Bitcoin, Gold and Competitive Currencies

You don't want to miss this thought-provoking James Turk interview with economist and trader Félix Moreno de la Cova.

Gold is simply analog bitcoin and, as gold bugs become more aware of that fact, two things will become more apparent. First, that specie-backed digital currencies will always be subject to trust in the custodial issuer, and more importantly, trust that the specie won't be confiscated or seized. Second, a transfer of wealth from national currencies to cryptocurrencies is occurring which will dwarf the transfer of wealth occurring in the precious metals sector. Enjoy.



For further reading:
"Ding, Ding, Ding! James Turk Gets It!", BitcoinMoney, September 20, 2012
"GoldMoney: James Turk in conversation with Félix Moreno de la Cova", Bitcoin Forum, September 14, 2012

Doug Casey on Cashless Societies

Interviewed by Louis James, Editor
International Speculator
Wednesday, March 7, 2012

http://www.proactiveinvestors.com/columns/casey-research/928/doug-casey-on-cashless-societies-0928.html

L: Doug, we've had a lot of questions from readers about the apparent push governments are making to go to paperless currency – all electronic, no cash. Do you think that's likely, and what would be the implications?

Doug: I think it's probably inevitable. It's not just cash, but the whole world is becoming increasingly digital. Credit cards already work very well all around the world, and everyone in the world, it seems, will soon have a smartphone – or at least everyone who might have any cash.

But it's not just a question of evolving technology. Governments hate cash for lots of reasons, starting with the fact it costs a couple of cents to print a piece of paper currency, and they have to be replaced quite often. As the US has destroyed the value of the dollar, they've had to take the copper out of pennies, and soon they'll take the nickel out of nickels. Furthermore, with modern technology, counterfeiters – including unfriendly foreign governments – can turn out US currency that's almost indistinguishable from the real thing. And the stuff takes up a lot of space if it's enough to be of value. So sure, governments would like to get rid of tangible currency. They'd like to see all money kept in banks, which are today no more than arms of the state. But it's not so simple: increasing numbers of people trust neither banks – most of which are insolvent – or currencies – most of which are on their way to their intrinsic values.

L: Hm. On the technology front, when I was in central Africa a few weeks ago, plastic money was accepted happily everywhere I went – Rwanda, Burundi, the DRC, and Kenya – though not by street vendors yet. And I had access to the Internet everywhere I went, even in the middle of the jungle…

Doug: Yes, the move towards digital currencies is already happening, and not just as a result of government efforts. Remember Bitcoin. And, as you know, I'm a big fan of Goldmoney.com, which is leading the way to a sound digital currency. Although Goldmoney.com has bowed to government pressure and has suspended its service allowing customers to transfer funds among one another, it's another sign of the times…

L: Yes, and Goldmoney.com is not the first attempt, nor will it be the last. We should mention to new readers that you are an investor in Goldmoney.com.

Doug: The world's going to digital currencies is in part a good thing, because it's convenient. But it's definitely a double-edged sword, because of government involvement in the field. If it were a strictly market phenomenon, I'd have no problem with it. It'd be just another choice. But if the state runs it, it would reduce people's choices – and privacy. But that's entirely apart from the fact that government – and I know this assertion will be shocking to most readers – has no business creating currency or minting money. Money, of all things, should be a purely market phenomenon. Government, as an institution, inevitably and necessarily corrupts everything it touches. Money is far too important to be left to the tender mercies of the state.

L: Sure. A completely digital currency would be an unlimited license to print and spend. Need to give people more welfare? Just tap a few keys, and it appears in their bank accounts. Need to buy more missiles? Just a few more taps on the keyboard… But the privacy issue is even scarier: digital money would seem like Big Brother's dream come true. They wouldn't even have to send their minions out to go through people's trash. They could see everything anyone ever spent money on and where they were physically when they did it, search for activity nearby, and much more, just by having computers report the details of people's accounts.

Doug: Exactly. They would justify it with a host of phony excuses ranging from the so-called War on Terrorism to the so-called War on Drugs. Maybe they'll tie it in to their disastrously failed War on Poverty. As the War on Islam heats up, one front will be an attack on the excellent Muslim hawala system, which allows cheap and reliable transfer of money between countries; that system, which is kind of a private SWIFT network, is excellent for evading FX controls. Ironically, Islamic countries are some of the very worst perpetrators of currency controls.

L: Maybe that's why the informal network exists in the first place? But yes, they gotta stop those evil money launderers from washing their money and hanging it out to dry…

Doug: Don't get me started on "money laundering." It's a completely artificial crime. It wasn't even heard of 20 years ago, because the "crime" didn't exist. Now, everyone speaks of it as though it were a real crime, like murder. It's ridiculous, and further proof of the totally degraded state of the average person worldwide, absolutely including US citizens – what we used to call Americans. The government proclaims something as a law, and "sheeple" robotically assume it's part of the cosmic firmament. If an official tells them to do or not to do something, they roll over on their backs like whipped dogs and wet themselves out of fear. The War on Drugs may be where "money laundering" originated as a crime, but today it has a lot more to do with something infinitely more important to the state: the War on Tax Evasion.

Incidentally, not that a US citizen can open an account with a Swiss bank anyway any longer – except with at least seven figures and loads of paperwork – but now the policy in Switzerland is to insist that clients prove that their funds are all tax paid. The situation is out of control. And the world's governments are increasingly working together to make sure no one slips through the net.

Read the rest of the article.

For further reading:

"The Assault on Financial Privacy Goes On", Kevin Brekke, December 22, 2011

Digital Currency Systems: Emerging B2B e-Commerce Alternative During Monetary Crisis in the United States

By Constance J. Wells, M.S. Aspen University Tuesday, February 8, 2011

From the Abstract:
Digital currency systems form the triumvirate nexus of government policies, money, and technology. Each has a global reach and responds to the needs of business and consumers. E-commerce depends on private and government financial institutions to enable payment transactions; the basis of e-commerce. As the United States financial crisis continues B2B enterprises may need to abandon traditional payment transaction systems and look to alternatives, in the form of Web based digital currency systems accessed via the Internet. The various types of digital currency systems generally fit into five categories: Barter Exchange Software Systems, Non-Bank Digital Currency Payment Systems, Digital Precious Metal Systems, Online Value Transfer Software Systems, and Online Stored Value Transaction Software Systems. Digital currency systems are not online banking. Digital currency systems use private electronic monies: electronic tokens, barter-exchange currencies, digital cash, and stored value e-cash vouchers. We explore the history of money against a backdrop of banking and government policies that cause cyclic monetary crisis's, how these current digital systems operate, how business can thereby benefit in their use, and why digital currency systems are such an underutilized service in the United States.

Digital Currency Systems: Emerging B2B e-Commerce Alternative During Monetary Crisis in the United States

View more documents from cjwells

Unconstitutional Fed Enables Police State

In "Police State Amerika", David Galland, Managing Director of Casey Research, has a conversation with constitutional lawyer and monetary expert Dr. Edwin Vieira, who holds four degrees from Harvard University. From the article:

"Dr. Vieira and I covered a lot of ground in our lengthy conversation, most of it related to the U.S. monetary system – its history, nature, and likely fate. But in between the details and analysis of how it is that the nation’s fiscal and monetary affairs have deteriorated to the current dismal state – and how the global sovereign debt crisis is likely to be resolved – a couple of deeply concerning truths emerged.

Concerning because, taken together, these truths have set the stage for a full-blown police state.

The first of these two truths has to do the nature of today’s money. To set the stage, I present the following excerpt from Dr. Vieira’s paper A Cross of Gold related to the original Federal Reserve Act."

