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Thursday, March 13, 2008

US Dollar Therapy Failed – Gold Close to Pass US$ 1,000/troy oz!

In my article two days ago, I doubt the high dose therapy by the Fed to save the US Dollar. My doubt was answered last night – which the therapy by the Fed and four other central banks – failed to save the US Dollar.

kegagalan US Dollar - US $ failureThe indicator of failure is clear if we use the stable purchasing power and the Muamalah scale that is fair for eternity, the gold or Dinar. Gold price in the international market was close to reach the US$ 1,000/troy oz last night. Look at the side chart that portrays the world gold trade since the Fed did the program to save the US economy – which also means the US Dollar. Look at the point that I gave an arrow in the line of 1,000.

Failure of the US Dollar will mean the failure of all fiat currency, including Rupiah. It is because we use US Dollar as the benchmark of the Rupiah value. If the benchmark dropped – then our currency will drop too.

Along with the drop of the Rupiah that follows the drop of the US Dollar, follows with it the wealth of this nation. Try to imagine how steep is the value decline (real purchasing power) of our nations wealth, part of it is our Central Bank’s foreign exchange reserves of US$57.125 billion last month.

The decline of purchasing power is not seen if we use fiat money, like the US$, Rupiah and other currency. The decline of purchasing power can only be seen if we compare with real commodity prices such as oil, rice, wheat, and the most universal one is gold.

I’m trying to understand why IMF in its Article of Agreement (Article IV section 2 ) allows its member nations to relate its currency with any other currency in the world – but prohibit to relating their currency with gold. It seems that only with gold, the failure of the world financial system can be seen clearly.

The failure of the US Dollar yesterday (so as the Rupiah), once again it is the proof of the failure of the paper money, just like in the article I wrote end of last year in The Destruction of Paper Money Follows Fibonacci Numbers.

Lucky, for those who believed my article 2.5 months ago and the safe all your hard work by converting your paper money wealth to real wealth, Dinar.

At the time I wrote the Fibonacci Theory article, 1 Dinar was Rp 1,090,100. This morning, 1 Dinar is Rp1, 272,600. It means that in Rupiah terms, you gained a profit of 16.74% in 2.5 months!

From the Dinar point of view, you have saved your wealth from a decline of 14.34%! In the last 2.5 months! Why different? Because in simple mathematics, (a/b-1) % is different with (b/a-1) %.

My theory and article can be wrong and may Allah forgive my sins if there are mistakes in understanding His Knowledge, the Right is only Allah.

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