NACHA Presentation by Jon Matonis

In October 1996, I was invited to speak at the NACHA Internet Council Meeting in McLean, Virginia. My subject matter was "Introduction to Internet Security Issues", which included an overview on Internet security basics, digital signatures, and public key cryptography relevant to the members of NACHA.

Formed in 1996, NACHA’s Internet Council addresses issues that advance electronic commerce over open networks and facilitate digital business transactions in a straight-through and secure manner. The Council has 75 members that focus on challenges and opportunities in the payments environment, including authentication; data security; risk management; compliance; emerging technologies; and online and mobile banking.

The Future of Money: The Return of the Gold Standard

By Julian Dibbell

Portfolio
Monday, April 13, 2009

http://www.portfolio.com/views/columns/dual-perspectives/2009/04/13/The-Return-of-the-Gold-Standard/

The most successful of the current crop of microcurrencies is GoldMoney, a 21st-century take on the oldest financial trick in the book.

When a retired Florida oncologist named Douglas Jackson launched the world’s first digital-gold currency in 1996—an online payment system fully backed by precious metal reserves and marketed under the brand name e-gold—he did not appear to be on the winning side of monetary history. Once upon a time, nearly a hundred years before, the gold standard reigned supreme: A dollar bill or a pound note or any other major currency was in those days just a marker for a fixed amount of government gold, redeemable at any time. But by the onset of the Depression, the economist John Maynard Keynes had declared the gold standard a “barbarous relic,” too crudely physical a form of money for the complex demands of modern economies. And by the century’s end, the multitrillion-dollar global money supply had long since shed its ties to gold or any other tangible asset in particular and now resided almost wholly in the digital circuitry of financial networks. Money had gone virtual, and reattaching it to gold made as much historical sense, it seemed, as instant-messaging by pigeon post.

But now, a decade into the emergence of a fledgling digital-gold currency industry, the idea is looking trendier than ever. Just last month a slick new digital-gold app for the iPhone shipped, allowing holders of GoldMoney—a gold-backed currency, with over $631 million worth of bullion in its London and Zurich vaults—to touch their iPhone screens and instantly transfer as little as a centigram of gold (about $0.30 worth) to other GoldMoney users. But more than the latest gadgetry, of course, it’s the latest economic news that’s making gold currency look smart again. In the blink of a business cycle, the wonders of floating currency have given way to the horrors of the credit crunch—the collapse, at last, of the boom years’ towering edifice of mortgage pools, default swaps, and other so-called synthetic securities—while the price of gold holds steady at historic highs approaching $1,000 an ounce.

Even at that price, insists GoldMoney’s founder, James Turk, “Gold is still relatively cheap.” Like many gold bugs, Turk believes the market price has a lot of climbing to do before it catches up with gold’s true value—which he calculates to be as much as $6,200 an ounce—and he’s not surprised that most of GoldMoney’s initial growth has come from customers looking mainly for a safe and simple way to invest in a debt-free, low-risk store of value.

Turk is just fine with GoldMoney’s investor appeal, because it allows GoldMoney to closely monitor the transactions that people use it for. As e-gold’s Douglas Jackson can attest, rolling your own currency can be a risky business: Having swiftly built up a base of over 5 million account holders drawn to e-gold both for its liquidity and its less-than-rigorous customer-identification policies, Jackson and other e-gold principals were hit with a federal indictment in April 2007 alleging that the currency was, as a Justice department statement put it, “a highly favored method of payment by operators of investment scams, credit card and identity fraud, and sellers of online child pornography.” Last summer the defendants pleaded guilty to money laundering and related charges, and while they were spared prison time, e-gold itself has for the time being been put on ice: The currency, which once circulated at “velocities” of over $2 million in payments per day, has effectively been shut down until Jackson and company can bring it up to regulatory code.

The legitimate users of gold-backed e-currencies see them as part of a hybrid monetary future: Digital gold’s unique efficiencies as a payment system make it particularly suited to international transactions. Gold-backed cash automatically evens out currency fluctuations that can play havoc with price points and profit margins in cross-border trade. Already GoldMoney allows for faster, cheaper online transfers of funds than the existing banking system does—particularly from one country to another, where standard bank wire fees of $20 or more look almost prohibitive next to GoldMoney’s maximum transfer fee of about $3.

