called community currency

World currency

With such developments as the Euro allowing for facilitated trade and perhaps a corresponding increase in a wider identity, proposals for a global currency have accelerated, even while it is recognized that several political and economic factors would need to be addressed and intermediate steps taken before such a concept might be accepted by the diverse nations of the world.

Historic Currencies

Ancient Greece

- Drachma

Ancient Rome

- Antoninianus
- As
- Denarius
- Dupondius
- Sestertius

Africa

- Dollar - Rhodesia
- Escudo
- Mozambican escudo - Mozambique
- São Tomé and Príncipe escudo - São Tomé and Príncipe
- Ekwele (Ekuele) - Equatorial Guinea
- Florin - Kenya, Somalia, Tanzania and Uganda
- Franc
- Moroccan franc
- Malagasy franc
- Metica - Mozambique
- Peseta - Equatorial Guinea
- Peso - Guinea Bissau
- Pound
- Gambian pound - Gambia
- Ghanaian pound - Ghana
- Libyan pound - Libya
- Malawian pound - Malaŵi
- Nigerian pound - Nigeria
- Rhodesian pound - Rhodesia
- South African pound - South Africa
- Sudanese pound - Sudan
- West African pound - Cameroon, Gambia, Ghana, Nigeria and Sierra Leone
- Rial - Morocco
- Rupee - Kenya, Somalia, Tanzania and Uganda
- Shilling - Kenya, Somalia, Tanzania and Uganda
- Somalo - Somalia
- Syli - Guinea
- Zaire - Zaire

America

- Austral - Argentina
- Colón - El Salvador
- Continental Currency - Colonial America
- Cruzeiro, Cruzado - Brazil
- Escudo - Chile
- Gulden - Suriname
- Inti - Peru
- Peso
- Bolivian peso
- Costa Rican peso
- Guatamalan peso
- Honduran peso
- Nicaraguan peso
- Paraguayan peso
- Scudo - Bolivia
- Sucre - Ecuador
- Trade dollar - United States of America

Asia

- Dollar - Mongolia
- Hwan - Korea
- Lira - Turkey
- Mohar - Nepal
- Pound - Israel
- Rixdollar - Sri Lanka
- Ruble - Tajikistan
- Rupee
- Gulf rupee - Bahrain, Kuwait, Oman, Qatar and UAE
- Burmese rupee - Burma
- Tael - China

Australasia

- Pound
- Australian pound
- New Zealand pound

Europe

- 14 national currencies which were replaced by the Euro in 2002:
- Austrian schilling
- Belgian franc
- Dutch gulden
- Finnish markka
- French franc
- German mark
- Greek drachma
- Irish pound
- Italian lira
- Luxemburgese franc
- Portuguese escudo
- San Marinese lira
- Spanish peseta
- Vatican lira
- Daler
- Rigsdaler - Denmark and Norway
- Rijkdaalder - Netherlands
- Riksdaler - Sweden
- Speciedaler - Norway
- Dinar
- Bosnia and Herzegovina dinar
- Croatian dinar
- Yugoslav dinar
- Florin - Austria
- Gulden
- Austro-Hungarian gulden - Austria-Hungary
- Danzig gulden - Danzig
- South German gulden - Baden, Bavaria, Frankfurt, Hohenzollern, Württemberg and other states
- Karbovanets - Ukraine
- Koruna - Slovakia (Second World War)
- Lira - Turkey
- Marka - Poland
- Real
- Spanish real (plural reales)
- Portuguese real (plural réis)
- Rubłi - Latvia
- Perper
- Serbian perper
- Montenegrin perper
- Scudo
- Italian scudo - Lombardy-Venetia, Modena and Papal States
- Maltese scudo - Malta
- Peso - Spain
- Talonas - Lithuania
- Thaler - Germany, Austria, Hungary
- Conventionsthaler
- Reichsthaler
- Vereinsthaler

Accounting units

- Franc Poincaré
- Special Drawing Rights
- European Currency Unit
- Currency sign
- Krugerrand
- Fictional currency
- Local currencies
- Petrocurrency
- Currency Pair

