Hong Kong Pulling Gold Reserves from London

By Chris Oliver
MarketWatch
Thursday, September 3, 2009

http://www.marketwatch.com/story/hong-kong-recalls-gold-reserves-from-london-2009-09-03

HONG KONG -- Hong Kong is pulling all its physical gold holdings from depositories in London, transferring them to a high-security depository newly built at the city's airport, in a move that won praise from local traders Thursday.

The facility, industry professionals said, would support Hong Kong's emergence as a Swiss-style trading hub for bullion and would lessen London's status as a key settlement-and-storage center.

"Having a central government-sponsored vault would create a situation where you could conceivably look at Hong Kong as being a hub, where metal could be traded for the region," said Sunil Kashyap, managing director at Scotia Capital in Hong Kong, adding that the facility was the first with official government backing in the region.

The Hong Kong Monetary Authority, which functions as the territory's unofficial central bank, will transfer its gold reserves stored in other vaults to the depository later this year, the Hong Kong government said in an earlier statement.

The monetary authority reported $63 million in physical gold reserves as of July 31, according to its International Reserves and Foreign Currency Liquidity statement. The authority wouldn't disclose where the reserves are held, but local media reports cited gold traders as saying that London's the most likely location.

Traders said the new depository facility could also foster new financial products, such as exchange-traded funds based on precious metals.

The 3,660-square-foot depository, located at the city's main Chek Lap Kok Airport, will serve as a "storage facility for local and overseas government institutions," according to the government statement.

Martin Hennecke, a financial advisor with the Hong Kong-based Tyche Group Ltd., said that could be appealing to regional central banks unnerved after watching the global financial system teeter on verge of implosion last year.

"Central banks are increasingly aware of the importance of having gold reserves at time of financial crisis and having it easily available at their own disposal," he said.

Meanwhile, local newspaper reports said the Hong Kong Mercantile Exchange had signed an agreement to use the depository for its physical settlement and storage needs.

Marketing efforts will be launched to convince Asian central banks to transfer their gold reserves to the Hong Kong facility, according to reports citing Raymond Lai, finance director with the Hong Kong Airport Authority.

Efforts will also be made to reach out to commodity exchanges, banks, precious-metals refiners and ETF providers, the reports said.

Management firm Value Partners planned to launch an ETF gold fund that will use Hong Kong instead of London as a repository for the gold backing the fund, local reports said Thursday.

Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.

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

Early Austrian Economics and The Austrian Case for the Free Market Process

These excellent audiobooks are available from Audible.com. The first one, Early Austrian Economics, features Carl Menger (1840-1921) and Eugen von Bohm-Bawerk (1851-1914) rejecting the classical and Marxian ideas that value can be measured objectively rather than subjectively.

The second audiobook, The Austrian Case for the Free Market Process, features Ludwig von Mises (1881-1973) and Friedrich Hayek (1899-1992) who were perhaps the foremost defenders of the free market and limited government during the mid-twentieth century ascendancy of Keynesian economics.

Book Review: Lords of Finance

The Economist magazine published a book review of Liaquat Ahamed's Lords of Finance: The Bankers Who Broke the World (2009). Theorizing aside, Ahamed provides a colorful historical account of the tumultuous period of the 1920s and early 1930s, and it seems like a redux of Barry Eichengreen and Peter Temin's "The Gold Standard and the Great Depression" (1997).

However, I would disagree that the discipline of a monetary gold standard acts as a negative straightjacket paralyzing government policymakers. The last eight decades have clearly shown the perils and instability of an unparalyzed fiat monetary policy. It is naive to claim that a restrictive gold standard is what caused and exacerbated the Great Depression, because the gold standard of the time was mismanaged by the authorities who increased interest rates to protect reserves, thereby leading to unnecessary levels of contraction and deflation across countries.

An Austrian analysis of the period's economic events is available in Murray Rothbard's America's Great Depression as well as Banking and the Business Cycle by C.A. Phillips, T.F. McManus, and R.W. Nelson. More important than adherence to a commodity monetary standard or not, and why this book is relevant to readers of The Monetary Future, is why central bankers possess the anointed capability to make those overriding decisions in the first place.

