An Industry Of Modern Day Gunslingers

By Mark Herpel
American Chronicle
Thursday, April 12, 2007

http://www.americanchronicle.com/articles/view/24200

Back in the days of the wild west, the United States was brand new, small town business was fresh and unregulated. A person could claim their fortune and leave their mark on just about any industry they desired, granted they had the savvy, smarts and cash to conquer the competition.

Flash forward 180 years to the .com era. Today the Internet is still very fresh and new. With no shortage of creative thinkers or venture capital, the world of private digital currency is certainly still brand new and unregulated by government. Sure the ‘Pinkerton boys’ are trying to shut down online gambling by prohibiting US payment processing but everyone knows, despite some very public ‘arrests’, trains are still being robbed and Pinkerton has a lot to learn.

The Internet currency or digital currency industry is no exception. Its brand new and as of yet just about totally unregulated.

So new and similar to the wild west that independent third party agents which transact between digital currency and fiat currency might even be considered the gunslingers of the ‘electronic wild west’ (the Internet). Literally billions of dollars, yen and euro move back and forth between fiat government issued money and private digital currency without so much as a request by government to keep track of the funds. Not a peep! Its not only the greatest area of the Internet, just like the wild west, its also super profitable (if you are good at your business). Like opening a saloon in Tombstone, an inexperienced operator could lose his shirt in a short time if they were not careful. Beware, the wild west also had its share of scammers, crooks and thieves and they did not use proxies! ‘Bad Men’ they called them back in that time. I think that same title might still ring true today but in a much more watered down characterization.

Third party agents accepting incoming funds are NOT banks. Additionally, since they do not actually issue the ‘digital money’ they are NOT money transmitters and since digital currency is not defined at a ‘currency’ like the Yen or the Euro, agents are NOT required to be money service businesses (MSB). Its the digital wild west and the independent third party agents, as one heavy e-gold user once told me, could be considered the ‘gunslingers’ of the electronic wild west. Their businesses and profits deterred only by the competition and their ability to keep up with the growing demand for their products.

Controlled by few laws, spread out over many jurisdictions and limited only by their ever present online savvy and imagination, third party exchange agents are truly masters of their own domain. Free to crank out as much profit as the market will deliver and almost no where for customers to complain if the business sours. Competition, is all they worry about and market share rules. Sometimes even partnering or buying out another rancher (agent) makes fine business sense. The cattle barons of the wild west would be proud of their continuing tradition across the Internet.

The wild west….what a great time to be alive. Claim your land, pan for gold or open that casino/bar in town and stake your claim to a fast fortune. Potential profits and new ventures were everywhere. The private digital currency Internet today seems no different. In just minutes, anyone can put up a web site, copy some catchy text, paste some affiliate ads and open a online shop with little restrictions. Digital currency agents/vendors experience little or no restrictions on licensing along with thousands of banks around the globe and still dozens of methods for accepting payment transacting. The thrill of the wild west is alive again.

Is the Fed Privately Owned? Does it Matter?

By Steve Saville
Excerpt from Commentary at www.speculative-investor.com
Tuesday, April 3, 2007

http://www.gold-eagle.com/editorials_05/milhouse041007.html

In our research we occasionally come across articles in which the writer rails against the 'fact' that the Fed is privately owned, the implication -- whether intentional or not -- being that everything would be fine if the Fed were a government agency. That is, the implication of such complaints is that private corporations can't be trusted to do the right thing when it comes to management of the monetary system whereas the government can. This, however, is a case where two wrongs -- the belief that the Fed is privately owned and the belief that government ownership would represent a significant improvement -- definitely don't make a right.