Galland then goes on to explain how the arbitrary nature of law enforcement drives citizen submission:

"To understand why this is so important as a precedent to the evolution of fascism, view the matter in reverse by considering how different things would be if the constitutionally mandated requirement that the government’s currency be redeemable in good money – gold or silver – was still enforced. In that case, the government’s ability to spend would be effectively limited by what it collected in revenues. That, in turn, would have greatly curtailed its ability to grow into the bloated juggernaut it has.

In other words, the American ideal of a limited government would have been hard wired.

....his final conclusion is that they are operating with an unseen agenda in mind. In his view, that agenda revolves around the rising potential for widespread social unrest emanating from the nationwide monetary Ponzi scheme. Doing its part to prepare, the Supreme Court has been establishing the precedents necessary for the government to cope with that unrest.

On this general theme, Dr. Vieira correctly points out that, in order for a fascist state to exist does not require the government to actually arrest anyone – but only that they can arrest anyone. Do you think you broke a law over the past week? I can assure you that every one of you dear readers broke a lot of laws. Sure, you may not have realized you were breaking a law – but, as the old saying goes, 'Ignorance of the law is no excuse.'"

For further viewing:
"Edwin Vieira Interview with James Turk", GoldMoney, June 10, 2011

Alternative Currencies

By Alex Newman
The New American
Thursday, June 10, 2010

http://www.thenewamerican.com/index.php/economy/economics-mainmenu-44/3738-alternative-currencies

The Federal Reserve’s monopoly on money and credit has caused so many problems for average Americans and the nation that addressing this issue is a prerequisite for returning the nation to economic sanity. Congressman Ron Paul has introduced a bill called the “Free Competition in Currency Act” (H.R. 4248), which would end the government-enforced monopoly by repealing “legal tender” laws, allowing private mints, and eliminating taxes on gold and silver coins.

It would definitely be a great start to getting rid of the central bank altogether. But unlike Paul’s proposal to audit the Fed, the free competition legislation has not yet enjoyed much visibility.

In fact, because of the constant loss of purchasing power of Federal Reserve Notes (dollars), various alternatives have already been developed and tried over the years. Many are still in existence. But each one has its drawbacks, and the government has already quashed some of the efforts.

The “Liberty Dollar,” privately issued silver and gold coins as well as warehouse receipts for the metal, was touted as “America’s inflation proof currency” when it was in circulation. It was founded in 1998, but the federal government eventually confiscated what it could of the backing and arrested its founder in late 2007 on ludicrous charges that the Liberty Dollars had a “resemblance” to “genuine coins of the United States.” The legal troubles persist, but a class action lawsuit against the feds is also in progress.

“Digital gold currency” and other “e”-metals are making significant headway. A company called e-gold Ltd, which allows users to trade in gold electronically, claims to have over five million accounts set up through its system. It stores gold and other precious metals and allows account holders to spend or accept electronic gold as payment with each other. GoldMoney, a firm that provides a similar service, says on its website that it is holding nearly a billion dollars worth of gold, silver, and platinum.

Alternative paper monies are also being used. In several communities across the nation, entrepreneurs have banded together to produce their own currencies, which operate alongside Federal Reserve Notes, but are used only locally by those willing to accept them in exchange for goods and services. Among them are Detroit Cheers, BerkShares in Massachusetts, and Ithaca Hours in New York. “The systems generally work like this: Businesses and individuals form a network to print currency. Shoppers buy it at a discount — say, 95 cents for $1 value — and spend the full value at stores that accept the currency,” USA Today reported last year in an article entitled “Communities print their own currency to keep cash flowing.” The goal is to help local economies in bad times.

But while various routes to set up alternative currencies and expose — and eventually end — the Federal Reserve gather momentum, none of the options currently in existence would offer a viable substitute for the present system if and when it suddenly collapses. And that has one monetary expert very worried.

“We have to start looking seriously at what the practical remedy is going to be as this system comes down,” warned Edwin Vieira, a constitutional attorney and an expert in monetary theory who has litigated cases involving money issues. He compared the central bank’s effect on the economy to having square wheels on a car: “Sooner or later, you’re going to shake something loose and the car will fail. And that’s our situation, we’re driving this car with square wheels — the front end, the rear end and the transmission are about to fall out — and we’re in the middle of Death Valley. Literally!”

Vieira told The New American that “the whole present monetary system is unconstitutional,” but if the scam was exposed and the general population suddenly lost faith in its paper debt money, an economic collapse and chaos would quickly follow without a viable system ready to replace it. “This is frightening to me, because imagine one of these lawsuits [against the Fed] wins, and now it becomes absolutely clear to the general public that this operation is totally permeated, if not entirely based on fraud … the house will come down.”

While Vieira had varying opinions of the different attacks on the Fed’s monopoly and secrecy, he praised e-gold and competition as practical solutions. He also noted that, despite various government barriers, it is possible to negotiate contracts in precious metals. But his main suggestion for now is to start at the state level with a precious-metals-based monetary system in which the state government collects part of its tax revenue from corporations in gold.

Vieira has actually written model legislation that would accomplish this goal, and he predicts that the system would catch on. “If — or rather, when — we have another crisis down the road, at least you already have a system set up and it can immediately expand to take the entire state out from under the collapsing banking structure. So it’s a kind of insurance policy — a really cheap insurance policy,” he said.

Reprinted with permission.

Digital Gold Currency and the Establishment of Sovereign DGC Systems

David Knox Barker, founder of Long Wave Dynamics, LLC, was recently interviewed by Clif Droke of the Gold & Silver Stock Report and he spoke extensively on digital gold currencies and their role in the future world monetary system. The most interesting aspect for readers of The Monetary Future revolves around the notion of sovereign players entering the digital gold currency market alongside the private digital gold currency banks. Barker states:

"All of a sudden for the first time in 20 years the central banks aren’t sellers of gold. I think we’re in a window here where gold is effectively the world’s second reserve currency. It’s not acknowledged publicly and people aren’t aware of it but I believe gold is the second reserve currency behind the dollar. Depending on what government policy does will depend on whether gold becomes more dominant. I think fiat currencies are here to stay but what most people have not yet recognized – James Turk has recognized it; he’s the founder of GoldMoney.com – is that during the next long wave advance gold will become even more important. [Turk] has created a new currency based on gold. If you combine the data system of the Internet with gold and with secure vault storage in Switzerland or London, Digital Gold Currency has the potential to become huge. Right now you can open an account with DGC at any given time and you can move in and out into other currencies into your gold account. It’s coming.

Imagine yourself as a Wal-Mart or an IBM and you operate in hundreds of countries and you have to hedge your currencies in all these countries. With James Turk’s company, businesses can open an account in Digital Gold Currency and operate in a way that prevents their having to do a lot of the hedging and eliminate a lot of the expenses they incur in their hedging activities. That’s one reason why I’m optimistic about the drivers of the next long wave advance.

Object oriented programming is another thing I’d like to mention that’s going to be a dominant force in the next advance. What you see is that these are the technologies that selected by industry during the long wave winter and begin to be capitalized but they don’t get fully implemented until the advance. For instance, the object oriented paradigm, which was converted to the object oriented computer programming approach, is making the world more efficient. But it’s also doing a few other things. The world really is a loosely coupled object model and object oriented programming, or OOP, is realizing that and allows companies to deploy in a more efficient manner. I think OOP is going to be a major driver in the next advance of the long wave. There’s also a connection between OOP (object oriented programming) and digital gold currency because under the hood of the systems running major corporations and banking institutions is an object oriented paradigm, a view of the world, which allows everyone to operate more efficiently and what it allows is for your computer systems to more intelligently reflect the real world. The way this will play into Digital Gold Currency (DGC) is that it will be a driver to make DGC a logical option for people. I think there will be a combination of private digital gold currency banks as well as sovereign players. I think you’ll see certain countries buying into Digital Gold Currency and effectively establishing sovereign DGC systems."

