Gold Backed Electronic Money
Gold Backed Electronic MoneyGoldBackedElectronicMoney is one of a number of electronic currencies (such as e-gold or e-dinar) that is 100% backed by real bullion.
In the case of e-gold:
In the case of e-Bullion there are gold and silver versions and a dollar transfer system called e-currency. http://www.e-Bullion.com/ pays no commissions.
In the case of GoldMoney? there is substantially more gold in storage than with e-gold, but far fewer users. http://goldmoney.com/
In the case of Pecunix, PGP security features and advanced programming interface provide high quality. http://www.pecunix.com/
Comparisons of the various systems, as well as Liberty Dollar silver money are available at http://indomitus.net/2004status.html
e-gold pays a small referral fee if people open an account after following one of these URLs. I figure someone may as well get the commission. If WardCunningham gets an e-gold account I suggest we replace these links by his referrer URL.
E-gold are spammers. I get unsolicited commercial email from them fairly often. -- EarleMartin
E-gold are not, in fact, spammers. Much unsolicited commercial e-mail purporting to be from e-gold.com are usually not from them at all. You can look at the raw source of e-mails to identify who sent the spam. Many of these spam messages are phishing attacks seeking to fool people into revealing their e-gold log in details. E-gold actively solicits abuse reports against spammers and scammers, see their web site at e-gold.com for details on how to contact them.
Could the two folks up above who have opened accounts tell us what they feel the advantages of this scheme are?
To me the advantage of this scheme is that it provides for instantaneous, irrevocable, low-cost international payments that are fairly free from government meddling. The gold backing is just the mechanism that makes it credible. The downside is the 1% per annum fee that you pay for the gold storage, but of course that's less than the inflation "fee" that you pay to hold cash in most countries. -- RogerBrowne
In 1946, economist and gadfly EC Riegel wrote a book _A New Approach to Freedom_ in which he pointed out that anyone can issue money. The gold backing and gold redemption features of some of these systems are a way of gaining reputation for the money which private issuers are issuing.
There have been scams in the industry. Notably, OSGold.com proved to be neither OffShore nor Gold, but a scam involving the Ponzi scheme OSOpps. Several lawsuits are now working their way through courts, alleging that as many as 60,000 users lost several hundred million dollars of value in the OSGold scam which failed in Summer 2002.
Another doubtful variant is INTGold, from "Internet Gold" company, which is presently (February 2005) not in good standing with the State of Texas. There is considerable evidence that INTGold has no gold available, or very little compared to their dollars in circulation, and no identifiable mechanism for converting back to gold was found on their INTGold.com web site.
From the site:
When I took economics in college (both micro- and macro-), they seemed to think that financial instruments should be backed with something of real value to prevent tinkering. But, these are people worried about the economic stability and health, not in trying to get votes but temporarily helping a group of people while hiding the long term expenses in doing so. --JoshuaBoyd?.
There's no question that dollar transfer schemes work. PayPal has been operating one for many years, claims 50 plus million users, claims to have handled $17 billion or so in transactions in 2004. However, the claims and complaints against PayPal are legion. See http://www.paypalwarning.com/ among others.
Another dollar transfer scheme, evocash.com, recently failed after about four years of operation. There is some evidence that evocash was active with Free Land Opps, which seems to have been another Ponzi scheme like OSOpps.
The main thing to keep in mind is that these currencies have nothing to do with the government gold-standard systems of the Bretton Woods accord (1944 to 1971) or previous centuries. Rather, the various systems like e-gold and e-Bullion and 1MDC are representatives of free market money. They are private currencies available for you to accept or reject on their merits.
Based on historical trends, I think an e-gold palladium-account is likely to do better than an e-gold gold-account.
If the vendors in this scheme were to quote prices in ounces, this scheme would be little different from any other LETS type system. But only a very foolish vendor would do this.
Oh? Some vendors are quoting prices in ounces or grams, and the e-gold payments system is geared up for this. Why not, for international transactions? But the e-gold payments system also allows you to specify equivalent amounts in several major currencies if you prefer.
Right, they are. Well, maybe foolish is too harsh, but surely by coupling their income (but probably not their costs) to something as volatile as the commodoties markets they arren't doing their accountants, or anyone else, any favours?
