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What Gives U.S. Dollars Their Value?

August 13, 2007 by Jason Dean · 1 Comment 

moneyMoney. We work for it. We buy things with it. We need it for retirement. But what is it, anyway? And what gives our money value?

When you take a second to think about it, it’s amazing that people don’t ask these questions of themselves more often. After all, the saying “money makes the world go ’round” is true — but why? Why do we work forty hours a week (or more) for these pieces of paper? And why are merchants willing to trade us real goods for them?

Gold and Silver
There was a time when a “dollar” was simply a term for a set weight in gold. Through the start of World War I, you could take your dollars to the U.S. government and convert them into gold at a rate of $20.67 per ounce. Redemptions were temporarily suspended in 1914, but later resumed. Then in 1934, the value of the dollar was changed so that one ounce of gold was worth $35. Although citizens could no longer redeem their dollars for gold, foreign governments could, all the way up until 1971.

The U.S. dollar used to also be convertible into silver. As late as 1968, dollar-bills were “silver certificates,” convertible into silver by the government. The last silver certificates were issued in 1957.

‘Fiat’ Money

But since 1971, the U.S. dollar has been convertible into absolutely nothing. Why then do people still work for them? The answer is legal tender laws. If you look at one of your dollars, you will notice it says, “This note is legal tender for all debts, public and private.” This means that people and business have to accept U.S. dollars — by law — for any debts. And of course, the U.S. government has to accept them for taxes.

But this isn’t good enough for a lot of people. They think that the “closing of the gold window” in 1971 put a death sentence on the U.S. dollar. Without gold or silver backing, there is little to stop the government from printing more and more paper money, and if adequate goods and services are not produced to equal the expanded money supply, then there is inflation. How much inflation have we had since going off the gold standard? Well, according to the Bureau of Labor Statistics Inflation Calculator, it would take $514.45 in 2007 to equal the purchasing power of $100 in 1971.

What Does This Mean to Investors and Consumers?

There are plenty of financial analysts slightly outside of the mainstream who have been preaching the coming “Financial Armageddon” for decades. So far, they’ve been wrong, but perhaps they will be right in the end. Regardless, it is probably a smart idea to diversify out of U.S. dollars so that you’re not vulnerable to inflation or a potential collapse of the dollar.

One way to do so is to convert your U.S. dollars into gold. No, the government no longer performs conversions for you, but you can buy gold in the open market. In fact, with gold-based exchange-traded funds (ETFs), it’s never been easier.

But gold isn’t the only investment that helps diversify out of U.S. dollars. You can convert your dollars to foreign currencies, invest in stocks (which have their own inflation-protection measures) — especially foreign stocks, or buy real estate. The collapse of the U.S. dollar is probably not something that should keep you up at night, but converting your dollars into real assets is probably a wise move, regardless. After all, your dollars themselves are worthless — it’s only what you can trade them for that gives them value.

5 Ways to Make Money from Global Warming

May 4, 2007 by SMD · 9 Comments 

As every investor knows, the easiest way to make money is to ride long term trends. Every indication suggests that the issue of global warming is a long way from going away; on the contrary it is only beginning to gain traction on the agendas of governments around the world.

The following are 5 ways that you can make money from global warming (and help human kind and the planet at the same time).

1.) Invest in Uranium

The most likely, albeit short term, solution to the over use of fossil fuels, is a surprising option: nuclear energy.

Aggressive new nuclear plant construction programs have begun, particularly in East Asian countries, Russia, and India. The United States itself is on the verge of resuming construction of new nuclear power plants, a process that has been dormant for more than 25 years. This is the beginning of the third era, the renaissance of nuclear energy.

In 2001, the U.S. government issued … a course to expand the use of nuclear energy in the near term by making more efficient the processes of obtaining extensions of licenses to operate existing nuclear plants and of obtaining licenses to build new nuclear facilities. The NEP further sought to encourage nuclear energy use through the development, demonstration, and deployment of next-generation nuclear power technologies. Importantly, it aimed at achieving this goal through research and development of advanced fuel cycles that might prove to be cleaner, more efficient, less waste intensive, and more proliferation resistant than a single-use nuclear fuel, which requires geologic disposal of the used fuel.