In another question from Clif Droke about what realistically can be done to balance the power of the Federal Reserve, Barker answered:

"I sincerely believe that Digital Gold Currency (DGC) will balance the Fed; it’s coming. The Internet has met gold and secure vaults in Switzerland, London or New York and we’re going to have international currency. It’s interesting that for the first time in 20 years central banks are no longer selling gold, they’re holding it.

I think what we’re effectively seeing is the development of the world’s second reserve currency. You’re going to see DGC combined with the Internet to see some very interesting dynamics in the currency market. I can actually see Fort Knox being turned into a Digital Gold Currency bank before this crisis is over with independence from the Federal Reserve and run by the U.S. Treasury.

So if you had a central bank that had only a price stability mandate and actually maintained higher reserve requirements and didn’t juice the system, and if you also had a competing Digital Gold Currency system, it would make for a very interesting world and I think it’s where we’re headed."

David Knox Barker is the founder of Long Wave Dynamics, LLC, and the publisher and editor of The Long Wave Dynamics Letter. Barker is one of the world’s foremost experts on the economic long wave and stock market cycles. He is the author of Jubilee on Wall Street (2009), published earlier as The K Wave (1995) by McGraw-Hill. He is a writer, inventor, entrepreneur, technical market analyst and world-systems analyst. He has researched and written on the impact of the long wave on international financial markets and the international political economy for over twenty-five years. He has applied long wave dynamics to entrepreneurial business development decisions throughout his business career. Barker was founder and CEO for ten years from 1997 to 2007 of a successful life sciences market research and marketing services company, serving a majority of the top 20 global life science companies. Barker holds a bachelor’s degree in finance and a master’s degree in political science.

For further reading:
"An interview with a long wave master (part 1)", Clif Droke, April 12, 2010
"The Great Republic", David Knox Barker, DGC Magazine, February 2010
"A Historical Review of the American Gold Market", Steven C. Kennedy, January 2002

The Digital Currency Doppelganger

Peter C. Tucker, J.D., Business Editor for Cardozo Journal of International and Comparative Law at Benjamin N. Cardozo School of Law, has published an engaging chronicle and modern analysis of the digital currency environment. It's entitled "The Digital Currency Doppelganger: Regulatory Challenge or Harbinger of the New Economy?" in Volume 17, Number 3 (2009) and the full article is available via a one-click download here. In addition to profiling certain digital currency issuers and exchangers, The Monetary Future has covered legal and physical jurisdiction concerns. Those articles can be found in the blog archives.

Unfortunately, the author here comes down on the side of regulation, both domestic and international. Financial privacy and monetary freedom are fundamental human rights that have been continually eroded, especially when it comes to the innovation and evolution of digital currencies. It is always amazing to me that the same people respecting the anonymity of a paper $100 bill do not seem to respect that same privacy when it is extended into a 'digital cash' equivalent. A digital bearer certificate, privately issued, would emulate the anonymity and untraceability features of a paper bill just like the ones in use today. The cryptographic technology exists now. Privacy should not be sacrificed simply for the sake of going digital.

Tucker correctly states that digital currencies ultimately are born of market demand. This market demand may be driven by microtransactions, wealth preservation against fiat currencies, confidentiality from merchants, general financial privacy, etc. Also, the commodity backing a private currency must be determined by the market, in accordance with Mises' regression theorem. Exchange agents provide a much-needed function in terms of localizing the service, facilitating rapid growth, and providing a vibrant two-way exchange for multiple digital currency issuers. The exchange agents also provide an additional layer of protection from over-zealous governments that seek to restrict the financial privacy of their citizens. Therefore, I come down firmly on the side of 'harbinger of the new economy' and I hope to play a part in its realization.

From the Introduction:

"You are a doctor, a board-certified oncologist and a founding partner of a lucrative group oncology practice. You enjoy the wealth and prestige that comes with practicing medicine until one day you read a book, Friedrich A. Hayek’s The Road to Serfdom. Long interested in credit theory, you familiarize yourself with the bad boys of economic theory, the Austrian School. You become convinced that the phenomenon of cyclical economics, the peaks and troughs of economic progress that have been observed for centuries, could be almost entirely attributed to the manipulation of money supplies by the federal governments of the world. Steeped in economic theory, you begin to hypothesize that wars and recessions the world over have been fertilized by the noxious manure of monetary manipulation. Although you continue to see patients your hobby, your interest becomes an obsession, a plan. You teach yourself a programming language and begin writing code day and night, often forgetting to eat. You lose weight, stop attending your local church, and finally, you sell your medical practice and liquidate your life’s savings. You launch a private currency on the Internet. You are Dr. Douglas Jackson, the founder of E-Gold Ltd."

"Nine years later, Dr. Douglas Jackson had a bad day. On the evening of December 19, 2005, Secret Service and U.S. Federal Bureau of Investigation (FBI) agents raided Dr. Jackson’s home and the offices of Gold & Silver Reserve Inc., the parent company of E-gold Inc. The agents copied data from Dr. Jackson’s servers, but did not immediately file charges. However, on April 24, 2007, a federal grand jury indicted both companies, Dr. Jackson, and his business partner on 'one count of conspiracy to launder monetary instruments, one count of conspiracy to operate an unlicensed money transmitting business, one count of operating an unlicensed money transmitting business under federal law and one count of money transmission without a license under D.C. law.' According to the indictment, Dr. Jackson and his business partner conducted fund transfers on behalf of customers whom they knew to have funded their accounts with moneys gained from unlawful activity, 'namely child exploitation, credit card fraud, and wire (investment) fraud; and thereby violated federal money laundering statutes.' The conspiracy to commit money laundering charge alone carries a maximum sentence of twenty years."

Doug Casey on Currency Regime Change

Interviewed by Louis James, Editor
International Speculator
Thursday, January 7, 2010

http://www.lewrockwell.com/casey/casey36.1.html

L: Happy New Year, Doug! What's on your mind these days have any new thoughts for the new year?

Doug: Well, the new currencies discussed in the news have caught my attention.

L: Ah, yes. Hugo Chavez is launching a new virtual currency among some Latin American and Caribbean countries called the sucre. It looks like its going to be little more than an accounting fiction among trading partners. But the new currency the Persian Gulf states are talking about launching, the so-called gulfo, that looks more like a serious contender. What do you make of this?

Doug: My first reaction is to say, Monkey see, monkey do. In imitation of the European Union, these people are monkeying around with what should be money. That's gold, of course. But you know, I've been surprised that the first of these Esperanto currencies, the euro, has lasted as long as it has. It was officially adopted in 1999, though not put into actual circulation as bank notes and coins until 2002. It started out with a theft, in that the old currencies that people had were only good for another three years. After that, your deutschmarks, guilders, francs, and what-have-you were good only for wallpaper. If you had any stuffed under your mattress, you found out what their intrinsic value was.

But the euro that's replaced them, too, is backed by nothing. Nothing but the good faith and credit of the participating governments which are all going bankrupt. The problems in the EU aren't just with Greece, Italy, and Spain; Britain and France are being downgraded, and its going to get much worse.

L: But wait a minute, is the euro really backed by even that? Well, maybe good faith, whatever that is, but not the credit of the participating countries. What would that mean? Credit in what? You cant take euros to the German government and say, I want deutschmark for these. Certainly not gold. If the dollar is a floating abstraction, the euro is all the more so, trying to stay afloat on a void.

Doug: I agree. If the dollar is an IOU nothing, the euro is a who owes you nothing. When it collapses, a lot of people are going to suffer a big wealth haircut. Bernie Madoff swindled thousands of people out of billions. The euro will swindle millions of people out of trillions.

