It looks as though a northern state in Malaysia called Kelantan will be using a new gold-backed currency as early as mid-August.  They won’t be the first state/country to be using a gold-backed currency; Indonesia has already minted a minimal number of pieces (25,000) to be used in Australia, Malaysia, and Singapore.

According to the Guardian, the states Islamist government is kick starting the currency by paying its government employees 25% of their paychecks with the gold dinar and silver dirham.  To further strengthen the cause all state companies will be accepting the currency and over 600 businesses will be doing the same.

Gold-backed currencies are touted as the only way to thwart the central bankers around the world, stop inflation and stabilize the world’s economies.  Many well respected financial analysts here in the US are calling for a gold backed dollar in order to do just that.  A gold-backed US dollar could work if gold bullion was confiscated and the price was again locked in at a much higher price to be equal with the money supply.  Some experts say that price would be anywhere between $3,000 and $11,000 per ounce, though I have heard some pretty extreme predictions as high as $47,000 per ounce.

The US was on the gold standard for many years until the Federal Reserve was allowed into our system in 1913.  They have systematically eroded the purchasing power of the dollar through a series of events.  First they removed us from the gold standard domestically in 1933 by confiscating all gold bullion and making it illegal to own gold.  Then under President Nixon they removed us from the gold standard internationally in 1971 by closing the gold window, making it impossible for foreign countries to convert their excess US dollars to gold.

A new gold standard in the US would thwart the ability of the government to print money at will, thus impeding inflation and the erosion of private wealth.  Inflation is merely a tax.  The more something costs you the less money you have to spend on other things.  Inflation shifts wealth from your pocket to the government’s pocket.  Physical gold and silver bullion have proven to keep up with inflation over the years.  Therefore everyone should have some in their portfolio.