With regard to covering a company’s financial requirements, the decision to raise funds for investment – almost – exclusively through internal financing, primarily retained earnings and deposits of the owners. In this way, the company aims to be independent of external influences – banks, distortions on the financial markets. – In terms of financial assets, the complete shielding of a portfolio against possible risks of the markets (the construction of a portfolio of securities so as not to be adversely affected by yield changes). – Gold is the only asset that can meet these requirements, especially because it is completely independent of expiration dates, settlement risks and subsequent investments – and, incidentally, of tax payments. This is why central banks are reluctant to reduce their gold holdings. If, in times of turmoil, confidence in a central bank were to depend on investments that could not be realized immediately – as was the case, for example, with the three-day closure of the stock exchanges following the Islamist attack of September 11, 2001, in the U.S.A. – this would possibly drag the entire financial system down in a vortex (depressive tumble). – The closing off of a national financial market to foreign countries. – The fact that the price of a bond moves independently of the movement in market interest rates (immunization of a bond means that its overall market value [price of principal plus the interest accrued] does not change in response to the change in market interest rates). – See foreclosure, Colbertism, financialization, internal financing, zero distribution, ranking theory, self-financing, interest burden ratio. – Cf. ECB Monthly Bulletin, April 2008, p. 70 f. (role of retained earnings for investment activity).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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