L: Right but then is it accurate to say that its backed by the good faith and credit of these governments? I don't think it is.

Doug: That's a good point. The average urban peasant in Europe thinks his government is somehow watching out for him. I suppose that's true, at least the way a dairyman watches his cows, or a swineherd watches his pigs. But the euro really is backed by nothing. Though, at the moment, you could say its backed by Mercedes cars and Gucci bags anything you can trade euros for. But that's for a limited time. I'm absolutely convinced the euro is going to fall apart it makes no sense at all. It might be convenient for the national governments to then blame the European Central Bank. There will be recriminations and bad feelings all around.

And yet, its had a period of relative success against the dollar, and since phony economics reigns everywhere in the world, its not surprising to see other countries wonder if they can pull off the same scam.

L: Sure: If it worked for them, why not for us?

Doug: Exactly. The thing is that in the case of the Gulf countries, nobody uses those currencies outside of the issuing countries. They are really non-entities and everyone would like to secure the advantages the U.S. dollar has for their own countries. When other countries use your currency as a reserve, or even as their own currency, you can print the things up by the truckload and ship them overseas in exchange for valuable goods. You can essentially export inflation.

Its a subtle fraud that's worked for the dollar and, to some degree, its started to work for the euro. People see that its backed by big countries that are perceived to still be wealthy, so they accept euros with some confidence. Its a colorful, arty, well-printed currency, which comes in denominations up to 500. Arabs would like to see their currency accepted with equal confidence.

L: Sure, why not?

Doug: Hell, I'd like to have a government and print up my own currency too. And Chavez and his cronies in these nothing-nowhere countries like Honduras and Cuba would love to have a central bank that gets that kind of respect. The Cuban peso has zero value outside of Cuba, and almost zero value inside Cuba. Cubans don't use it if they can possibly avoid it, and never hold it. Its like the Old Maid card. And that's within a police state, where everyone has been indoctrinated over three generations about how their governments paper was actually better than gold. Lenin quipped that it's best used for constructing urinals in an ideal socialist world. And of course if you're very wealthy, or a fool, you can certainly use it that way.

But it's not going to work. I guarantee that where these things don't turn into total disasters, they will come to nothing. Anyone who is holding assets in sucres or gulfos, just like euros and dollars, is going to be left with nothing when the game of musical chairs stops.

Look at the sucre. Its supposed to be for trade between the participating countries. They wont actually issue paper money or coins. If they are just going to use it to settle trade between themselves, its just an accounting gimmick. The whole thing is ridiculous. The first trade in the sucre is supposed to happen between Venezuela and Cuba for a shipment of rice, any day now. What of real value could the Cubans possibly use to pay for this? They produce absolutely nothing but sugar and cigars.

L: So Instead of paying with sugar and cigars, they'll pay with sucres, which they got like imaginary monopoly money at the beginning of a game? And the Venezuelans will take these and use them to buy something really exciting from Bolivia?

Doug: [Laughs] Yes, perhaps a boatload of alpaca wool sweaters. The whole thing is ridiculous. Its really nothing more than a bunch of bankrupts passing IOUs around to each other. They make each other feel as though they've been paid, when in fact they all have nothing.

We have to start by asking: What is a currency?

The answer is that a currency is a government substitute for money.

This originated in the practice of private banks to issue bank notes. You'd take your gold to a bank, and the bank would issue you a paper note attesting to the gold you had on deposit. Why would they do this? Because its more convenient to carry a paper in your pocket than a large amount of gold. That's how this started, with bank notes that represented real money in storage.

And then, as governments took over the function of banking with their central banks every country has a central bank now they, too, printed up bank notes (currencies) that represented gold on deposit. After a while, people seemed to forget that the currency only represented value and had no intrinsic value of its own, and governments were able to stop backing their currencies with anything at all.

That's how the modern financial world works; its entirely based on nothing masquerading as something of value.

L: I guess its a cultural thing, like a witch doctor whose spells are backed by the full faith and credit given him, which is indeed powerful in a society that believes in them. Because everyone believes, when he says certain things will happen, they do, and people accept his powers as real. But he does not, in fact, command any magical forces, and the paper currencies people accept all around the world do not, in fact, represent any real value. At some point, reality asserts itself, as when the witch doctors powers fail in some vital task. That may be what's happening to paper currencies in the world today; if the U.S. dollar follows the Zimbabwe dollar, the whole paper fade may be torn apart, beyond any repair.

Doug: That could be. Although, while inconvenient in the process, it would be a good thing in many ways. These governments labor under the conceit that printing up more paper will create more wealth. The truth is that it does just the opposite, because the inflated money supply sends false signals to the market, and people build things, buy things, invest in things, etc. that they would not do without that false information. That's how governments distort economic decision-making and create massive misallocations of capital.

L: Have you seen that YouTube video on China's empty city?

[Ed. Note: http://www.youtube.com/watch?v=0h7V3Twb-Qk]

Doug: That's a perfect example.

L: Well, monkey see, monkey do is a pretty negative assessment of these new currency ideas, but isn't there a positive side? Not that they'll actually work, but that they might hasten the collapse of the paper charade?

Doug: It certainly is a sign of the times. It shows that all these other governments, at least, can see the writing on the wall and want to get away from the U.S. dollar. They know that if they keep using dollars and storing them, they're going to end up holding the Old Maid card, or getting burned by the hot potato, if you prefer. That's the economic reason. In the case of people like Chavez and Morales, they want to get away from it for political reasons as well. There's no reason to want to help the enemy by using his currency.

But the Russians are playing it much smarter. They've been consistently and significantly building their gold reserves over the last several years. They seem to add substantially to those reserves every month.

For a long time, I've thought that what will happen is that someone will come out of left field and offer the world a gold-backed version of their currency. It could easily be the Russians, or the Chinese. And if they did it right, making the currency fully redeemable in gold, that currency would become the strongest in the world. As a result, capital would pour into their banking system. And, assuming they made some other reforms, namely cutting taxes and regulation, their economies would become real powerhouses producing sustainable growth.

L: So, back in June of 2006, when we wrote about a credit crisis leading to a currency regime change in the International Speculator (back before it split into The Casey Report to cover the big picture and Casey's International Speculator to cover the junior gold stocks and similar speculations), you weren't thinking that the euro would take over from the dollar?

Doug: No. I meant that this worldwide experiment with fiat currencies is going to come to an end. And its going to come to a bad end. And I suspect that its going to be sooner, rather than later.

Remember the basics: What is money? Its a medium of exchange, its a store of value, and, if you wish, its a unit of account. It shouldn't also have to serve as a political football. Paper can work for a while, while there's confidence in it, but in the long run, nobody wants to have to trust anyone certainly not a bunch of bureaucrats to maintain the integrity of what you keep your wealth in. So you want some form of money that can serve those three basic purposes and that you don't have to take on blind faith. That means you've got to use a commodity-based money, and the best commodity to use for money is gold.

The reason for that is simple physics, not gold bug superstition. Its not mysticism, and its not barbarism. Its simply because gold has the five characteristics identified by Aristotle we've talked about this at some length before. Gold is durable, divisible, consistent, convenient, and it has utility and value in and of itself. Also, it cant be created out of thin air. That's what makes gold a particularly good money. It has the right characteristics for use as money, just as aluminum is particularly suited for making aircraft and uranium is useful for reactors. Only an idiot tries to put a round peg in a square hole, year after year, trying to make it fit somehow.

L: But that kind of thinking is so alien in the modern world, do you really think a government could adopt a new gold standard? I suppose someone could stumble across the right idea and it could be adopted, not because an enlightened government at last understood the importance of real, sound money, but simply because they had no choice. But it just seems a bit far-fetched.