For further reading/listening:
"The Myths About a Return to the Gold Standard", John Tamny, May 5, 2009
"Gold-Exchange Standard, Gold, and Monetary Freedom", Michael S. Rozeff, May 4, 2009
"Heroes and Zeroes", The New Yorker, February 2, 2009
"Did Hayek and Robbins Deepen the Great Depression?", Lawrence White, Journal of Money, Credit and Banking, Volume 40 Issue 4, 2008
"Is the Gold Standard Still the Gold Standard among Monetary Systems?", Lawrence H. White, Cato Institute, February 8, 2008
"Gold Standards and the Real Bills Doctrine in U.S. Monetary Policy" (plus audio), Richard H. Timberlake, Econ Journal Watch, Volume 2 Number 2, August 2005"Two Kinds of Gold Standards", Gary North, August 26, 2003
"The Austrian Analysis and Solution for the Great Depression", Richard M. Ebeling, December 1997
"Austrian Business Cycle Theory and the Causes of the Great Depression", Richard M. Ebeling, October 1997
"Did the Gold Standard Cause the Great Depression?", Mark Skousen, May 1995
"The 'Costs' of a Gold Standard", Roger Garrison, The Gold Standard: An Austrian Perspective, 1985
"The Political and Economic Agenda for a Real Gold Standard", Ron Paul, The Gold Standard: An Austrian Perspective, 1985

Visit to Perfect Money Office in Panama

By Mike Seltman
Ecommerce Journal
Friday, August 21, 2009

http://www.ecommerce-journal.com/articles/17608_visit_to_perfect_money_office_in_panama_how_was_it

It has become something usual for Ecommerce Journal edition to conduct journalistic investigation sending its reporters to the offices of different payment systems across the world. So far we have made certain that the Internet users are misled by such payment services as Liberty Reserve, Alter Gold, Numox, EcuMoney and others. This time we decided to check up whether the information about the office of Perfect Money Finance Corp. which is acting at the payment systems market as Perfect Money is authentic.

According to the allegations of the payment system Perfect Money its brick-and-mortar office locates in Panama. Full address as well as glossy photographs of its headquarters the company demonstrates in the special section on its website.

Having just these photos and address information was not enough for us to be sure in reliability of these data. Thus we decided to make a visit to Perfect Money. First, we sent a letter of inquiry to the Support Service asking it to arrange for us a meeting at the office of the company. To our surprise we have received a confirmation.

A reporter of the Ecommerce Journal landed in Panama, the capital of the Republic of Panama, early in the morning and immediately headed for the place specified in the business address: Oficina 207, 2-do piso, Century Tower, Tumba Muerto, Panama, Republica Panama.

He reports: “Before my departure to Panama I consulted Google Maps service to get some idea of the appearance of the office where Perfect Money is supposed to be. After I started from the Panama airport towards the downtown I noticed the eminent building of Century Tower from afar.

“At the reception I was asked where I was going. When I said it was Perfect Money I was looking for they told me the number of the company office. The number turned to be the same as indicated in the address section on the company website. It was 207.

“I rang the bell and a nice girl opened the door. After greetings she invited me to the conference hall. Passing one room I cast a look through a chink and noticed that there were some people working at their desktops. I thought they were programmers or Support Team. Later I decided to verify if I was right and I was told that it was a finance department of the company.

“During our conversation the secretary told me about the future plans of the company as well as the history of Perfect Money Finance Corp. and she also destroyed some myths about the payment system. Well, the information I got wasn’t new to me, it just clarified my surmises. Of the information they provided I was allowed to publish only some facts. They told me that the company is actively upgrading its Support Team and in a short term they will enable Support Service in other languages with phone support.

“On the whole my visit to Perfect Money can be valued as quite successful. My suspicions that the legal address of Perfect Money is just an entry on the website have not been justified. I want to note only one thing. The office was rather small for such a large international company as Perfect Money. On the other hand, maybe it is just a peculiarity of our information era when modern corporations can work with customers all over the world via the Internet while having just a small offline office. In the end we paid our civilities and at a positive note I left the office of Perfect Money and a beautiful city of Panama.”