Proposed Currencies

- Eco
- Perun

Lists

- List of currencies
- List of motifs on banknotes
- List of international trade topics
- List of historical exchange rates

External links

- [http://dictionary.reference.com/search?q=currency Table of currencies (from dictionary.com)]
- [http://www.tokencoins.com The early currencies of Southern Africa]
- [http://aes.iupui.edu/rwise/ Ron Wise's World Paper Money Homepage]
- [http://ostermiller.org/calc/currency.html Currency exchange rate conversion calculator] from ostermiller.org
- [http://tokyoahead.com/main/staticpages/index.php/chart2 Historical Currency Charts, Matrix & Converter]
- [http://haas.ca/articles/20040311-currency.cfm Minting New Security]
- [http://www.ratesfx.com/resources/currency.html Currency resources on the net]
- http://www.banknotes.com
- http://www.banknoteworld.com
- [http://www.forexpower.info Foreign Currency Trading Articles]
- [http://www.rebelstatescurrency.com/ Currency issued by the individual States of the Confederacy during the American Civil War]
- [http://www.monetary-unit.com/ Ad-Free website on worldwide currencies with short Descrption and Pictures]

Records

- [http://tomchao.com/trivia.html A site compiling information on cu

Gold

Gold is a chemical element in the periodic table that has the symbol Au (L. aurum) and atomic number 79. A soft, shiny, yellow, dense, malleable, ductile (trivalent and univalent) transition metal, gold does not react with most chemicals but is attacked by chlorine, fluorine and aqua regia. The metal occurs as nuggets or grains in rocks and in alluvial deposits and is one of the coinage metals. For millennia, gold has served as money and is also used in jewelry, dentistry, and in electronics. Gold forms the basis for a monetary standard used by the International Monetary Fund (IMF) and the Bank for International Settlements (BIS). Its ISO currency code is XAU.

Notable characteristics

Gold is a metallic element with a characteristic yellow color, but can also be black or ruby when finely divided, while colloidal solutions are intensely colored and often purple. These colors are the result of gold's plasmon frequency lying in the visible range (due to a relativistic effect), which causes red and yellow light to be reflected, and blue light to be absorbed. It is one of only three metals which have an actual easily-identifiable color; the other two are copper, which is red, and caesium, which has a pale golden color. It is the most malleable and ductile metal known; a single gram can be beaten into a sheet of one square meter, or an ounce into 300 square feet. A soft metal, gold will readily form alloys with many other metals. This can be done to increase its strength, or create several exotic colors, sold for instance in the western United States to the tourist trade as "Black Hills" gold. Adding copper yields a redder metal, iron blue, Silver produces green, aluminium purple, platinum metals white, and natural bismuth together with silver alloys produce black. Native gold contains usually eight to ten per cent silver, but often much more — alloys with a silver content over 20% are called electrum. As the amount of silver increases, the color becomes whiter and the specific gravity lower. Gold is a good conductor of heat and electricity, and is not affected by air and most reagents. Heat, moisture, oxygen, and most corrosive agents have very little chemical effect on gold, making it well-suited for use in coins and jewelry; conversely, halogens will chemically alter gold, and aqua regia dissolves it. Common oxidation states of gold include +1 (gold(I) or aurous compounds) and +3 (gold(III) or auric compounds). Gold ions in solution are readily reduced and precipitated out as gold metal by the addition of virtually any other metal as the reducing agent. The added metal is oxidized and dissolves allowing the gold to be displaced from solution and be recovered as a solid precipitate. Recent research undertaken by Frank Reith of the Australian National University shows that microbes play an important role in the formation of gold deposits, transporting and precipitating gold to form grains and nuggets that collect in alluvial deposits. [http://www.abc.net.au/science/news/enviro/EnviroRepublish_1032376.htm]