Doug: Sad but true. Especially when you consider that if a government took its currency back onto the gold standard, it would be, in fact, giving up a lot of power. Paper currencies allow governments to tax in a very subtle way, through inflation, and they wont want to give that up. And the phony economics that are popular today make everyone believe that governments have to stimulate economies another really stupid and counterproductive idea. There are severe limits to how much of that you can get away with if you actually have to have the gold in hand to pay for things. Its a stretch but so is the impossible tight wire they are trying to walk between maintaining some value in the dollar and stimulating the economy now.

L: On the other hand, suppose the Gulf states launch their gulfo and it flops, so they decide to give it some real backing I wouldn't see them reaching for gold first, but they have a lot of oil, and crude oil is pretty divisible, reasonably durable, and valuable. Its not nearly as concentrated a value as gold, so its not very convenient, and its not at all consistent there are numerous grades of the stuff that meld into one another from heavy oil to light sweet crude but it is something in demand all around the world. It just seems like it would be easy for them to think of this.

Doug: Yes, but it would be hard for individuals to take delivery of, say 10,000 dollars worth of oil they're not set up to store it, and even if they were, it'd be hard to truck it to the store.

L: That's true, but this is the 21st century. You wouldn't have to take $10,000 worth of oil with you anywhere, any more than you'd have to take $10,000 worth of gold. There could be trusted warehouses, for example, that issue warehouse receipts, like the old bank notes but transferrable electronically with something like a debit card. I'm not saying it would be better than gold, I'm just saying that, while its hard for me to see any central banker deciding to convince his or her head of state to take the country back onto the gold standard, I could see guys from a bunch of oil-producing countries deciding to back their currency with something real which they have an abundance of.

Doug: Well, anything's possible, and it would be a step in the right direction. Although I could easily put $10,000 of gold in my shirt pocket. Anything commodity-based would be better than the current regime, even if its suboptimal, like oil. Look, the market will decide what works best as money. I don't really care if people decide to go back to salt or cows, or use seashells or bottle caps. The point is that money shouldn't be something controlled by the state, because they will find some way to corrupt it.

The good news is that the nation-state is on its way out (as I mentioned in our conversation on the military). The thing that amazes me, though, is the insane anti-gold psychology that prevails among academics and the ruling classes. Its actually a psychological aberration with these people. But I suspect that's because gold gives them much less control over individuals, and allows individuals much more control over their own destinies.

L: Okay, so, whether they work out or not, the emergence of these new currencies seems to back the idea of currency regime change. But haven't others tried this before? What about the Islamic dinar?

Doug: Yes, that's a very interesting example. I have a lot of problems with all religions, as you know, but Islam is particularly problematic, because its much more than just a religion. It inserts itself into absolutely every area of life socially, politically, economically everything. But, looking at the bright side, in the Koran, Mohamed says excuse me, Allah says, because everything in the Koran is the incontrovertible word of Allah that the dinar is a certain weight of gold, and that the diram is a certain weight of silver. This is what you're supposed to use for money.

So, its a little bit surprising to me that these Islamic theocracies choose to overlook the word of Allah regarding money. Oh well, so much of religion is about hypocrisy. Even when they come up with a good idea, that's the one they find some way around

At any rate, Mohamad Mahathir, former prime minister of Malaysia, floated this idea of going back to using the dinar and diram ten years ago, at least for settlement of trade between Islamic governments. It never got off the ground I suppose that was because those governments knew better than to trust each other to actually deliver on the gold and silver those currencies would have been meant to represent. Every government in the Muslim world is a kleptocracy, even to a greater degree than those elsewhere. Which is strange, in that I believe the average Muslim tends to be more honest than the average Christian in financial dealings.

L: If that's so, then maybe this new gulfo is a necessary missing link. If you could establish an Islamic intergovernmental monetary authority that had credibility, then maybe people would trust in the redeemability of a new dinar and diram it issued.

Doug: Well, it might work, but its still unnecessarily complex and prone to trust problems. Who would guarantee the good behavior of the gulfo authority? Governments get overthrown or subverted all the time. And agreements between governments literally aren't worth the paper they're printed on. Why should anyone trust a cockamamie artificial unit, constructed out of whole cloth by the type of people who are employed by a government?

The ideal would be for people to simply start using gold as money again. There would be no fractional reserve banking, because gold can only be in one place at a time banks would only lend money they actually owned, or that was entrusted to them for only that purpose, and you can bet they'd be a lot more cautious in doing so.

This ridiculous old chestnut about gold not paying interest is baloney paper money doesn't pay interest either. What pays interest is lending money to people who put it to some sort of creative use that generates more wealth, enabling them to pay back more than they borrowed. It would work for rubber balloons too, if you could get them accepted as money and they could be lent out to entrepreneurs to create wealth.

All these ideas people have about money in our world, which has been functioning without real money for decades, are so perverse that it makes me wonder if the presidential palaces in places like Washington and Caracas aren't located in an alternate reality. Frankly, I get rather impatient with people who talk about what the government should do to fix the problems, how the monetary system should be reformed, etc. Its all nonsense. Its all a waste of time. It would all be so much simpler and sounder if governments could be completely banned from having anything to do with money. We should just let the market decide, and if the market had to deliver a money, it would almost certainly be gold, because its the commodity most suited to it.

L: To some degree, the market is responding to governments failure to produce reliable money. There have been several gold-backed currencies established in recent years, though they have to be careful what they call it. There was NORFED, which went to great pains not to call itself a money, nor its silver tokens coins but was still getting its gold and silver warehouse receipts accepted as payment by all sorts of businesses, including some Walmarts until it got shut down by Uncle Sam. E-Gold was the first digital gold currency that saw fairly widespread adoption until it, too, got shut down by the U.S. government. Now there's GoldMoney.com, which seems to be pretty open about competing with governments in the currency business What do you make of all this?

Doug: I've got to say that I have a lot of confidence, personally and professionally, in Jim Turk and GoldMoney.com. Im a very small shareholder, as is Casey Research, actually, though I admit that might be thinking with our hearts a bit as well as our heads. But I think GoldMoney.com is going to grow, because it allows you to store your gold at very low cost and settle transactions with other account holders. Its not actually a bank, because it doesn't lend gold. Its simply a gold storage mechanism and a transfer mechanism.

Incidentally, to the best of my knowledge and I'm no tax attorney, so you should check with a good one but to the best of my knowledge, gold stored with GoldMoney.com is not reportable under current U.S. law. So, its a very convenient way to diversify your assets internationally and out on the Net, without the onerous reporting requirements that come with actual bank accounts.

L: So, GoldMoney.com is your preferred digital gold currency. Can you say a bit more about how that works, for those not familiar with it? Can they go down to the local Safeway and use it to buy groceries?

Doug: They could if the local store had a GoldMoney.com account. That wouldn't be a Safeway, probably, but a local store might have an account. Then you could use computers to transfer X grams of gold from your account to the stores account, and they'd give you your rice and beans, or champagne and caviar, or whatever you were buying.

L: Most stores don't have computers with Internet browsers at their check-out stands.

Doug: No, its not widespread in commerce yet, but as it becomes so, someone will probably find a way to make a buck distributing dedicated hardware to take care of the transactions, just as stores have adopted credit card terminals. But as individuals, you and I could agree that you'll buy my car for X grams of gold. You'd log on to your GoldMoney.com account and transfer the gold to my account, and Id log on to verify the transfer, then Id give you the keys to the car. There are scores of thousands of individuals you can do business with in this way today.

I think everyone ought to have a GoldMoney.com account. Although the first thing is to have a bunch of gold coins in your own possession.