First, let's deal with the myth that the Fed is privately owned*. As noted by G. Edward Griffin in The Creature from Jekyll Island:

"The federal government does not own any stock in the [Federal Reserve] System. In that sense, the Fed is privately owned. That, however, is misleading in that it implies a typical private-ownership relationship in which the stockholders own and control. Nothing could be further from the truth. In this case, the stock carries no proprietary interest, cannot be sold or pledged as collateral, and does not carry ordinary voting rights. Each bank is entitled to but one vote regardless of the amount of stock it holds. In reality, the stock is not evidence of "ownership" but simply certificates showing how much operating capital each bank has put into the System. It is not a government agency and it is not a private corporation in the normal sense of the word. It is subject to political control yet, because of its tremendous power over politicians and the elective process, it has managed to remain independent of political oversight. Simply stated, it is a cartel, and its organization structure is uniquely structured to serve that end."

To operate as a commercial bank in the US a bank must own the stock of the Federal Reserve, but, as Mr. Griffin points out, this stock does not confer any of the normal rights of ownership. Furthermore and as explained elsewhere in Mr. Griffin's book, the members of the Fed's National Board of Governors -- the seven most senior executives of the Fed -- are appointed by the US President and confirmed by the Senate. These 7 senior executives dominate the 12-member Federal Open Market Committee (FOMC), not just because they form a majority but also because they have veto power over who the other 5 members of the Committee will be.

In other words, a small group of people appointed by the US President exerts almost total control over the Fed, while the stockholders are stockholders in name only. Of course, banks are major beneficiaries of the Federal Reserve System in that the existence of the Fed paves the way for banks to grow their assets at a much faster pace than would otherwise be possible. Also, the private banking system exerts considerable influence over the government and, therefore, over the President's appointees to the National Board of Governors. It's important to understand, though, that this influence has nothing to do with the ownership of Federal Reserve stock. In fact, some of the most important US financial corporations in terms of their influence on the government -- Goldman Sachs springs to mind -- are not even members of the Federal Reserve and hence own no Federal Reserve stock.

This leads us to the question: does it matter whether the Fed is, or isn't, privately owned?

The answer is no, it doesn't; the question of the Fed's ownership is really just a "red herring".

The main issue (problem) is that the Fed, regardless of its ownership, has the legal power to counterfeit money in unlimited amounts. This power, in turn, enables the unfettered growth of both the Federal Government and the banking system. Specifically, due to the existence of the central bank there are no rigid limits on how much the government can borrow and spend because the Fed stands ready to monetise (purchase using money created out of 'thin air') every dollar of new debt not purchased by private investors. As a result, the rampant expansion of government gets 'paid for' by the devaluation of the existing stock of money. And due to the potentially unlimited quantity of money that can be created by the Fed, the private banks are able to grow their balance sheets to a much greater extent than their equity levels would otherwise dictate.

In summary, the issue is not the Fed's ownership; the issue is its ability to create an unlimited amount of "legal tender" money out of 'thin air'.

*Some writers have claimed that the US Fed is not only privately owned, it is privately owned by a small group of FOREIGN banks. Dr Edward Flaherty specifically addresses, and refutes, this foreign ownership claim in an essay at www.usagold.com/federalreserve.html.

Steve Saville is the founder of The Speculative Investor and currently resides in Shanghai.

Meeting Of The Real And Virtual Economies

By Emerson Swanson
Article Dashboard
Friday, June 15, 2007

http://www.articledashboard.com/Article/Meeting-of-the-Real-and-Virtual-Economies/1318073

In the world of Azeroth, life can be cheap but saving up for that much desired epic mount can take months of labour. Welcome to the World of Warcraft, currently the world's largest MMORPG (Massively Multiplayer Online Role Playing Game). In the World of Warcraft, the auction house presents the avid window shopper with a cornucopia of wonders, from fabulous swords to armour guaranteed to make you the hardest elf in your neck of the woods. To purchase such wonders, the player needs gold, something that requires quite literally hours, days or weeks of in-game labour. However visit Ebay or Eye on MOGs, a price comparison engine for virtual commodities, and you have the opportunity to convert real life earnings into virtual gold, platinum, ISK or Credits, depending on the virtual world that you alter ego(s) inhabits.

