The scientist has long been using the theory of exponential decay (exponential decay theory) to estimate the age of ancient objects, fossils and many others. The concept is easy to be understood in conjunction with this theory is the existence of the concept of part-time (half-life), is the time required subject matter decays exponentially to become the living half of the original material.

If this theory applies to objects that exist in nature, whether this theory also applies to the modern human creations such thing as paper money?. Well, my knowledge no one has made a scientific study about this – but by looking at the world gold price statistics in a variety of paper currency during the last 40 years – I suspect could be an exponential decay of this theory also applies to paper money.

Let us consider the following facts: In 1970, when gold was still used as the standard currency of the world in the Breton Woods agreement at that time world gold prices were at U.S. $ 35.94/Oz. With the rupiah to Rp 415/US $; then the gold price at that time in Indonesia was in the range of USD 480/gram.

Now after 40 years passed, the gold price to U.S. $ 1.109/Oz and the exchange rate to USD $ 9.175/U.S. $ price of gold in the amount to be in the range of Rp 327.000/gram. This means that after 40 years, the value of U.S. $ against the gold remaining in 3:24% and 0.15% of the Rupiah lives.

Now these facts when we plot the graph of the Residual Value after the half to N = 100%/2^N as above, we would know where the position of U.S. $ and where also the position of the rupiah. After 40 years of U.S. $ is now in a half-life between the 4th to the half-life to 5; in other words the U.S. $ has a half-life of about 8.9 years.

In the same period of 40 years amount has now been on part-time to part-time to 9 to 10, or in other words the amount has a half on a number of around 4.2 years.

What this mean?; When you hold Rp 327.000 now you can buy 1 gram of gold; if you have money the same 4.2 years longer then you live to get ½ grams of gold. After 8.4 years, the same money to live equivalent ¼ gram of gold. By the time your child is now in kindergarten, college entrance 12.6 years from now that same money to stay for 1 / 8 gram of gold.

We could debate the scientific of the theory application to predict the decay of the residual value of these bills. But it never hurts us to see the value of paper money is tens of years back, so that we can be wise in choosing to use our savings could be tens of years are still ahead.

So that our children can go to school with sufficient funds in time. And so in our old age we can still pay all our own needs.

Other articles you need to read;

• Does the Euro exchange rate down drastically affect on the fall in gold prices?
• The Easiest Way to Understand and Manage The Investment Risk
• Which one is your investment choice, investment in shares or gold for the best?
• Where are the trends in gold prices towards the end of 2011?
• The World gold price booming proves the weakness of the global financial system

This entry was posted on Friday, November 4th, 2011 at 3:01 pm and is filed under Currency. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.