L: Why do you think this one will be any more government-proof than E-Gold or NORFED? I've got to say that I was an early E-Gold adopter and had accumulated some gold on my account. After the feds moved in and shut them down, I'm a bit hesitant

Doug: First of all, E-Gold was run entirely from within the United States, which made them a sitting duck. I also understand that their accounting systems were not so great, which led to many problems. GoldMoney.com stores its bullion in vaults in London and Zurich, and they are very, very careful to work within the bounds of the law although the law is an arbitrary thing at best, and governments feel no need to obey it when an issue is important to them. At any rate, to open a GoldMoney.com account, you have to identify yourself as a real person, etc., whereas E-Gold allowed anonymity. Basically, the GoldMoney.com guys are trying to stay as pure as the driven snow, to avoid problems with the government.

And they are growing rapidly.

But who knows? Like I said, these governments can do anything they want, including break down your door in the middle of the night. For the time being, GoldMoney.com looks like a very good way of conducting transactions digitally, especially for transferring money without going through the banking system or the Federal Reserve. That might be what gets them in trouble in the end, because the government is keen to see all transactions.

L: Wait are you saying that GoldMoney.com will eventually suffer the fate of the others already crushed by the government? Is this an idea that will have to wait until government as we know it collapses?

Doug: My first reaction is to say Good riddance, although I wont because that would scare Boobus americanus, who thoughtlessly conflates government with society. But anything can happen what do you think?

L: I think that threatening the governments monopoly in the money business is like trying to hold a knife to its jugular. It would be simply intolerable to any nation-state in the world today. If GoldMoney.com, or any other such system ever started seeing seriously widespread adoption that threatened the governments death grip on money, I think government would respond with force. I think it would do so overwhelmingly, and without regard to domestic or international law, nor with any regard to human decency.

I wouldn't want to be in GoldMoney.coms offices when the storm troopers came crashing in, and I wouldn't want to have any significant portion of my net worth in such an account at that time. Until society has achieved genuine separation of economy and state, I'd be hesitant to trust wealth to any private competitor to the government money monopoly.

Doug: I'm afraid you've got the realistic view on this. On the other hand, its just as dangerous to trust your wealth to some instrument of the state, which all the banks and brokers are in today's world.

L: Where does that leave us?

Doug: Well, remember that leaving too much of your wealth in any of these fiat currencies is also very risky at this point. There is no single safe currency, and diversification can help. Id think of GoldMoney.com as being like a gold checking account; I wouldn't put all my wealth into it, but its a good place to park gold for near-term transactions.

As for the paper currencies, the euro is probably the worst of them, but the U.S. dollar is not far behind, nor are any of the others. They will all eventually trade at their intrinsic value, and I expect eventually will turn out to be this decade.

And as we've said before, you want to have a significant amount of gold in your personal possession but not in a safe deposit box in your home country. In addition to GoldMoney.com, there's Canada's Central Fund, the ETFs, and Perth Mint Certificates for handling larger amounts of gold without having to build your own Fort Knox.

Switzerland is still a relatively good place to store things in Europe. In South America, Uruguay is the best, in Central America, Panama, and in the Orient, Singapore.

L: Okay then any other investment implications to currency regime change, besides battening down the hatches, buying gold (and silver), and diversifying the political risk to your assets by spreading them across different countries?

Doug: I hate to sound like a broken record, but there are times when the best solution is also the most obvious solution. When it comes to cash money, the answer is gold. Its the only way to go. For details on how to play this, investors should try out Casey's Gold and Resource Report.

L: Got it. And while none of the new currencies on the horizon inspire much confidence in you, if one were launched that was genuinely commodity-backed, would that get the nod from you?

Doug: Yes, it would. If the Panamanians, for instance, decided to put their original currency, the colon, back on the gold standard, that would greatly enhance the value of having a bank account in Panama, in colons. They've dollarized their economy, but the colon still exists, so this is not unrealistic. It would draw in a huge amount of capital, because a lot of people would still trust a currency, even a gold-backed one, more if it were issued by a nation-state. Atavism is ingrained in the human psyche.

It's possibilities like this that make me optimistic about a gold-backed currency in the future. I think somebody's going to do it. I think that gold will be reinstituted as money in day-to-day use within 20 years. That's my bet.

L: So noted Doug Casey's guru-vision for this week. I look forward to seeing if you're right.

Doug: Yeah, 20 years go by in the blink of a cosmic eye. Till next week.

Doug Casey is Chairman of Casey Research and a highly respected author, publisher and professional investor who graduated from Georgetown University in 1968.

Issuer Market Update - September 2009

By Jon Matonis

The Issuer Market Update is a periodic snapshot of active digital gold currency issuers. Only those issuers and currencies that have precious metals backing are included in the analysis, although some issuers may also offer non-metal digital currencies.

Additionally, I have included each issuer's date of founding and the legal jurisdictions for administrative, operational, and guarantor entities, if applicable. Certain companies below will be the focus of issuer highlight studies in the future. Please bear in mind that not all issuers are forthcoming about the full details of their legal and control structure -- a fact that I believe puts them at a relative disadvantage.

1. c-gold (2007) - Seychelles, Malaysia
   
2. e-dinar (2000) - Dubai, Malaysia
3. e-gold (1996) - Nevis, USA
4. EuroGoldCash (2008) - Panama
5. GoldExchange (2006) - Costa Rica
   
6. GoldMoney (2001) - British Channel Islands
7. GoldNowBanc (1999) - unknown jurisdiction
8. Gold-Pay (2008) - Panama, Costa Rica
9. iGolder (2009) - Belize
10. Liberty Reserve (2005) - Costa Rica
11. Pecunix (2001) - Panama, Vanuatu
12. Perfect Money (2007) - Panama
13. WebMoney (1998) - Belize, Lithuania, Russia, Dubai

Interviews with Issuers:
"Interview with c-gold", DGC Magazine, June 19, 2009
"Interview with iGolder", DGC Magazine, April 16, 2009
"Interview with e-gold", DGC Magazine, March 20, 2009
"Interview with Gold-Pay", DGC Magazine, March 20, 2009
"Interview with Perfect Money", Ecommerce Journal, January 23, 2009
"Interview with e-dinar", DGC Magazine, October 22, 2008
"Interview with WebMoney", DGC Magazine, October 22, 2008
"Interview with GoldMoney", DGC Magazine, October 22, 2008
"Interview with Liberty Reserve", Planetgold.com, May 20, 2002

Goldgrams Product is Not Anonymous

By Jon Matonis

Goldgrams® are the basic units of value within the GoldMoney system. One troy ounce of pure gold bullion contains 31.103 grams of metal, and one goldgram (gg) is equal to one gram. It's really not much different than a registered bank account or a gold bullion account in the United States. GoldMoney from Net Transactions Limited is regulated by the Jersey Financial Services Commission under the Financial Services (Jersey) Law of 1998 within the British Channel Islands. Jersey is an autonomous possession of the British Crown, and Britain is responsible for its external affairs including negotiations with the European Union. However, be careful because GoldMoney is not anonymous and it is not untraceable.

I realize that this article will tend to get a lot of people worked up, because James Turk and his crew have been dutifully serving the precious metals buying community for many years. It is an exemplary organization with superior customer service, top-grade insurance policies, and routine vault audits; however, it has two other features that do not serve it well as a potential leader in the emerging digital gold currency field.

First, GoldMoney follows the same know-your-customer rules with proof of identification that most banks around the world adhere to as part of FATF (Financial Action Task Force) guidelines. That puts GoldMoney at a serious disadvantage. For a digital currency to thrive and survive, it must possess, at a minimum, the same features that make a $100 bill and 500-Euro note so popular -- namely anonymity and untraceability. Otherwise, it is not true electronic cash but merely another traceable book entry that can be subpoenaed by governmental or taxation authorities.