The world of Real Money Trading has come a long way since its fledgling days when gamers departing from a virtual world would use websites like Ebay to convert their in-game assets into real world money. Today it is a multi-billion dollar industry, with industry insiders like Steve Sayler of IGE estimating that as much as $2.7 billion will change hands within this secondary market during the course of 2006. This lucrative industry is now catered for by companies like MMORPG SHOP, Mogmine and MOGS, which have entire infrastructures set up to 'farm' for in-game gold and valuable items. Not only can you purchase in-game spending power with real world money from such sites, but many are service driven, for example offering power levelling to fast-track your avatar to new heights of maturity, turn you into a master craftsman in days rather than months, or boost your reputation within the world you inhabit. Sites like Mogmine offer specialised services like fruit picking, specified item farming, or will take your character through that instance that's been weighing so heavily on your mind.

What we are experiencing here is a whole new type of economy where the border between the real and virtual world is blurring. There are currently hundreds of companies catering to this phenomenon, with some virtual items being sold for hundreds or even thousands of dollars. Virtual real estate is earning real world money, with people like 43-year-old Wonder Bread deliveryman John Dugger purchasing a virtual castle for $750, setting him back more than a week's wages. According to Edward Castronova, an economics professor at Indiana University who has performed extensive research into online economies, Norrath, the world in which EverQuest takes place, would be the 77th richest nation on the planet if it existed in real space, with players enjoying an annual income better than that of the citizens of Bulgaria or India. A visit to GameUSD indicates the current state of virtual currencies against the US dollar, demonstrating that some virtual world currencies are currently performing better than real world currencies like the Iraqi Dinar.

Real Money Trading and gold farming are met with mixed feelings in the gaming world, with some gamers criticizing the fact that real world wealth can affect in-game prestige and capabilities. Critics of the secondary market believe that such activities within the virtual economies intrude on the fantasy and provide the more economically empowered with an unfair in-game advantage. However this ignores the real world fact that earning money and advancing one's character within a virtual world takes a good deal of time, and some gamers have more money than time on their hands. The average age for gamers is 27, and approximately half of all gamers are in full time employment. For a group of friends playing together, it can thus be relatively easy for the cash rich to fall behind the time rich in terms of gameplay, as they are obliged to spend the lion's share of their time working their real world jobs while friends are spending time levelling their characters. For such individuals, for whom time translates into money, a few dollars is a small price to pay to ensure virtual survival the next time they enter an instance with their high level friends.

Companies set up to farm virtual commodities are furthermore criticised as being little more than sweatshops, an attitude encouraged by the fact that many of these companies reside in low wage economies like China. However, pay and work conditions in such companies, where workers are paid to spend their days playing enjoyable, stimulating games, cannot compare to that of their compatriots who spend their days mindlessly producing the components that go into our computers, or the trainers that we wear while playing. Essentially the objection is a moral one, with many Westerners objecting to low wage economies catering to this type of leisure activity. Often workers are paid partly in kind, with food and accommodation included in remuneration packages, with the pay received thus presenting largely surplus. While pay may not equate to Western standards, this type of economic activity reminds us that we are living in a continually globalising economic environment where quality of life and spending power should be taken into account as much if not more so than say a straight dollar for yen exchange rate. Companies like Mogmine provide their staff with health benefits, holiday pay and share options, along with the chance for advancement within the organisation. Brian Lim, CEO of Mogmine, comments that 'many mid- and high-level management started out as gamers and now they have equal or more pay than respectable managers in more conventional businesses.' Within these lower wage economies, these thus represent desirable jobs.

Other complaints centre around the negative effect of such farming activities on in-game economies. At Mogmine, Brian Lim's gamers play the game as it is meant to be played, but hone good techniques for gold generation along the way, thus ensuring that the work remains interesting to staff. Jonathan Driscoll comments that competition for resources has always been a feature of gameplay, and points out that his World of Warcraft farmers do their work within instances, and thus do not impact on others' gaming experiences in the least. Complaints that farmers are responsible for in-game inflation smack of sour grapes when compared to common factors like players with high level characters acting as benefactors for their low-level alts, and thus facilitating the unrealistic in-game spending power of such low level characters. While some developers do not condone real money trade on their servers, others like MindArk, with their game Project Entropia, have included the secondary market as a part of their services. Even Sony Online Entertainment, who until recently stood staunchly against real money trade, have jumped on the band-wagon with the release of their Station Exchange service, actively facilitating Real Money Trading in Everquest 2. Other games, like the upcoming Roma Victor, embed the secondary market as part of their financial model rather than relying on the common subscription model, with players purchasing Sesterces to play and advance in the game.