But even the most avid goldbugs aren’t happy to contemplate what it would take to lead all the world’s floating currencies back to the rigors of the gold standard. “I don’t think we could go back to that,” says Mahendra Naik, a director of Iamgold, a gold mining company. “The world has evolved quite considerably, it’s quite developed.” On the other hand, he points out that “if you keep printing money, sooner or later people lose faith.” In Zimbabwe, for example, the nation's reserve bank just issued the new $100 trillion bill, rendering Zimbabwe’s legal tender, in the words of the country's own finance minister, “essentially dead.”

For further reading:
"The Future of Money: DIY Currencies", Annalee Newitz, Portfolio, April 13, 2009
"Cyber currencies spawn 21st century gold rush, money-laundering fears", Marcelo Ballve, Associated Press, June 17, 2001
"Combine the Power of the Internet and the Gold Standard", Wayne Dawson, Spring 2000

The End of Cash

By James Gleick
The New York Times Magazine
Sunday, June 16, 1996

http://www.around.com/money.html

Cash is dirty -- the New Jersey Turnpike tried to punish toll collectors recently for wearing latex gloves (thus giving the driving clientele a "bad impression"), but who can blame them? Cash is heavy -- $1 million in $20 bills weighs more than you can lift, and drug dealers have been disconcerted to note that their powdered merchandise is handier for smuggling than the equivalent money. Cash is inequitable -- if you are one of the 50 million Americans poor enough to be "unbanked," you pay extortionate fees to seedy, bulletproofed check-cashing operations (even more extortionate than the fees charged for automatic teller machines, often up to 1 or 2 percent and rising). Cash is quaint, technologically speaking -- unless you're impressed by intaglio-steel-plate-printed paper with embedded polyester strips (meant to inconvenience counterfeiters). Cash is expensive -- tens of billions of dollars drain from the economy each year merely to pay for the printing, trucking, safekeeping, vending, collecting, counting, armored-guarding and general care and feeding of our currency.

Read the rest of the article.

My Essay on Digital Gold Currencies

By Bartleby
The Ultimate Apocalypse
Saturday, April 11, 2009

http://anti-state.com/forum/index.php?board=5;action=display;threadid=21954

Before the advent of digital currencies backed by precious metals, the issuance of money was controlled by Central Banks. Banking has a long history, but from 1971, the US Federal Reserve abandoned the gold standard, which all world currencies were tied to under the Bretton Woods system, so that there was hypothetically no limit to their ability to issue credit in the form of loans. Many countries began a process of financial deregulation and their currencies were 'floated' to compete on the international currency market. This unlimited credit no longer tied to a commodity with real value such as precious metals contributed/caused many economic recessions and devalued the currency so that, according to the Consumer Price Index (CPI), one US dollar today is only worth six cents of what it was approximately seventy years ago (Measuring Worth 2008). Private digital gold is a move away from fiat currencies issued by governments that have nothing to back it's value with.

Most countries have central banking - usually (especially in the case of the Bank of England, The US Federal Reserve and the Reserve Bank of Australia) non-government entities that have been given power via legislation to determine the monetary policy of the country. They do this by controlling how much money is in circulation through open market operations (buying and selling currency on the open market). This allows them to determine interest rates and the cash rate which in turn influences inflation, productive output and unemployment.

Another function is that they loan out money to the federal government at interest and this becomes government debt. This is done by the Treasury printing up a number of bonds and these are sold on the open market (mostly to banks as they carry low interest rates). The sale of these bonds transfers to money in the Treasury accounts where it is then used to pay for government programs. The Central Banks then buy these bonds from the bank, using money it created from nothing, and that is how money is created (Martenson 2009). Commercial banks then "loan" out this money at many times what they actually have in their deposits (if there is a deposit requirement), and many of those dollars end up in other banks where it is again loaned out many times, multiplying the amount of debt money in the economy.

Even under the gold standard, the banks lent out many times what they had in their reserves, which led to several recessions and the gold standard was repeatedly abandoned then re-instituted for various reasons of financing government spending (Money As Debt 2007).