Well, see it the other way, it's not the commodities markets that are volatile, but the currencies.
Sure, you can view it either way. Either way still seems like exposing yourself to more risk that you need to for a not very clear return. Then again, when I looked recently most of the vendors on ebay who were accepting payment in e-gold were selling from the Russian Federation. Now, given the monetary chaos over there, maybe that makes sense.
My motivation in getting an e-gold account is from my search for AnonymousEmoney, while e-gold is not anonymous it does provide for small transfers around the world and coupled with PGP signed PromiseNotes could provide the real world interface to a truely anonymous monetary transfer system.(see also http://metalsavings.com/ for numbered interest paying accounts for e-gold, metalsavings closed down, https://www.1mdc.com is however filling the gap nicely) --AndrewMcMeikan
If you have a fear of commodities then hedge using http://www.bamdex.com (no longer available)
It's easy to see the romance of having an account denominated in ounces of gold, and maybe that's reason enough to do so. Note that whomever opened this page refers to the metal backing this system as real bullion. It's that real that makes e-gold a marketing triumph.
As an aside, my office is couple of hundred yards walk from the Bank of England (the central bank of the UnitedKingdom), and the office of Merlyn Lowther, Chief Cashier of that bank. Her signature appears on BofE notes under the inscription "I promise to pay the bearer on demand the sum of [whatever the denomination is]" If you were to get to see her, brandishing such a note and demand your, lets say, five pounds, she'd just take the fiver off you, and give you another one back. Maybe even the same one. If you really stamped your feet and threatend to hold your breath till you died you might get five GBP1 coins, which make no claim to convertability. This idea seems to upset some people. (Meditate on what happens to the value of that note with her promise on it while it is in her hand.)
The gold down in the vaults, though, that I walk over some days going to and from work, well that's just conviently high-valued scrap metal. That idea seems to upset some people too.
If you aren't convinced that isolating your money from commodities (however you do it) is not a good thing, consider what happened to the Spanish Empire's gold-standard economy when the metal stolen from South America arrived in Madrid.
I thought that most currencies were backed by commodities, like oil, just not gold anymore ... And doesn't using a basket currency (redeemable for any combination of a given group of commodities at the bank's choice) stabilize a currency?
We'll here's the confusion that e-gold's marketing takes advantage of: currencies aren't "backed" by anything anymore. A currency is an instrument, one denominated, like all instruments, in some combination of other instruments. Currencies are unusual only in that, rather than having a definition given in a prospectus, they can be denominated in different other instruments at different times, however is convenient for the curren situation. Currency notes are in some sense government bearer bonds, but very flexible ones.
Currency notes are denominated in... you guessed it, currency notes. Currency notes are a commodity, just like gold is. Like all commodities, the value of currency notes is driven by supply and demand. The demand is variable, depending on the currency market. American currency is in particular demand these days, maybe for good reason, and maybe not, but in demand. Where it gets tricky though is the supply side of the equation. As governments print more currency (or issue bonds -- same thing) the value of all the currency goes down. The same is true for gold. Every ounce that come out the ground decreases the value of all ounces already out of the ground. The issue is that the rate at which gold comes out of the ground is relatively predictable whereas the rate at which new currency comes into circulation is a complete unknown. In principle a sufficiently strong-willed government could decrease the rate of supply increase to be equal to the rate at which the notes are counterfeited, but they rarely do this. The idea of physically storing gold to back the electronic money is interesting from a marketing point of view, but completely unnecessary for the e-money system to work. The only thing that is required is for there to be a tension between supply and demand, and a rock-hard infallible way to control the supply. --AndyPierce
I remember a book by RobertHeinlein (BeyondThisHorizon?, I think) in which someone living in a future economy explains to a bemused survivor from our current one, that when someone produces something, (s)he has to put in circulation an amount of money equivalent to that product. --AalbertTorsius
E-Gold would be more interesting if the fees were significant, like 3% a month. Then it would serve its purpose better.
Your advocating higher fees?? why! Interest I can understand, but fees? --amc
The market-makers have a lot of power in this scheme. I bet they are literally making money like bandits.
