A few weeks ago, members of the Swiss parliament discussed introducing a gold bullion-backed currency to trade alongside their paper-based currency (source: Forex Pros, May 22, 2012).

In Switzerland, the official currency is the Swiss franc. What was proposed was a gold franc that would be backed by gold bullion. It would initially be circulated in Switzerland, with a fixed exchange of one gold franc containing 0.1 grams of gold bullion for five Swiss francs.

This proposal was initiated by the country’s largest elected party, the Swiss People’s Party. The party initiated the proposal because it felt gold bullion could play a role—as it has in history—in protecting the Swiss currency from debasement.

This is parallel to another role gold bullion has played throughout history: to preserve wealth. Gold bullion maintains purchasing power and value not only for an individual, but also for a country, as the Swiss are alluding to.

Considering the global financial crisis that is ongoing and is currently visiting the European Union, the parliament had a wider discussion on returning the Swiss franc itself to being backed by gold bullion, instead of by the promises of politicians and bankers.

What the members of the Swiss parliament are alluding to is the loss of confidence in paper currencies that could develop due to the global financial crisis. Should the situation continue to worsen, it is not out-of-the-realm of possibility that investors and people will lose faith in the ability of politicians and bankers to actually solve the financial crisis.

Loss of confidence means investors and people will sell their currencies, which they perceive to have no value, and buy things that have value, which, as history has shown, have traditionally been hard assets like gold bullion, land, silver bullion, and art; to name just a few.

The odds of such a gold bullion currency coming into circulation are almost zero in today’s marketplace. The Swiss know that if they begin to circulate a gold bullion-based currency, investors around the world would flock to it in droves.

This would drive the price of the gold franc to record highs. In turn, this would cause gold bullion prices to skyrocket as investors would realize that, as the financial crisis around the world continues to wreak havoc on the world economy, gold bullion is one of the hard assets that will preserve one’s wealth amid the chaos.

Furthermore, it would highlight the fact that all other currencies are based on the faith of politicians and bankers, whom people have less and less confidence in to solve the financial crisis.

This debate in Switzerland proves the theory of gold bullion as a preservation of wealth. While others continue to dismiss gold bullion as a useless asset, they cannot wipe out what has been true for 5,000 years.

As the financial crisis worsens, more and more people will turn to gold bullion. I urge my dear readers to do the same. (Also see: Another Reason to Own Gold-related Investments.)