Applications

Pure gold is too soft for ordinary use and is hardened by alloying with silver, copper, and other metals. Gold and its many alloys are most often used in jewelry, coinage and as a standard for monetary exchange in many countries. Because of its high electrical conductivity and resistance to corrosion and other desirable combinations of physical and chemical properties, gold also emerged in the late 20th century as an essential industrial metal.
- Gold can be made into thread and used in embroidery.
- Gold performs critical functions in computers, communications equipment, spacecraft, jet aircraft engines, and a host of other products.
- The resistance to oxidation of gold has led to its widespread use as thin layers electroplated on the surface of electrical connectors to ensure a good connection.
- Gold is used in restorative dentistry especially in tooth restorations such as crowns and bridges.
- Colloidal gold (a gold nanoparticle) is an intensely colored solution that is currently studied in many labs for medical, biological and other applications. It is also the form used as gold paint on ceramics prior to firing.
- Chlorauric acid is used in photography for toning the silver image.
- Gold(III) chloride is used as a catalyst in organic chemistry. It is also the usual starting point for making other gold compounds.
- Disodium aurothiomalate is a treatment for rheumatoid arthritis (administered intramuscularly). It inhibits lymphocyte proliferation, lysosomal enzyme release, the release of reactive oxygen species from macrophages, and IL-1 production. However, it can also cause photosensitive rashes, gastrointestinal disturbance, and kidney damage.
- The gold isotope Au-198, (half-life: 2.7 days) is used in some cancer treatments and for treating other diseases.
- Gold is used as a coating enabling biological material to be viewed under a scanning electron microscope.
- Many competitions and honors, such as the Olympics and the Nobel Prize, award a gold medal to the winner (with silver to the second-place finisher, and bronze to the third.)
- Since it is a good reflector of both infrared and visible light, it is used for the protective coatings on many artificial satellites.
- Gold flake is used on and in some gourmet sweets and drinks. Having no reactivity it adds no taste but is taken as a delicacy.
- White gold (an alloy of gold with platinum, palladium, nickel, and/or zinc) serves as a substitute for platinum.
- Green gold (a gold/silver alloy) is used in specialized jewelry while gold alloys with copper (reddish color) are more widely used for that purpose (rose gold).

History

rose gold Gold (Sanskrit jval, Greek χρυσος [khrusos], Latin aurum for "shining dawn", Anglo-Saxon gold, Chinese 金 [jīn]) has been known and highly valued since prehistoric times. It may have been the first metal used by humans and was valued for ornamentation and rituals. Egyptian hieroglyphs from as early as 2600 BC describe gold, which king Tushratta of the Mitanni claimed was as "common as dust" in Egypt. Egypt and Nubia had the resources to make them major gold-producing areas for much of history. Gold is also mentioned several times in the Old Testament. The south-east corner of the Black Sea was famed for its gold. Exploitation is said to date from the time of Midas, and this gold was important in the establishment of what is probably the world's earliest coinage in Lydia between 643 and 630 BC. The European exploration of the Americas was fueled in no small part by reports of the gold ornaments displayed in great profusion by Native American peoples, especially in Central America, Peru, and Colombia. Gold has long been considered one of the most precious metals, and its value has been used as the standard for many currencies (known as the gold standard) in history. Gold has been used as a symbol for purity, value, royalty, and particularly roles that combine these properties (see gold album). Gold in antiquity was relatively easy to obtain geologically; however, 75% of all gold ever produced has been extracted since 1910.[http://www.goldsheetlinks.com/production2.htm] It has been estimated that all the gold in the world that has ever been refined would form a single cube 20 m (66 ft) a side. The primary goal of the alchemists was to produce gold from other substances, such as lead — presumably by the interaction with a mythical substance called the philosopher's stone. Although they never succeeded in this attempt, the alchemists promoted an interest in what can be done with substances, and this laid a foundation for today's chemistry. Their symbol for gold was the circle with a point at its center (☉), which was also the astrological symbol, the Egyptian hieroglyph and the ancient Chinese character for the Sun (now 日). For modern attempts to produce artificial gold, see gold synthesis. During the 19th century gold rushes occurred whenever large gold deposits were discovered, including the California, Colorado, Otago, Australia, Witwatersrand, Black Hills, and Klondike gold rushes. Because of its historically high value, much of the gold mined throughout history is still in circulation in one form or another.

