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Why does Tavid sell investment gold?

Published by Kirke Sööt in category Financial news on 04.02.2008
Gold price (XAU-EUR)
2170,64 EUR/oz
- 32,16 EUR
Silver price (XAG-EUR)
27,61 EUR/oz
- 1,10 EUR

At first glance, the answer to the question, why Tavid sells investment gold seems simple: to earn a profit. Most business is done to earn a profit. A car company sells cars, a construction company builds apartments, a restaurant prepares food, bank loans money – all in order to earn. Is everything really as simple as that? Shouldn’t the purpose of cars be a more comfortable journey from point A to point B, the purpose of building apartments to offer people better living conditions, shouldn’t a restaurant be established primarily for the enjoyment of food and shouldn’t a bank be first and foremost, a place where people keep their money.

Next to these – extremely necessary services for humanity – the purchase and sale of gold seems relatively pointless and an activity which creates absolutely no added value. At first glance, it seems that this is something you do only if you want to earn additional profit, because there doesn’t seem to be any value created here. When we move beyond the surface, then everything that is simple and clear on the outside turns out to be complicated and unexpected.

Let’s start from the beginning. Let’s take banking. Differently from some more contemporary fields of activities like logistics, aviation or media, we can look back on a history that goes back over 2000 years. We see what has brought happy and successful times in finance and banking, and how, over the course of history, the decisions of finance moguls have hurled the masses into poverty. Without lingering on history any further, let us recollect that humanity has been using different forms of money for thousands of years already. These means of payment included sea shells and a fist of salt among other peculiar things. In time, it was important to find an exchangeable value that would suit everyone. It was very uncomfortable to rear camels if all you got in turn for them from your neighbour were cows. Even though what you really wanted was a vineyard. At this point, the emergence of money was inevitable. It was of course important that money itself would hold some value. After several attempts, humanity decided to stick with gold on different continents. Gold was the most appropriate equivalent of money. There is a limited amount of gold, it is easily processed, gold does not burn in a fire, and gold does not rust. Gold was the best means of trade for all kinds of goods between different people and nations. Attempts have been made to give up a monetary system pegged to gold, but nothing good has come of it. At the height of the Roman Empire, General Nero believed he had come up with a genius solution of how to generate wealth endlessly without working and creating value, plus keep up his lavish lifestyle. Nero decided to melt silver money and coin new ones, which had half the silver. It seemed that now, Nero would be able to spend twice as much. At first, he could. Then, Nero repeated his hat trick several times, until the content of silver in the coins was 4% of what it had originally been. Nero could spend money infinitely satisfying his desires, but for the Roman Empire, this was the beginning of its demise. If during the years 10-260 A.D., inflation was 0.4% a year, then during the years 260-340, prices jumped up 20 times.

At this point, I would like to draw your attention to a lie, which has become a truism. Namely, inflation equals the increase in prices. There is inflation in Estonia because the prices are going up. The price of foodstuffs is going up, so therefore, we have inflation. But actually, as prices go up, the value of money decreases. The value of money decreases if you pull a Nero or in other words, the state puts uncovered money into circulation. Unfortunately, this is the system underlying the modern banking system. In the beginning, the bank was an institution, which lent out the money brought to it by clients. If there were no deposits or own funds then it was not possible to lend money out. Simple and logical. Things changed in the 20th century. Bankers found that they can lend out a lot more, because if you get the loan money back later, then nobody can blame you for putting surplus money into circulation. According to the current system, they can practically (practically because not quite everyone who wants a loan actually gets one) release as much money into circulation as there are lenders. It is presumed that all who have received a loan will repay it later. And even though it seemingly stirs up the economy, as a shot of doping stirs up an athlete, the long-term functioning of this system is impossible. The system can only work based on the classical pyramid scheme principle i.e. until there are people who want new loans. If there no longer are people who want a loan then the system will start to fall apart. The entire system is built on short-term profit, which is of course very human, but like all human vices – it is harmful. We can say right away that a banking system built on this scheme is being used by the entire world right now.

This is the backdrop, which led Tavid to start offering gold. At first, it was Tavid objective to help preserve a company owner`s money and there was no plan to start selling gold to other people. But after some gold was purchased for Tavid, others who found that not everything under the sun is well, expressed their interest in gold also. Then, Tavid started offering everyone the possibility to keep their money in investment gold. At this point, I must honestly confess that even though the goal of selling gold was not to make big money, because the main activity for Tavid is still currency exchange, then Tavid gets a profit on distribution of gold and it is not an act of charity. Just like cars are not sold at production cost and it is not possible to eat in a restaurant without paying the mark-up. But profit is not the main objective.

The objective is clear. In this monetary crisis, there should be as few Estonians who lose out as possible. Every 30-40 years, Estonians` life savings have been taken away from them. Those have been spared, who have had gold during these times. As the next crisis will be an international one, then now is the time to think about the time following the crisis, when banking and economy will get back on track after this bubble economy. Then, the competitive ability of countries will depend on how much actual value can be found in each state – gold. The US became the leading force in the world, when they acquired the largest gold reserves. Therefore, Estonia also will have a better competitive position if Estonians have more gold. Gold is actually money. It has been money for over 1000 years, it is money now and it will remain money in the future.

Most probably, many people will not take this seriously presuming that it is another advertising trick to sell more gold.

I respect such an opinion fully. What people decide to do with their money must be their own free choice. Before you purchase gold, I suggest you seriously look into it in order to understand the part gold has played in the history of the world and what may lie ahead for gold in the future. First and foremost, I call upon the reader to rely on his or her common sense, and not the opinion of newspapers or your neighbour.

As way of conclusion, I would like to repeat the words of a classic, Bernhard Shaw „ You have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you to vote for gold”.

Alar Tamming

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