Second, the physical and legal jurisdiction that Net Transactions Limited has selected for its base of operations, British Channel Islands, does not permit it to conduct operations in a way that would ever lead to a viable, circulating digital gold currency. Unlike admirable digital currency jurisdictions such as Panama, the British Channel Islands will blindly conform to both OECD and FATF guidelines in an effort to retain so-called legitimacy. GoldMoney has been neutered like e-gold, although sadly, with GoldMoney it was voluntary.

Therefore, far from being a promising digital replacement for the $100 bill and private money remittance services, GoldMoney has become a glorified bullion bank no different than Monex in the United States or BullionVault in the United Kingdom. Their future as a digital gold currency is seriously in doubt, because as Dr. David Chaum, founder of DigiCash Inc., boldly stated to Seth Godin in his Presenting Digital Cash (1995) interview:

"It really is not electronic cash unless your privacy is protected. That's the idea of cash. You don't have to reveal your identity to pay. Cash is the most popular payment system on the planet. It's something even kids know how to use. Its particular structure may have had one technological origin, but its now established as a fundamental payment system and certainly the most prevalent one. If you want to create an electronic thing that will replace cash, at least in cyberspace, then it should have all the features that cash has. It can have more features, but it can't have fewer."

In other words, be very afraid of the cashless society unless the privacy of paper cash is vigilantly maintained.

Virtual Cash Meets the Real World

By Cherise Fong
CNN
Thursday, July 9, 2009

http://www.cnn.com/2009/TECH/06/22/digitalbiz.ecurrency/index.html

There's gold in them there screens: Real-money transactions in virtual worlds are finding new legitimacy.

While China is seriously cracking down on the exchange of virtual currencies for real cash, virtual economies backed by newfound legitimacy elsewhere are quickly gaining ground in the real world.

On June 24, 2009, the role-playing game 140 Mafia launched on Twitter, following in the footsteps of highly lucrative games Mob Wars and Mafia Wars on Facebook (and now iPhone) to link virtual-currency exchanges to real-money transactions.

In March 2009, MindArk -- creator of the MMORPG (massively multiplayer online role-playing game) Entropia, where one player famously bought an island for US$26,500 in 2004 -- saw its wholly owned subsidiary Mind Bank granted a banking license from the Swedish Financial Supervisory Authority.

The new license allows Mind Bank to be the first bank to directly incorporate real-money transactions with virtual-world activities. Selling virtual assets directly between players for real-world cash has been strictly prohibited by most game publishers, which find themselves looped out of the profits.

What has been profitable in the meantime to some hardcore players of World of Warcraft and EverQuest (and other games) is "gold farming" -- accumulation of "gold," weapons and other status symbols of a seasoned player -- followed by the online auction of such assets or user accounts.

Since games publishers began policing eBay for this type of unauthorized activity, several Web sites such as PlayerAuctions have adopted a PayPal-like approach in order to broker the trading legally, acting as an open marketplace for player-to-player exchange of digital assets.

Dual-currency economies

However younger games (often aimed at younger audiences) are ditching the conventional subscription-based model of the above games to adopt the "freemium" model, which lets users play for free, but allows them to enhance their experience by purchasing accessories or other premiums through micropayments.

Frenzoo, a "3D fashion game for girls", is one game that has adopted this model. CEO Simon Newstead explains: "The idea with dual currencies is that there is a paid currency [Gold Coins], which is paid for using real money and exchanged between sellers and buyers. In addition, there is a second currency -- a free or so-called 'earned' currency [Silver Coins] -- which is gained through activity and progression in the world or game."

"In this way," he continues, "the economy can recognize different forms of contribution, and in newer economies these can also be traded between each other. For example, people earning currency and selling it to people who have less time but have real money."

Mirrored economies

As one of the first successful virtual economies, Second Life's huge marketplace includes objects and services for sale, as well as a real estate market.

In 2008, more than $100 million worth of the world's Linden dollars were bought and sold on Second Life's official LindeX exchange, according to its Web site.

"In Linden Exchange, the U.S. dollar part of the transaction is via PayPal, a well-known entity, so there's a certain amount of trust that comes with it," says Darrly Chang, co-founder of D&D Dogs, a two-man freelance venture that sells virtual dog pets and avatars to Second Life residents.

Recently, however, business has slumped along with the real-world recession.

"We'll continue to see a proliferation of alternative currencies associated with specific platforms and communities, much as frequent-flier miles are associated with individual airlines or even networks of airlines," says Dan Jansen, CEO of Virtual Greats, which specializes in creating branded, copyrighted material for virtual worlds.

"In the longer term we may see a global standard for virtual currencies, but it will take some time."

Golden e-currency?

James Turk, chairman of digital-gold company GoldMoney, agrees.

"But," he adds, "inevitably digital gold currency will make significant inroads in global commerce because it lowers the cost of transacting with one another. Reducing transaction costs creates more opportunities for global commerce."

In March 2009, GoldMoney launched a dedicated iPhone application allowing its account holders to exchange gold and silver units within minutes.

Putting a trendy iPhone application that allows people to manage their own digital gold on par with other popular banking applications branded by well-established banks brings e-currency a step closer to the modern mobile end-user.

Furthermore, GoldMoney is firmly anchored to real-world assets and individuals, notably strictly forbidding anonymous accounts -- unlike the former incarnation of the pioneering company E-Gold, whose founder this month ends his six-month house arrest in Florida after pleading guilty to money laundering-related crimes.

So how realistic is the prospect of a single, global, digital currency?

"It all comes down to trust," says senior economist Frederic Neumann.

"We trust the government to guarantee our 'virtual' money for real currency. [With digital gold] the gold standard is guaranteed by a private company. Governments already have several hundred years of sovereignty engrained in people's minds, so that trust is very difficult to establish."

For further reading:
"Exploration on Operation of Online Virtual Currency", Hong Wu, Hui Peng, and Youwei Zhu, May 23, 2009
"Two-Way Exchange of Virtual Currency: Future Tendency and Inherent Risks", Hui Peng and Linyu Niu, March 7, 2009
"Real Currency Economies: Using Real Money in Virtual Worlds", Billy Harris and Andy Novobilski, January 2008

One Global Digital Gold Currency...The Devil´s Work Indeed!

By Mark Herpel
American Chronicle
Thursday, April 2, 2009

http://www.americanchronicle.com/articles/view/96914

Digital Gold stands firm as a protector of personal wealth and value

I am constantly amazed at the bad information I see and read regarding digital gold or digital gold currency.

Senior Fellow, Director of International Economics and quite possibly the hardest working man over at the Council on Foreign Relations, Mr. Benn Steil, mentioned digital gold more than two years ago in his article, "Digital gold and a flawed global order". He offered a positive viewpoint and forward looking statements regarding the future of digital gold. Here is what Mr. Steil had to say:

Digitized commodity money may then be in store for us. Gold banks already exist that allow clients to make and receive digital gold payments—a form of electronic money, backed by gold in storage—around the globe. The business has grown significantly in recent years, in tandem with the dollar´s decline. As radical and implausible as it may sound, digitizing the earth´s 2,500-year experiment with commodity money may ultimately prove far more sustainable than our recent 35-year experiment with monetary sovereignty.

However, in the recent news headlines, it seems that not everyone completely understands Digital Gold Currency and the powerful role it can play in everyday commerce.

This month I have been inundated with no less than 36 Skype discussions and emails regarding Mr. Bob Chapman´s piece from "The International Forecaster" and GoldSeek news. The article is entitled, "Staggering Deficits In A Depressionary Economy". [1]

How did Mr. Chapman, or anyone for that matter, get the ridiculous idea that Digital Gold Currency is big government´s global tool to control and spy on the population?

Who said that digital gold will allow governments to control every aspect of my life? Ridiculous!