Value

Klondike] Klondike Like other precious metals, gold is measured by troy weight and by grams. When it is alloyed with other metals the term carat or karat is used to indicate the amount of gold present, with 24 carats being pure gold and lower ratings proportionally less. The purity of a gold bar can also be expressed as a decimal figure ranging from 0 to 1, known as the millesimal fineness, such as 0.995. The price of gold is determined on the open market, but a procedure known as the Gold Fixing in London, originating in 1919, provides a twice-daily benchmark figure to the industry. Historically gold was used to back currency in an economic system known as the gold standard in which one unit of currency was equivalent to a certain weight of gold. As part of this system, governments and central banks attempted to control the price of gold by setting values at which they would exchange it for currency. For a long period the United States government set the price of gold at $20.67 per troy ounce ($664.56/kg) but in 1934 the price of gold was set at $35.00 per troy ounce ($1125.27/kg). By 1961 it was becoming hard to maintain this price, and a pool of US and European banks began to act together to defend the price against market forces. On March 17 1968, economic circumstances caused the collapse of the gold pool, and a two-tiered pricing scheme was established whereby gold was still used to settle international accounts at the old $35.00 per troy ounce ($1.13/g) but the price of gold on the private market was allowed to fluctuate; this two-tiered pricing system was abandoned in 1975 when the price of gold was left to find its free-market level. Central banks still hold historical gold reserves as a reserve asset although the level has generally been declining. The largest gold depository in the world is that of the U.S. Federal Reserve Bank, held at Fort Knox. Since 1968 the price of gold on the open market has ranged widely, with a record high of $850/oz ($27,300/kg) on 21 January 1980, to a low of $252.90/oz ($8,131/kg) on 21 June 1999 (London Fixing). Prices have risen to the $500/oz mark in late 2005, due to a depreciation of the US dollar and inflation due to rising energy costs.

Gold and the money supply

In January 1959 US M3 money supply was $288.8 billion, and the Official Gold Holdings of the United States was then 17,335.1 Tonnes, or about 557 million ounces (there are 32,150.7 Troy Ounces in a Tonne). That means that in 1959, there were $518 in circulation for every ounce of gold reserves held by the USA. Although the theoretical price should then have been $518 per ounce, the actual price, as fixed under the gold standard was only $35 an ounce. By August 2005, the US M3 money supply had risen to $9,873.9 billion, whilst at the same time the Official Gold Holdings of the United States had fallen to just 8,133.5 Tonnes, or about 261 million Troy Ounces. This means that today, in 2005, there are $37,831 in circulation for every ounce of gold held by the United States. The above numbers show the falling influence of gold in the monetary system of the world today. Goldbugs believe, or even hope, that one day gold's importance will return as the printing of paper money gets out of control and we end in a hyper-inflationary fiat money collapse.

Restrictions on gold ownership

Because of its use as a reserve store of value, the possession of gold is sometimes restricted or banned. Within the United States, the private possession of gold except as jewelry and coin collecting was banned between 1933 and 1975. President Franklin D. Roosevelt confiscated gold by [http://www.the-privateer.com/1933-gold-confiscation.html Executive Order 6102], and President Richard Nixon closed the gold window by which foreign countries could exchange American dollars for gold at a fixed rate.

Return of a Gold Standard?

In the first few years of the 21st century, reports started to circulate that Malaysia was planning a return to the gold standard -- to issue and use gold dinars as currency in international trade. The purported purpose of this move would be to reduce dependence on the United States dollar as a reserve currency, and to establish a non-debt-backed currency in accord with Islamic law against the charging of interest. [http://www.islamidag.dk/ulamaongold.html] Nonetheless, gold dinar currency has not yet emerged. [http://english.aljazeera.net/NR/exeres/E7515CEE-880E-492F-B225-A94E21D90D2B.htm] [http://www.mineweb.net/columns/american_notes/336075.htm]