So money is created out of thin air, which they then loan out in the form of credit with interest. Thus, all money is based on debt. Eventually the banks make too many bad loans and there is a credit crunch. People go to withdraw their money from the banks before they become insolvent. It then becomes a banking crisis. The central banks then step in and bail out the banks or pay out deposit insurance (Diamond 2007).

An alternative currency was needed, one that is not controlled by central banks and the overzealous spending of governments. The world wide web caused a growing free market to emerge in transactions for goods and services (digital or real). The response to this was to introduce a secure digital currency for ease of global transactions. Some of these digital currencies were backed by real reserves of precious metals (E-Gold, GoldMoney). Being free to open an account, anybody could exchange their fiat currency for gold-backed digital currency. This can then be used as a form of online digital payment for goods and services or in possible P2P transactions as a way of sending money to anybody around the world. The digital gold currency can be exchanged from fiat currency by a number of global exchange providers. Governments had difficulty regulating this because it was a global digital currency issued through secure electronic payment systems through the internet, and gold reserves (often insured) are held in numerous vaults around the world, such as in the case of Goldmoney (Goldmoney n.d.).

Digital gold currencies are easy to use as transactions are electronic and therefore instantaneous, there is no need to carry around gold coins to pay for your wares. You can also buy anything around the globe using the world wide web. Although not many companies accept digital gold currencies as payment, it is possible to obtain a prepaid debit card funded by a gold, which will exchange that into the appropriate currency whenever you use the card to make a transaction. The only downside to these cards is there are higher fees involved, charged by the issuer (E-Forexgold n.d.).

Another downside to using digital gold currencies is fraud. Many ponzi schemes have been built up around them, called High Yield Investment Programs (HYIPs) ,advertising high returns yet only paying out the funds they get from other investors. Eventually, they cannot get enough investors and the scheme collapses, they then steal all of their investor's money (Zetter 2006). Identity theft is another problem as people's accounts can be hacked over the web using spyware installed on their computer (E-Gold n.d.).

Sustainability, which is the property of being sustainable - to be maintained as a viable property (Dictionary.com 2009), refers, in the case of IT sustainability, both to the net internal/external 'costs' of the IT industry (Meyer 2008) and it's present and future viability in the current world economic, political and social environment. It's use, though, can be applied to a number of specific areas depending on the context in which it is used - but mostly it refers to economic and ecological sustainability.

Sustainability is often used to refer specifically to environmental sustainability with the run off costs from that, and the alleged impact human activity has on the environment and the response to this by different sectors of the population. Certain politicians, who have the ability to make and enforce laws, have seized upon the opportunity of using sustainability in the environmental sense to justify drafting new regulations and imposing various forms of taxation.

Environmentalism has a long history, which goes back to the days of Thomas Malthus and his theories regarding overpopulation (Malthus 1798), but in modern times 'sustainable development' has become an often-used term by various interest groups and government agencies to refer to the industrial expansion across the globe and it's impact on the environment. Governments have responded to this by enforcing costs and regulations on ICT so that what are termed 'external' costs on the environment are actually made into internal 'costs' on the agents responsible (Meyer 2008). These legislation requirements have an impact on the business, thus they are forced to adapt or risk the penalties.

The first move to create standards across the IT industry in response to environmental concerns was probably the ENERGY STAR initiative, which is a "joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy". Set up in 1991 and first applied to IT through applying energy ratings to monitors and personal computers in 1992, this then expanded to include other aspects of the industry and more initiatives relating to environmental sustainability. It then expanded globally to many other areas including Australia, Canada, Japan, New Zealand, Taiwan and the European Union (Energy Star 2008).

The Intergovernmental Panel on Climate Change (IPCC) was formed in 1988 and was set up by the World Meteorological Organization (WMO) and the United Nations Environment Programme (UNEP). The aims of the IPCC, in their words, was to be an "objective source of information about the causes of climate change, its potential environmental and socio-economic consequences and the adaptation and mitigation options to respond to it", for use by policymakers. It's latest report "Climate Change" was released in 2007 and it stated that human-caused greenhouse gases were most likely contributing to an increase in global average temperature and that global atmospheric concentrations of carbon dioxide, methane, and nitrous oxide have increased as a result of human activity (IPCC 2007).

