Tuesday, July 10, 2012

"We buy gold for cash"

Good morning economists. Today we will discuss the increasing number of pawn shops that started making an appearance all over the globe. A pawn shop operates by lending money to people in return for something of value, a watch, a gold ring or bracelet. In principle, the person who borrows the money can go back to the pawn shop after an agreed time period and claim back the valuable item by paying the amount borrowed plus some interest. In the United States, the concept of the pawn shop has been around for decades, however, the idea seems to be spreading to the rest of the globe because of the current recession. Should you pawn your valuables?

Of course if we had the chance and money was ample, we would not even think of pawning our valuables. However, because money is scarce its value has increased. In other words people value liquidity more than their prized possessions. People who are in a difficult financial situation, either because they owe money or because they have been unemployed for a rather lengthy amount of time place more value on liquidity than people with a steady income. It is these people that will eventually consider using the services of a pawn shop.

Although I am in favor of the free market economy, I am radically against taking advantage of people in need. The Cypriot government decided that pawn shop ads are illegal and should be taken down. I am afraid that nothing has been done to this effect. I call on the government to protect the people by imposing a price floor for gold. In other words set a minimum price that a pawn shop could buy gold in order to protect the interests of the people who wish to use these services.

Have a nice day!


  1. In buying gold should know the difference between the real and fake. Government should impose certain rules on gold buying to protect the interest and rights of the people.

    Joan @ Pawn Shop Websites

  2. That is correct although I would think that pawn shop personnel are well trained to know the difference between real and fake otherwise why open a pawn shop to begin with?