SourceAs a result of nuclear being more and more the “go to” alternative to fossil fuels the price of Uranium has increased dramatically and continues to rise at an incredible rate.

The price of uranium was approximately $10.75 per pound in early 2003. By mid 2006, the price had risen to approximately $45.00 per pound. In early 2007 the price approached $100.00 per pound.

http://web.ead.anl.gov/uranium/guide/facts/

Many uranium companies are positioned for continued exceptional growth.

2.) Create a Website

Here’s a couple ideas to get you started:

  1. How about a social bookmarking type site (like http://del.icio.us/ ) that is specifically for tips on how to combat global warming, or if you’re a bit edgier, publicly reporting companies (to put public pressure on them) that are doing really bad things or just reporting general abuses of the environment.
  2. An e-commerce site themed around energy efficient products
  3. A site promoting eco alternative tips, possibly user contributed with education products, to promote the cause.

3.) Stop Paying an Ego Tax on Your Car

Buy a More Efficient Car (and invest the savings)

Most cars have a large premium on ego value. Most city dwellers will never need the features that their SUVs provide. The real reason they think they need an big heavy powerful car, is that it makes them feel more secure. In other words the benefits are more directed towards the ego than reality.

As global warming becomes more and more prominent and dangerous, the price of fossil fuels is only going to rise and the tax on ego based transportation will continue to increase.

Paying for ego benefits can be expensive, to your wallet and to the planet. The goods news is that ego costs are easy to cut, and even better is the self-esteem dividend that you’ll receive from not needing to pander to your own ego gone wild.

4.) Trade in Eco Tax currency

Here’s how it works. If you do something that contributes positively to the efforts to reduce greenhouse gases, like installing a wind farm and selling the electricity to your power company, you earn power credits.

Then companies that create an excess of greenhouse gases can purchase credits to allow them to go over the emissions standard and most of all ease their conscience and improve their public relations.

The result is that the polluters are paying the eco-conscious to do the work of reducing greenhouse gases for them.

Pollution as Commodity

And speaking of easing your guilt, here comes TerraPass. Their slogan: “Clean up after your car, fight global warming”. As an SUV [or any other gas-guzzler car] owner you have the opportunity to purchase a TerraPass for about $80, display it proudly on your windshield and drive guilt free in the summer smog and brown-outs.

Trade pollution like stock

Here’s how it would work: Company X, which uses the latest technology to burn coal for electricity, receives a permit that lets it emit 1,000 tons of greenhouse gases a year. But the company, which now emits 1,500 tons of pollutants a year, believes it will cost too much to switch to cleaner-burning natural gas. Meanwhile, Company Y also gets a permit to emit 1,000 tons of greenhouse gases a year. But it has an antiquated coal-fired system that it can economically retrofit to be more efficient. As a result, it expects its plants to reduce emissions to 500 tons. So it sells its unused 500 tons to Company X. Averaged together, both companies’ emissions fall within the emissions cap.

5.) Invest in Green Funds

“Green funds” are mutual funds that invest in environmentally friendly companies, such as those involved in clean energy (wind, solar, biomass); or in progressive companies that use environmental technology to reduce greenhouse gases in industries such as oil, gas, coal and mining.

According to Jantzi, U.S. mutual funds with green leanings total $2-trillion and account for about 10 per cent of total investments in that country.

Invest in Green Funds

Bonus Tip

Have a contingency plan. If we can’t get our act together and things really go to hell with global warming and climate chance, and you’re one of the ones lucky enough to survive, a couple gold bars or a few hundred ounces of silver, could make you royalty in whatever passes for the world that remains.

In summary

I believe that we can not only save the planet from global warming and the damage of fossil fuel abuse, but we can also make money doing it. In fact, if it doesn’t somehow turn into an activity that is predominantly sponsored by powerful capitalists, who have largely their own interests at heart, then we have a much lower chance of surviving the last 100 years of our arrogant abuse of our planet.

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