Today's real story is about a jubilee benefit that started cheap but grew expensive. A benefit in gold!

Intro

In Thailand it is common to give gold as a present. People buy a 23karat gold chain of 1 or a 1/2 baht. The latter represents a little over half an ounce (TOz). Chains upto 20 baht exist for 17000 USD.

The benefit involved.

The multinational I worked for, promised its employees in Thailand a so called long service benefit of 1 Baht of gold with every ten years of service and 2 baht when reaching 30 years. When this benefit was set up the price of gold was relatively low and working population still young so who cared. However under accounting rules a company must put a provision on the balance sheet for this future benefit and I was the one doing the math here at head office.

If you look at below graph you can understand what happened with this company provision and the value of this cheap benefit : IT EXPLODED during the years 2007-2012. This meant the local site not only had a loss in it's books every year that I had to explain over and over again but also that the benefit suddenly represented a couple of monthly salaries which was never the intention.

Morale

The morale here is not that you should not make promises in gold to employees, no it is that gold is a very good way to preserve wealth. Most of my readers know this already although some prefer silver as it is undervalued at the moment, which could be true. Anyway the graph is the real learning here. In bad times gold value goes up where other assets go down. The effect of Quantitative Easing (nice but I prefer 'printing money') does ruin our fiat money!

Goldrooster