Such trading of virtual goods for real world money is potentially just the tip of the iceberg for the development of virtual economies where people come together within virtual worlds to promote and trade real world products. Games like The Matrix Online already sell advertising space to real world companies to promote their products to gamers who spend their leisure time within the world.

We are thus embarking on an entirely new type of economic activity, where real and virtual worlds are meeting within an economic sphere. As a fledgling economy, it is difficult to chart where this phenomenon may take us, but the sheer weight of currency being spent and earned within these economies and the development of services to monitor real to virtual exchange rates and market prices indicates that they are here to stay.

Emerson Swanson is a contributor to Article Dashboard and this article was published originally during late 2006. Reprinted with permission.

Digital Gold Currency - A Solution to the Global Financial Crisis

UTAR, CCIS (Center for Computing and Intelligent Systems), and MNCC will be jointly organizing an Evening Talk on 'Digital Gold Currency - A Solution to the Global Financial Crisis'. The talk will be presented by Dr. Ng Liang Shing from the Faculty of Computer Science & Information Technology University of Malaya.

Speaker's Biography:
Dr. Ng Liang Shing is a Senior Lecturer at the Department of Artificial Intelligence, Faculty of Computer Science & Information Technology, University of Malaya. His research areas include Artificial Intelligence, Image Processing, Computer Architecture and Internet applications.

Abstract:
"Is the root cause of the global financial crisis due to the fact that governments / central banks can print as much as money as they like? If so, is it possible to eliminate paper money and consequently eliminate financial crises altogether?"

The recent global financial crisis has raised many questions on a global scale -- from technical, financial, to political and even moral. In this lecture, we explore the following issues:

a) the role of fiat currency in the global financial crisis,
b) the history of money: from Roman, Persian, Islamic, Chinese to modern,
c) a novel form of currency called the Digital Gold Currency.

We further discuss the use of computer simulation of Digital Gold Currency to investigate the future of global and national economies, including worst case scenarios such as capital flight and currency collapse, more specifically:

i) how to model the impact of Digital Gold Currency for small, medium and large businesses,
ii) how to prepare small, medium and large businesses for the adoption of Digital Gold Currency,
iii) simulation of capital flight and currency collapse, and how Digital Gold Currency can help minimize the impact,
iv) the scenario of a truly globalised economy with DGC as a universal currency.

It will be held as follows:

Date: 17 June 2009 (Wednesday)
Time: 6.30pm
Venue: PB Auditorium 1,
Universiti Tunku Abdul Rahman (UTAR)
No. 13 Jalan 13/6
46200 Petaling Jaya
Selangor, MALAYSIA

Bullion and Bandits: The Improbable Rise and Fall of E-Gold

Wired magazine, on June 9, 2009, published this excellent account of the e-gold business in the wake of the federal investigation entitled "Bullion and Bandits: The Improbable Rise and Fall of E-Gold". Also included in the article is probably the most telling photo (above) of friend Doug Jackson on the floor surrounded by file boxes labeled U.S. Secret Service.

E-Gold founder Doug Jackson wanted to solve the world's economic woes, "but instead got an electronic ankle bracelet for his trouble (below)."