Gold in investment portfolios

As a tangible investment gold is sometimes held as part of a portfolio because over the long term gold has an extensive history of maintaining its value. It has in the last century gained ground in relation to fiat currencies owing to inflation. Gold becomes particularly desirable in times of extremely weak confidence and during hyperinflation because gold maintains its value even as fiat money becomes worthless. People who enjoy investing in gold are known as goldbugs. Futures contracts based on gold currently trade on various exchanges around the world. In the US this occurs primarily on COMEX (Commodity Exchange) which is a subsidiary of the New York Mercantile Exchange. Speculation about the future price of gold and other commodities is carried on at COMEX. Recently, gold-based ETFs like [http://finance.yahoo.com/q?s=GLD GLD] have emerged as a more convenient investment vehicle. In some countries such as Switzerland, it is possible to hold physical gold as part of an investment portfolio, due to the absence of taxes and narrow bid-ask spreads, however in other countries portfolio managers sometimes hold gold shares or gold bullion securities as a proxy for the metal itself. Exchange Traded Funds such as Gold Bullion Securities are securities sponsored by the World Gold Council and which are fully backed up by allocated gold held by a custodian. The main Gold Bullion Securities are as follows:
- New York Stock Exchange (NYSE), Symbol:GLD (Streettracks Gold Shares, ISIN No. US8633071043)
- London Stock Exchange (LSE) Symbol GBS (Gold Bullion Securities ISIN No. GB00B00FHZ82)
- Euronext France Symbol:GBS (Gold Bullion Securities ISIN No. GB00B00FHZ82 )
- Australian Stock Exchange (ASX), Symbol:GOLD (Gold Bullion Securities ISIN No. AU00000GOLD7)
- Johannesburg Securities Exchange (JSE), Symbol:GLD (New Gold Debentures ISIN No. ZAE000060067 )

Occurrence

Exchange Traded Fund Due to its relative chemical inertness gold is usually found as the native metal or alloy. Occasionally large accumulations of native gold (also known as nuggets) occur but usually gold occurs as minute grains. These grains occur between mineral grain boundries or as inclusions within minerals. Common gold associations are quartz often as veins and sulfide minerals. The most common sulfide associations are pyrite, chalcopyrite, galena, sphalerite, arsenopyrite, stibnite and pyrrhotite. Rarer mineral associations are petzite, calaverite, sylvanite, muthmannite, nagyagite and krennerite. Gold is widely distributed in the Earth's crust at a background level of 0.03 g/1000 kg (0.03 ppm by weight). Hydrothermal ore deposits of gold occur in metamorphic rocks and igneous rocks; alluvial deposits and placer deposits originate from these sources. The primary source of gold is usually igneous rocks or surface concentrations. A deposit usually needs some form of secondary enrichment to form an economically viable ore deposit: either chemical or physical processes like erosion or solution or more generally metamorphism, which concentrates the gold in sulfide minerals or quartz. There are several primary deposit types, common ones are termed reef or vein. Primary deposits can be weathered and eroded, with most of the gold being transported into stream beds where it congregates with other heavy minerals to form placer deposits. In all these deposits the gold is in its native form. Another important ore type is in sedimentary black shale and limestone deposits containing finely disseminated gold and other platinum group metals. Gold occurs in sea water at 0.1 to 2 mg/t (0.1 to 2 ppb by weight) depending on sample location.

Production

ppb Economic gold extraction can be achieved from ore grades as little as 0.5 g/1000 kg (0.5 ppm) on average in large easily mined deposits, typical ore grades in open-pit mines are 1–5 g/1000 kg (1-5 ppm), ore grades in underground or hard rock mines are usually at least 3 g/1000 kg (3 ppm) on average. Ore grades of 30 g/1000 kg (30 ppm) are usually needed before gold is visible to the naked eye, therefore in most gold mines you will not see any gold. It is claimed, that all the gold that has been mined throughout the history of mankind could be incorporated in a solid ball with a diameter of 27 metres. metre Since the 1880s South Africa has been the source for a large proportion of the world's gold supply. Production in 1970 accounted for 79% of the world supply, producing about 1,000 tonnes, however production in 2004 was 342 tonnes. This decline was due to the increasing difficulty of extraction and changing economic factors effecting the industry in South Africa. The city of Johannesburg was built atop the world's greatest gold finds. Gold fields in the Orange Free State and the Transvaal are deep and require the world's deepest mines. The Second Boer War of 1899–1901 between the British Empire and the white Boers was at least partly over the rights of miners and possession of the gold wealth in South Africa. Other major producers are Canada, United States and Western Australia. Mines in South Dakota and Nevada supply two-thirds of gold used in the United States. Siberian regions of the USSR also used to be significant in the global gold mining industry. Kolar Gold Fields in India is another example of a city being built on the greatest gold deposits in India. In South America, the controversial project Pascua Lama aims at exploitation of rich fields in the high mountains of Atacama, at the border between Chile and Argentina. The idea of producing gold out of lesser metals or other cheap substances has fascinated people throughout the centuries. Scientists, kings and charlatans obsessed with the secret art of alchemy accidentally invented practically useful materials (e.g. porcelain), while searching in vain for the philosopher's stone, which was supposed to turn mercury into gold. Modern science has since proven the impossibility of making gold from other elements via chemical reactions. However, it is possible to obtain infinitesimally small amounts of gold by artificial nuclear transformations in particle accelerators The gold isotopes produced would likely be radioactive. No economically feasible method to manufacture gold artificially has been found and published yet. The possibility of cheap man-made gold would have unforeseen economic and political consequences.