Do market-makers have any more power with gold-backed currency than with any non-gold-backed currency ?
At least there are no literal money-makers in this scheme.
Is there any international LETS type system? I thought they were all geographically local. http://www.cyberclass.net/turmel/urlsnat.htm
Gold has little intrinsic value. Why would you base a currency on such a fiction?
What does have IntrinsicValue ? Uranium ?
Fuel, food, water, energy, all of these have intrinsic value. Their abundance is largely determined by geography. Human effort has intrinsic value. My favorite currency basis is time. Each of us has a limited supply of it. Only medical science can increase that supply. I invest my time in a job so that I can earn free time to do what I like. I should be paid in stopwatches.
See also:
I am extremely nervous about relying on the rarity of gold. One day in the not too distant future (next 10 to 20 years) I believe that nanorobotics will advance to such a degree that the production of gold by manipulating atoms becomes not only possible, but cheap to do on a large scale. If this happens, the basis of the world's economy will crumble overnight.
But how much of the world's economy relies heavily on gold, anyway? Most of the major currencies in the world are floating currencies now. If nanorobotics really did advance, perhaps the biggest effect might be lots more gold necklaces around the necks of players in hip-hop clubs. --AnonymousDonor
Also, "the production of gold by manipulating atoms" is logically impossible: gold is an element, and so producing it from things which are not gold requires manipulating not atoms but nucleons (protons and neutrons); not even the most rabid nanophiles are suggesting that this will be possible. Unless you refer to harvesting gold from currently uneconomical sources, such as the oceans?
While the dollarsigns where still flashing in our eyes, our teacher added that while it is theoretically possible to produce gold trough either atomic fusion or fission, it would cost more than the value of the gold thus produced. So much for chemistry. -- AalbertTorsius
On the other hand, some people invest in diamonds and similar precious gemstones. "Perfect" rubies can already be mass-produced very cheaply ( for $15.00 (plus shipping), you can buy a 6.00 mm diameter synthetic ruby sphere http://www.edmundoptics.com/onlinecatalog/displayproduct.cfm?productID=2050 . ), and nanotechnology is expected to to reduce the cost of perfect diamonds, rubies, and certain other gemstones to about the same price (per pound) as steak.
The US went off the gold standard in 1971. Since then, the Consumer Price Index has roughly quadrupled, while the current price of gold is about nine times what it was back then. So if, in 1971, you had converted some big chunk of your assets into gold, and then left an equally big chunk as dollar bills under your mattress, the buying power of the gold would be less than half of the buying power of the dollar bills. And if you had bought a house in 1971, using a mortgage denominated in gold rather than in dollars, the effective interest rate would have creamed you.
Yes, if the Federal Reserve goes hog-wild and prints zillions of dollar bills, the resulting inflation will suddenly make that gold very attractive. However, their temptation to do so is checked by the international bond market; bond traders would sell off T-bills if they thought the US dollar was going to be inflated so irresponsibly.
And even when we had gold-backed currencies, governments still inflated their currencies relative to gold. I remember seeing an exhibit on money at the Israel Museum (sponsored by the Bank of Israel, natch) that showed a series of coins (same design, different years) minted by some empire or another. Over the course of a few centuries, the coins went from about 97% gold to less than 5%.
Since then, the Consumer Price Index has roughly quadrupled, while the current price of gold is about nine times what it was back then. So if, in 1971, you had converted some big chunk of your assets into gold, and then left an equally big chunk as dollar bills under your mattress, the buying power of the gold would be less than half of the buying power of the dollar bills.
This is actually backwards. Let's say that you put one ounce of gold worth $20 (dollar having been fixed to 1/20 ounce) and $20 under your mattress. 30 years later you lift up your mattress and go shopping. You sell the ounce of gold for over $300 (the cost of production being $260, and the market price being just over $300), but your $20 note from the mattress is still only $20 and buys significantly less than it would have 30 years ago due to inflation, so the gold has more than ten times the buying power, not half. Gold would lose value if it were produced cheaply (asteroid maybe?); if that seemed likely to happen then people would migrate to some other rare substance well beforehand. Only sudden disruptive events or technology would cause a disruption; this holds for everything. -- AndrewMcMeikan
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