For further reading:
"Let's talk about Doug", StakeVentures, July 1, 2009
"Special e-gold Issue", DGC Magazine, December 2008
"How the Man finally brought e-gold down", StakeVentures, July 22, 2008
"E-gold founders to plead guilty?", Financial Cryptography, July 22, 2008
"U.S. v. E-gold, Ltd. - Judge's Opinion", Westlaw 550 F.Supp2d 82, May 8, 2008
"60 e-gold Exchange Agents, Who’s Still Alive? You Might Be Surprised…", Mark Herpel, American Chronicle, July 22, 2007
"E-Gold Gets Tough on Crime", Wired, December 11, 2006
"Gold Rush", Business Week, January 9, 2006
"Letter from Dr. Douglas Jackson", Chairman of e-gold, Ltd., January 6, 2006
"In Gold We Trust", Wired, January 2002

South Korean Government to Illegalize Real Money Trade

By Jun-Sok Huhh
Virtual Economy Research Network
Thursday, November 23, 2006

http://virtual-economy.org/blog/finally_korean_governement_are

According to an article of a Korean newspaper, if a recent proposed bill named “Amendment for Game Industry Promoting Law” be through the National Assembly, all kinds of mediating businesses between in-game money and real money could be punished.

The amendment adds the former original bill to a clause for prohibiting acts of exchanging in-game money to real money. This tells that anyone cannot do her business for ‘exchanging’ or ‘mediating’ exchanges of, and 'repurchasing' outcomes of games by real money. The 'outcomes' mentioned include in-game money, all kinds of in-game points, but in-game items are not among these.

According to an official concerned, RMT mediating companies can be punished for their acts of mediating in-game money. Already well known, most of RMT transactions are being done by in-game money, not specific items. So, all of these companies are at the outside of the law.

As the bill can be validated without any period of suspension, the authorities concerned can regulate any act of mediation and the mediating companies, once the bill is passed. If nothing special happen, the bill is expected to be carried by Dec. of this year.

Meanwhile, the government is also considering another regulatory measure for in-game items that are not included in the above case. After some public hearings are held, they are to submit another amendment until early of year 2007.

* According to one of members of Gamestudy.org, the first edition of the amendment proposed by a congressman had no explicit expression for in-game currency like Arden of Lineage. The bill itself should be checked for getting more exact picture.

The previous news for sales of two mediating companies to IGE might be precursor for this action of government. Actually, as the firm like ItemMania is owned by IGE as of now, this measure might bring a small trouble between two countries. What if the IGE would move the business from Korea to U.S.? Also, the amendment might be strongly influenced by the big scandal about gambling arcade gaming of this year. The most criticized fact about the scandal was the exchange between gift certificates won by game playing(actually it is not playing, but just gambling) and real money. At that time some observers were harshly bashing RMT of online games in the like manner.

Anyway, considering the size and effects of RMT in Korea, this measure is to be another big turn in Korean MMOG market. It is a structural change to effect players, developers, and other derivative companies around online games.

Digital Gold Industry Overview

On December 13, 2006, Jim Davidson released the comprehensive presentation, Digital Gold Industry Overview from The Free Market Monetary Education Association.

The Free Market Monetary Education Association was organized in Kansas in October 2006. The group is a Kansas not-for-profit corporation. The nature of the business entity is "...to provide education in the practical aspects of free markets, finance, monetary policy, and information systems."

The Chairman of the Board of Directors is Jim Davidson. Raised in Lawrence, Kansas, Jim was valedictory speaker at his high school commencement. He attended Columbia College of Columbia University as a National Merit Scholar, John Jay Scholar, and Kansas Scholar. In 1985, he received a bachelor's degree in history from Columbia. While in New York, he worked in the banking industry as weekend shift supervisor for a lockbox operation handling about 45 million dollars a week and managing a crew of twelve. In 1987 he received a master of business administration from Rice University's Jesse Jones Graduate School of Administration. Since then he has worked in aerospace, real estate, finance, marketing, and management consulting.

In addition to The Indomitus Report, Jim is writing a book on new countries and another on privacy. Jim is also the co-author of The Sovereign Individual: Mastering the Transition to the Information Age (James Davidson and William Rees-Mogg, 1999).

For further reading:
"Interview With Free Market Money Guru, Jim Davidson of Vertoro, parts 1-2, parts 3-4", Mark Herpel, American Chronicle, November 14, 2007