Compounds/isotopes

Although gold is a noble metal, it can form many compounds, auric chloride (AuCl₃) and chlorauric acid (HAuCl₄) being the most common. Gold compounds can be aurous (univalent, +1) or auric (trivalent, +3). Gold also can under extreme conditions form a +5 state with fluorine (gold pentafluoride, AuF₅), as well as (unusually for a metal), a -1 state. Such compounds containing the Au^- anion are called aurides and include caesium auride, CsAu, rubidium auride, RbAu, and tetramethylammonium auride, (CH₃)₄N⁺ Au^-. Gold also forms:
- The AuCl₄^- ion after dissolving in aqua regia
- Gold halides (F,Cl,Br,I)
- Gold chalcogenides (O, S, Se,Te)
- Gold cluster compounds
- Gold hydrazide: an olive-green powder, AuN₂H₃, one of several explosive compounds known archaically as aurum fulminans There is only one stable isotope of gold, and 18 radioisotopes with Au-195 being the most stable with a half-life of 186 days.

Precautions

The human body does not absorb gold very well, thus compounds of gold are not normally very toxic. Liver and kidney damage has, however, been reported for up to 50% of arthritis patients treated with gold-containing drugs. Gold used in dentistry is widely regarded as the safest form of restorative material, as well as the most successful.

Symbolism

Gold has been associated with the extremities of utmost evil and great sanctity throughout history. The Golden Calf is a widely-recognised symbol of idolatry and revolt against God; concentration camp guards removed the golden teeth from the mouths of gassed Holocaust victims. In Communist propaganda, the golden pocket watch and its fastening golden chain were the characteristic accessories of the class enemy, the bourgeois and the industrial tycoons. On the other hand, eminent orators such as John Chrysostom were said to have a mouth of gold with a silver tongue. Gold is associated with notable anniversaries, particularly in a 50 year cycle, such as a golden wedding anniversary, golden jubilee, etc. Great human achievements are frequently rewarded with gold, in the form of medals and decorations. Winners of races and prizes are usually awarded the gold medal (such as the Olympic Games and the Nobel Prize), while many award statues are depicted in gold (such as the Academy Awards, the Emmy Awards and the British Academy Film Awards). In the software development cycle "going gold" means releasing a version that is ready for distribution to customers, rather than a buggy beta version. Medieval kings were inaugurated under the signs of sacred oil and a golden crown, the latter symbolizing the eternal shining light of heaven and thus a Christian king's divinely inspired authority. Wedding rings are traditionally made of gold; since it is long-lasting and unaffected by the passage of time, it is considered a suitable material for everyday wear as well as a metaphor for the relationship. In Orthodox Christianity, the wedded couple is adorned with a golden crown during the ceremony, an amalgamation of symbolic rites. The symbolic value of gold varies wildly around the world, even within geographic regions. For example, gold is quite common in Turkey but considered a most valuable gift in Sicily.