These recommendations outlined in the IPCC Climate Change 2007 report is going to have a definite effect on the IT industry. In 2008, the SMART 2020 Report, authored by the Global e-Sustainability Initiative (GeSI) and The Climate Group, a non-profit organisation that according to their press release "works internationally with government and business leaders to advance climate change solutions and accelerate a low carbon economy" (GeSI 2007-2008), was released. This report looked at the impact of ICT on global warming and how ICT could reduce emissions in other sectors of the economy. It found that ICTs could deliver approximately 7.8 GtCO2e of emissions savings in total by 2020 and also that ICT accounts for about 2% of global emissions of carbon dioxide (SMART 2020 2008).

The effect the recommendations had and the increasing awareness led to more direct changes within the finance and economics of the business environment. The environment effects economics and economics effects the environment, because both deal with scarcity of resources which is the key thing behind sustainability practices. Financial sustainability refers to cash and capital resources whilst economic sustainability is how the organisation fits into the wider economy (Sustainability Report 2005-2006). Finance and internal economics of the business directly relate so that can mean profitability, productive efficiency, longetivity and re-investment into the business. Outside of the business, it's how the organisation promotes sustainability by choosing 'green' ways of doing business (IE: managing waste and recyling), using ethical practices, buying/supplying to sustainable organisations and generally having a net positive impact on the local and global community (Weston 2008). It has been found by international consulting firm McKinsey that "investment in energy efficiency of about $170 billion annually worldwide would yield a profit of about 17 percent, or $29 billion" (Knickerbocker 2008). International investors are also pledging more money to 'green business', governments issue them tax credits and the rise of the carbon emissions trading market (Knickerbocker 2008). Some surveys have also shown that some consumers prefer to buy products from environmentally-friendly corporations, which directly affects the bottom line (GreenBiz 2009).

Since, as explained above, economics directly relates to sustainability issues, the possible effects of digital gold currency (if widely adopted) on economics could lead to positive sustainability practices. This is because the current system of credit creation - creating money out of nothing - is unsustainable and is likely to lead to another severe economic collapse. The Global Financial Crisis of 2008-2009 is evidence of this. But history also shows it too, as in the 20th Century across the world there were several recessions, periods of hyperinflation and even a global Great Depression (a particularly severe recession). Because of globalisation, the economic effects of a downturn in one country will inevitably affect the entire world. This impacts on sustainability because the current system leads to these unsustainable practices of environmental degradation, via exploiting natural resources through massive economic expansion, in the first place.

Thus, economists look for reasons behind these calamities and discover that each time it can be traced back to how money is created is used. The issuance of debt-based money was started by the Bank of England in 1694, beginning the modern era of capitalism. By lending out more money than they had in their reserves (called fractional reserve banking) they were able to substitute paper for gold. This process hereby indebted all sectors of society to the banks and thus began the credit expansion that continues today. The difference now, is that currency is no longer backed by gold, and through the Bretton-Woods system instituted after World War 2, the whole world abandoned the gold standard to use paper money (all currencies were tied to the US, and so when the US abandoned the gold standard because they had used up all their reserves, so did the rest of the world) (Schoon 2009). And since then prices, which were fairly stable before, have exploded upwards, according to the CPI (Murphy 2009).

This system is completely unsustainable because every dollar is based off debt, and is created through loaning it out at interest. So for the economy not to go completely bankrupt it has to produce enough wealth in order to cover both the principle and interest of the loan. Problem is, the interest is compounding and so when the repayments can't be made, the only way to pay it off is to take out another loan to pay off the previous loan. This leads to an out of control spiralling of debt.

This creates a vicious cycle and the people who suffer are those who pay taxes through 'active income' and the future generations that are going to be laden with debt, because they are the slaves who have to do physical/mental work in order to fund the ever compounding loan repayments that materialise from this debt-based currency. There are few alternative options, as governments either put taxes on any sources of value or completely monopolise it if they don’t ‘prohibit’ it. For example, any transaction not recorded by government or barter trade is referred to as an 'underground economy' which involves many unrecorded transactions and barter trade. This is mostly done because either the transaction has been deemed 'illegal' or to avoid paying taxes. Therefore, even the use of an alternative currency as 'legal tender' has been made 'illegal', even if it's lawful in some cases as a genuine barter trade (Von NotHaus 2007).