For further reading:
"Perfect Money VS Liberty Reserve. Which one is the better?", Ecommerce Journal, March 29, 2009
"Exclusive Interview with Perfect Money PR Director", Ecommerce Journal, January 23, 2009
"Interview with Perfect Money payment processor", Ecommerce Journal, July 7, 2008
"New E-Currency: Perfect Money - perfect or not? What are the roots?" Ecommerce Journal, April 18, 2008

Zimbabwe Considering Gold-backed Currency

By Nelson Banya
Thomson Reuters
Thursday, August 20, 2009

http://www.mineweb.co.za/mineweb/view/mineweb/en/page504?oid=87809&sn=Detail

The country is looking for an alternative to its hyperinflation-ravaged Zimbabwean dollar that was replaced by multiple currencies in January


HARARE -- Zimbabwe's central bank governor Gideon Gono on Thursday proposed the introduction of a gold-backed local currency, which was destroyed by hyperinflation and replaced by multiple foreign currencies in January.

A unity government formed by rivals President Robert Mugabe and Prime Minister Morgan Tsvangirai in a bid to end a political crisis introduced multiple foreign currencies to stop sky-rocketing inflation and revive the economy.

But Gono, a Mugabe ally whose reappointment last year has been opposed by Tsvangirai, says the shortage of foreign currencies in the country was hurting economic recovery efforts.

In an article he wrote in the state-controlled Herald newspaper, Gono urged the re-introduction of the Zimbabwe dollar to ease the liquidity crunch, but said this was not a call for "a blind return to the money printing press".

"Rather, what I am calling for is the guarded reintroduction of the Zimbabwe dollar where such a new currency will be fully backed by credible, tangible and locally available assets, such as gold, diamonds or platinum, among several other possibilities," Gono said.

Zimbabwe's inflation has tumbled from an official annual rate of 231m % in July 2008 -- which independent analysts say was understated -- to a monthly rate of 1% in July 2009 following the decision to abandon the local currency.

But the unity government, which says it needs at least $8.3 billion for reconstruction, has so far failed to attract anticipated foreign financial aid, with Western donors demanding broad economic and political reforms.

"Whilst Zimbabwe has managed to stabilise the hyperinflationary pressures that characterised 2008, the country has relapsed into a serious demand deficiency loop that is threatening to choke the productive sectors across the board," Gono said.

"As a country we had pinned our hopes on vibrant financial liquidity being injected by outsiders. This has not yet happened. Industrialists too are on the brink of relapsing into the downward spiral due to the severe demand deficiency now dangerously characterising the country's goods and services markets."

Although Gono also floated the idea of issuing domestic currency under a currency board, he expressed reluctance at the loss of monetary authority that this system would entail.

He, however, proposed an independent body to evaluate mineral reserves and recommend the amount of local currency to be issued.

"Government will establish an independent committee to ascertain and certify the quantity of gold or diamonds produced to back the issuance of local currency," Gono said.

Although Finance Minister Tendai Biti was not immediately available to comment, he has previously said the Zimbabwe dollar would not be re-introduced any time soon.

Tsvangirai, who has also ruled out the immediate return of the local unit, is at odds with Mugabe, who has backed Gono on the matter. (Editing by Andy Bruce)

For further reading:
"Zimbabwe central bank says raided private bank accounts", Reuters, April 20, 2009
"Zimbabwe Prime Minister to talk with South Africa on use on rand", Reuters, February 19, 2009
"R.I.P. Zimbabwe Dollar", Steve H. Hanke, February 9, 2009
"Zimbabwe knocks 12 zeroes off inflation-hit dollar", Reuters, February 2, 2009
"It Can’t Be Any Worse", Newsweek, January 24, 2009
"Free Banking for Zimbabwe", Steve H. Hanke, November 20, 2007
"Hyperinflation Around the Globe", Mike Hewitt, October 14, 2007

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.