References

- [http://periodic.lanl.gov/elements/79.html Los Alamos National Laboratory – Gold]
- [http://www.infoplease.com/ce6/sci/A0821152.html The Columbia Electronic Encyclopedia, 6th ed]

External links

- [http://www.webelements.com/webelements/elements/text/Au/index.html WebElements.com – Gold] (also used as a reference)
- [http://mineral.galleries.com/minerals/elements/gold/gold.htm Mineral Galleries - Native Gold]
- [http://www.lateralscience.co.uk/gold/auriferous.html Getting Gold 1898 book]
- Gold Category:Chemical elements Category:Transition metals Category:Numismatics Category:Historical trading items ms:Emas ja:金 simple:Gold th:ทองคำ

Wage

A wage is the amount of money paid for some specified quantity of labour. When expressed with respect to time (usually per hour), it is typically called the wage rate, and is specified in pre-tax amounts. It is often the main monetary item upon which the worker and the employer focus when negotiating an employment contract. Early forms of wages included salt (from which the word salary is derived). In modern English, the word salary tends to be used when referring to employment in which the employee is not paid by the hour. Depending on the structure and traditions of different economies around the world, wage rates are either primarily market-driven (the USA) or influenced by other factors such as tradition, social structure and seniority, as in Japan. Several countries have enacted a statutory minimum wage rate in an attempt to prevent the (some say supposed) exploitation of low-paid workers.

Etymology

Wage derives from words suggesting making a promise, often in monetary form. Specifically from the Old French word wagier or gagier meaning to pledge or promise, from which the money placed in a bet (wager) also derives. These in turn may derive from the French gage to wager, the Gothic wadi, or the Late Latin wadium, also meaning "a pledge".

Wages in the United States

In the United States, wages for most workers are set by market forces, or else by collective bargaining, where a labor union negotiates on workers' behalf. The Fair Labor Standards Act requires a minimum wage at the Federal level although states and cities can and sometimes do set their own higher minimum. For certain Federal or State Government contacts, employers must pay the so-called prevailing wage as determined according to the Davis-Bacon Act or its State equivalent. Activists have also undertaken to promote the idea of a living wage higher than current laws require.

External links

- [http://www.rationalrevolution.net/articles/capitalism_wages.htm Understanding Capitalism Part III: Wages and Labor Markets] - Critical of capitalism
- [http://www.dol.gov/esa/minwage/america.htm U.S. Department of Labor: Minimum Wage Laws] - Different laws by State
- [http://www.usda.gov/nass/graphics/data/fl_allwg.txt Average U.S. farm and non-farm wages compared to the minimum wage (1981 - 2004)] Category: Labor category:Organizational studies and human resource management ja:賃金

Price

:For people whose family name is Price see Price (disambiguation). In economics and business, the price is the assigned numerical monetary value of a good, service or asset. The concept of price is central to microeconomics where it is one of the most important variables in resource allocation theory (also called price theory). Price is also central to marketing where it is one of the four variables in the marketing mix that business people use to develop a marketing plan.

Conventional definition

Historically, price value has superseded the barter value of pre-monetary systems, in which bartering was used to determine a value of a good or service. However, in countertrade prices may nevertheless be used to establish trading ratios, and informal bartering continues. Economists, strictly speaking, view price as an exchange ratio between goods which reflects a utility preference by the buyer. Prices can also said to exist in a barter system, although they may not be expressed in money. From this point of view, a price is similar to an opportunity cost, that is, what must be given up in exchange for the good or service that is being purchased. The price of an item is also called the price point, especially where it refers to stores that set a limited number of price points. For example, Dollar General is a general store or "five and dime" store that sets price points only at even amounts, such as exactly one, two, three, five, or ten dollars (among others). Other stores (such as dollar stores, pound stores, euro stores, 100-yen stores, and so forth) only have a single price point (1$, 1£, 1€, 100¥), though in some cases this may get more than one of some very small items.

