London-based fintech company to pay staff in gold

By: Frank Knopers 

London-based fintech company TallyMoney wants to provide its employees with Paying for gold instead of British pounds. In this way, the company wants to help its employees to maintain purchasing power, writes the British financial newspaper City A.M. The director of the fintech company, Cameron Parry, says in an interview with the newspaper that gold has proven itself as something that retains its purchasing power.

According to Parry, it is pointless to give people more money if the purchasing power of that money is constantly decreasing. That's why he offers his staff the opportunity to receive salary in gold: "The cost of living is getting higher and higher. And it makes no sense to give a little more salary each time, because a salary increase is just a bandage for the bleeding. In times like these, when money is constantly losing purchasing power, gold offers people the best chance of maintaining their purchasing power."

Salary in Gold

According to the Bank of England, inflation will rise to ten percent this year. This is despite the fact that most employees will only receive a few percent pay rise at most. This means that they will lose net purchasing power. To prevent that, TallyMoney wants to pay salaries in gold. Gold that has already risen more than ten percent in value this year, measured in British pounds. Since the beginning of this year, employees had already received their salaries in gold their purchasing power would have increased slightly.

Ella Fraser, a 25-year-old employee of the company, has already agreed to the proposal to receive salary in gold. "Nowadays, the prices of everything seem to be rising. Young people are increasingly concerned about the value of the money in their wallets. I think it's important for employers to look in a more innovative way at how they can help their staff through this difficult time."

TallyMoney is the first company in London's financial hub to make this move. Whether more companies will follow suit remains to be seen. The disadvantage of paying salaries in gold is that people still have to pay their fixed costs in fiat money. This means that they have to sell part of their gold every month. After all, gold is not a means of payment in today's economy, but a means of saving.

Does gold protect against inflation?

According to the director of TallyMoney, the precious metal offers protection against inflation. Yet, historically, that correlation hasn't been as strong. After all, there were also Periods where high inflation was accompanied by a decline in the Gold price, e.g. from 1980 to 1984 and the period from 1988 to 1991. That's because interest rates were also much higher then, so inflation was less of a problem than it is now. Now inflation is hitting much harder, because saving no longer yields anything.

It is therefore much better to look at the real interest rate, the interest rate after correction for inflation. That says more about the development of the purchasing power of money than just the inflation rate. History shows that gold consistently yields well in times of low or even negative real interest rates. And there we have Also to be experienced now, because inflation is currently much higher than interest rates. Gold is therefore not necessarily a good hedge against inflation, but it is an instrument to maintain purchasing power in the longer term. For example, the price of gold has risen on average about 8% per year since 1971.

This contribution comes from Geotrendlines

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