In the past decade, Digital Gold Currency has been a safe private banking and commerce financial tool for millions of users. It has only been, in just the last 36 months, that the U.S. Government has made an attempt to regulate its use within their borders. The wild prediction that there could, should or would ever be ONLY one digital world currency backed by gold is laughable.

Private Digital Gold Currency companies have been in operation for more than ten years. DGC (digital gold currency) is a private value transfer solution which is always issued by a business and not a government agency.

Digital gold is an everyday guaranteed solution to the never ending problems of inflated national currency. DGC is NOT government issued legal tender.

Yes, on a global scale, there could be one financial category known as "digital gold currency" however that category could contain thousands of private brand name gold currencies. Here are some examples:

• GoldMoney gold grams
• e-dinar (digital gold dinar and silver dirham)
• Pecunix grams
• iGolder gold grams
• Webmoney WMG purse gold grams
• c-gold grams
• CryptoBullionReserve GoldGrams
• GoldNowBanc GoldGrams
• PC GoldGrams
• Gold-Pay grams
• Wontongold Grams

These are all currently functioning private Digital Gold Currencies.

Digital gold is unlike national currency. In the case of government issued paper money, one U.S. Dollar does NOT equal the value of one euro, yen, ruble or pound. National paper currency has floating exchange rates. However, one gram of digital gold always equals one gram of any other digital gold in any other country around the world. Gold is universally accepted by weight, no matter what brand name it holds. Gold backed digital units are the perfect candidate for a global digital currency.

One Gram = 1 gram = one gram

A digital gram of "Bob´s USA Gold" is identical to one gram of "Benson & Co.s" Singapore digital gold, which is also guaranteed to be exactly the same as a gram of "Amr´s XtraOrbit Egyptian" digital gold. Any private currency backed by gold can be easily exchanged for any other digital gold currency with no loss from exchange rates or additional fees which are always present with a paper currency exchange.

The concept of one global currency backed by gold should not mean ONE government issued digital currency. A global digital currency backed by gold should be understood to mean thousands of privately issued gold currencies or brands of currency. The public needs to recognize that digital gold currency is already in use today around the globe, it is NOT some devil which government henchmen dreamed up to control the masses. Digital gold is a private banking solution which offer extraordinary personal security and protection from inflation.

Digital gold = Freedom

Here is Mr. Bob Chapman's statement from "Staggering Deficits in a Depressionary Economy" (March 14th, 2009):

We are hearing more and more about digital gold as a private-bank solution to potential devaluation of fiat currencies. The May/June issue of the CFR´s, Foreign Affairs magazine, Benn Steil a senior fellow and director of International Economics, who has been on loan from the parent Royal Institute in London since 1996, says digital gold, "although a niche business at present, gold banking has grown dramatically in recent years in tandem with the dollar´s decline." Mr. Steil was the Illuminist who drew up the plans for the North American Union and the Amero. If there is digital gold out there somewhere we haven´t heard about it.

The new approach to a world currency obviously will be digital gold. This way they can introduce a one-world currency backed by gold to make it acceptable to the world public. The digital nature means government would know every aspect of your financial life and would control you and your country. The gold storage would, of course, be controlled by the Illuminists. The elitists have come to the conclusion another fiat currency is not going to be acceptable. This is why JP Morgan Chase, Citicorp and Goldman Sachs talk in terms of $2,000 gold and UBS projects $2,500. Historically such benchmarks are usually and normally exceeded by prices from $3,000 to $7,000.

When did Digital Gold become big government´s tool for spying?

Here a newsflash, the government already keeps a very close watch on the population through bank accounts and credit cards. Since 9/11 U.S. government agencies already, "...know every aspect of your financial life... and control you and your country" as Bob states. Digital gold won´t bring government agencies any further into your bedroom than they already are, that is an outright lie.

Bob also makes this statement in his article, "If there is digital gold out there somewhere we haven´t heard about it." Well, anyone reading can get on over to GoldMoney.com, Wmtransfer.com (WMG), Loom.cc or iGolder.com and try it out. Stop trying to demonize one of the best digital assets Americans have in the uphill battle to protect their wealth.

Digital gold is a protector of personal freedom and property rights. Private digital gold companies stand for freedom and financial privacy.

"To improve our money system it is neither necessary nor wise to destroy our present system. It is only necessary to produce a better product and to introduce it gradually."--Dr. Edward Popp, "The Great Cookie Jar", 1978

In all fairness I must disclose that I did email Mr. Bob Chapman and he responded saying that I just misunderstood him. After that response, I immediately re-read his article along with Ben Steil´s article(s) and a few others. I think I understand completely. Citizens in today´s world are moving away from the centralized greedy megabanks and towards local, smaller, decentralized level financial playing fields and that usually means gold or silver.

Every concerned citizen I´ve met is angry that their life saving and family nest egg just lost 40% of its value in the past two years. Everyone I meet seems mad that their job was shipped overseas in the past few years because manufacturing is not too expensive to do in the United States. Every person I know is angry at the Congressional big spenders for blowing through $3 Trillion dollars on bailouts and stimulus packages. I believe I understand it completely, it´s crystal. People want sound money.

The advances of today which give us digital gold instead of shiny gold coins for retail commerce should make NO difference in anyone´s ability to recognize honest money. The advantage of using digital gold as money is clear, gold cannot be created with a few keystrokes like excess bank loans. Digital gold gives citizens the ability to protect the population´s wealth just as freshly minted U.S. gold coins did back in 1792.

America was founded on gold and silver money. In previous decades all U.S. money was backed by gold or made of silver. It was good enough for Thomas Jefferson and it is good enough for today´s Americans.

There is nothing wrong with using digital gold currency as money and people like Mr. Chapman need to either rethink their position, clarify their writing and stop spreading rumors.

In the free Internet world, thousands of creative minds have already been building private currencies for more than a decade. Since gold is still considered money as it has been for thousands of years, the use of digital gold will continue to grow as a safe harbor protecting value from the approaching financial storm.

Digital gold currency is the number one monetary advocate for individual rights, privacy and freedom.

Georgia, Missouri, Washington State, Maryland, Montana, Colorado, Indiana & Previously New Hampshire

Today, there are about a half a dozen states with pending honest money legislation which includes the use of privately issued Digital Gold Currency for commerce and in the collection of taxes and fees. Here is one example from Indiana Honest Money:

Requires the treasurer of state and fiscal officers of political subdivisions to: (1) maintain one or more electronic gold currency accounts with a designated electronic gold currency payment provider; and (2) conduct all monetary transactions of the state or political subdivisions through electronic gold currency accounts. Provides that an electronic gold currency payment provider must use an electronic gold currency unit that constitutes a monetary unit of account and represents a claim of title to and ownership of a specifically defined, fixed weight of gold held by an independent specie vault. Specifies that a specie exchange with which an electronic gold currency payment provider associates must conduct the business of exchanging gold and silver coin, legal tender of the United States, and the electronic gold currency of the electronic gold currency payment provider.

I believe that in the very near future privately issued digital gold will be in much wider use throughout the US and around the world. However, there certainly will not be just one issuer and the gold currency could never originate from a government agency. There will be thousands of different private issuers and brand named Digital Gold Currencies in use protecting citizens wealth and privacy.

America was built on gold and as the United States sails past the $14 Trillion dollar debt level, I am very surprised to see any intelligent person trying to downplay the importance of sound money like Digital Gold Currency. Credit cards and fiat money are much bigger villains.[2]

1] "Staggering Deficits in a Depressionary Economy", Bob Chapman, March 14, 2009

2] "Credit Card Fraud Is Funding Terrorist Networks: Not Digital Gold Currency", Mark Herpel, American Chronicle, July 14, 2008

Mark Herpel is the editor of Digital Gold Currency Magazine and resides in Panama. This article was also published in DGC Magazine (April 2009).