Marxian price theory

In Marxian economics, it is argued that price theory must be firmly grounded in the real history of economic exchange in human societies. Money-prices are viewed as the monetary expression of exchange-value. Exchange-value can however also be expressed in trading ratios between quantities of different types of goods. In Marxian economics, the increasing use of prices as a convenient way to measure the economic or trading value of labor-products is explained historically and anthropologically, in terms of the development of the use of money as universal equivalent in economic exchange. However, in an anthropological-historical sense, Marxian economists argue a "price" is not necessarily a sum of money; it could be whatever the owner of a good gets in return, when exchanging that good. Money prices are merely the most common form of prices. Marxian economists distinguish very strictly between real prices and ideal prices. Real prices are actual market prices realised in trade. Ideal prices are hypothetical prices which would be realised if certain conditions would apply. Most equilibrium prices are hypothetical prices, which are never realised in reality, and therefore of limited use, although notional prices can influence real economic behaviour. According to Marxian economists, while all labor-products existing in an economy have economic value, only a minority of them have real prices; the majority of goods and assets at any time are not being traded, and they have at best a hypothetical price. Six criticisms Marxian economists make of neoclassical economics are that neoclassical price theory:
- is not based on any substantive, realistic theory of economic exchange as a social process, and simply assumes that exchange will occur;
- simply assumes prices can be attached or imputed to all goods and services;
- assumes equilibrium prices will exist and that markets tend spontaneously to equilibrium prices;
- fails to distinguish adequately between actual market prices; administered prices; and ideal, accounting, or hypothetical prices.
- disconnects price theory from the real economic history of the use of prices.
- is unable to provide a coherent explanation of the relationship between price and economic value.

Austrian theory

The last objection is also sometimes interpreted as the Paradox of Value, which was observed by classical economists. Adam Smith described what is now called the Diamond–Water Paradox: diamonds command a higher price than water, yet water is essential for life, while diamonds are merely ornamentation. One solution offered to this paradox is through the theory of marginal utility proposed by Carl Menger, the father of the Austrian school of economics. As William Barber put it, human volition, the human subject, was "brought to the centre of the stage" by marginalist economics, as a bargaining tool. Neoclassical economists sought to clarify choices open to producers and consumers in market situations, and thus "fears that cleavages in the economic structure might be unbridgeable could be suppressed". Without denying the applicability of the Austrian theory of value as subjective only, within certain contexts of price behaviour, the Polish economist Oskar Lange felt it was necessary to attempt a serious integration of the insights of classical political economy with neo-classical economics. This would then result in a much more realistic theory of price and of real behaviour in response to prices. Marginalist theory lacked anything like a theory of the social framework of real market functioning, and criticism sparked off by the capital controversy initiated by Piero Sraffa revealed that most of the foundational tenets of the marginalist theory of value either reduced to tautologies, or that the theory was true only if counterfactual conditions applied. One insight often ignored in the debates about price theory is something that businessmen are keenly aware of: in different markets, prices may not function according to the same principles except in some very abstract (and therefore not very useful) sense. From the classical political economists to Michal Kalecki it was known that prices for industrial goods behaved differently from prices for agricultural goods, but this idea could be extended further to other broad classes of goods and services.

References

- Milton Friedman, Price Theory.
- George J. Stigler, Theory of Price.
- Simon Clarke, Marx, marginalism, and modern sociology: from Adam Smith to Max Weber (London: The Macmillan Press, Ltd, 1982).
- Makoto Itoh & Costas Lapavitsas, Political Economy of Money and Finance.
- Pierre Vilar, A history of gold and money.

Devaluation

See also

External links

Currency

History

Early Currency

Coinage

The Era of Hard and Credit Money

Legal Tender Era

The Paper Money Era

Modern currencies

Currency names

A-E

F-M

N-R

S-Z

Privately-issued currencies

Local currencies

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See also

Historic Currencies

Ancient Greece

Ancient Rome

Africa

America

Asia

Australasia

Europe

Accounting units

Proposed Currencies

Lists

External links

Records

Gold

Notable characteristics

Applications

History

Value

Gold and the money supply

Restrictions on gold ownership

Return of a Gold Standard?

Gold in investment portfolios

Occurrence

Production

Compounds/isotopes

Precautions

Symbolism

References

See also

External links

Wage

Etymology

Wages in the United States

See also

External links

Price

Conventional definition

Marxian price theory

Austrian theory

References

See also