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Please note: The Frank Talk articles listed below contain historical material. The data provided was current at the time of publication. For current information regarding any of the funds mentioned in these presentations, please visit the appropriate fund performance page.

The Ghosts of Fiat Currencies Past

December 19, 2012

Benjamin Franklin on the $100 BillNearly 600 paper forms of money created over the past several centuries are no longer in circulation, according to research summarized by Gold Silver Worlds recently. While the reasons vary from declarations of independence, monetary unions, war or hyperinflation, these ghosts of currencies past portray a haunting history for paper currencies backed only by the trust of a government.

David Morgan’s research highlighted by Gold Silver Worlds finds that of 599 former paper currencies over the past 900 years, 30 percent were dissolved due to monetary unions or dissolutions, such as the creation of the euro in 1999. Another 28 percent of paper currencies ceased to be money because of war, 27 percent were destroyed by hyperinflation, and the remaining 15 percent stopped circulating due to acts of independence.

In addition, with the U.S. monetary base rising to an extreme level, we appear to be entering new territory. Gold Silver Worlds writes:

“Given all these insights and the fact that the whole world is using the U.S. dollar as the reserve currency, a failing dollar has the potential to result in one huge global catastrophe … this situation of one global fiat currency system (backed by nothing tangible) hasn’t happened before in history.”

I believe this is what is driving a large, growing and diverse base of consumers to gold. Among these “Fear Trade” gold buyers are emerging markets’ central banks that have a desire to diversify their reserves away from the dollar. In my view, this is positive for gold and gold miners.

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