According to Jerome Corsi when the dollar collapses, as it inevitably will under this unsustainable system of debt-based money, international transactions will instead come to rely on digital gold as a private, bank-managed currency (WorldNetDaily 2009). Unlike fiat money, digital gold currency is directly based off the value of precious metals such as gold and silver, with gold being the most popular. Thus it cannot be devalued by oversupply as there is a fixed amount of these commodities available in the world. This is because they are rare to find, but not only that explains their value as gold is used in many different materials and electronics so that it's value will never diminish. Historically, gold prices are quite stable (until recently when they exploded upward as a result of the abandoning of the gold standard) and are often a good investment in periods of hyperinflation. The price of gold tends to rise during recessions, as shown recently when it hit 1000 USD/Oz, which is an historical high (Kitco n.d.). It can also co-exist fine along with fiat money, as it can be exchanged according to the current price through digital gold currency exchangers (Murphy 2005).

CITATIONS

Dictionary.com. n.d. http://dictionary.reference.com/browse/sustainability (accessed 12 March, 2009).

Malthus, T. R. 1798 An Essay on the Principle of Population. http://www.econlib.org/library/Malthus/malPlong.html (accessed 10 March, 2009).

Meyer, C. 2008. We Need a Definition of "Sustainability"... And Here It Is. http://blogs.harvardbusiness.org/leadinggreen/2008/06/we-need-a-definition-of-sustai.html (accessed 9 March 2009).

Global e-Sustainability Initiative. n.d. SMART 2020: Enabling the Low Carbon Economy in the Information Age. http://www.gesi.org/LinkClick.aspx?fileticket=tbp5WRTHUoY%3d&tabid=130 (accessed 13 March 2009).

Energy Star. n.d. Major Milestones. http://www.energystar.gov/index.cfm?c=about.ab_milestones (accessed 8 March 2009).

IPCC. n.d. About IPCC. http://www.ipcc.ch/index.htm (accessed 6 March 2009).

Department of the Environment and Water Resources. 2007. Sustainability Report 2005-2006. http://www.environment.gov.au/about/publications/sustainability/05-06/economic/index.html (accessed 5 March 2009).

GreenBiz. 2009. Consumers Still Buying Green Through Economic Changes. http://www.greenbiz.com/news/2009/02/08/consumers-still-buying-green-through-economic-changes (accessed 10 March 2009).

IPCC, 2007: Summary for Policymakers. In: Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change [B. Metz, O.R. Davidson, P.R. Bosch, R. Dave, L.A. Meyer (eds)], Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.

IPCC, 2007: Summary for Policymakers. In: Climate Change 2007: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, M.L. Parry, O.F. Canziani, J.P. Palutikof, P.J. van der Linden and C.E. Hanson, Eds., Cambridge University Press, Cambridge, UK, 7-22.

The Climate Group. 2008. SMART 2020: Enabling the low carbon economy in the information age. http://www.theclimategroup.org/assets/resources/publications/Smart2020Report_lo_res.pdf (accessed 13 March 2009).

Weston, T. 2008. Economic sustainability: When everyone profits. http://www.flyingsolo.com.au/p251262998_Economic-sustainability-When-everyone-profits.html (accessed 15 March 2009)

Obringer, L. A. n.d. How the Fed Works. http://money.howstuffworks.com/fed.htm (accessed 12 March 2009).

Corrupt Banking System. 2007. Streaming video recording. http://www.youtube.com/watch?v=PzXZ_Hs1g6U (accessed 10 March 2009).

Economic Quarterly. 2007. Banks and Liquidity Creation: A Simple Exposition of the Diamond-Dybvig Model. http://www.rich.frb.org/publications/research/economic_quarterly/2007/spring/pdf/diamond.pdf (accessed 10 March 2009).

von NotHaus, B. 2007. Frontal Assault on Freedom: FBI Raids Liberty Dollar. http://www.libertydollar.org/commentary/pdfs/1196746004.pdf (accessed 11 March 2009).

Kitco Inc. n.d. 24 hour spot chart - gold. http://www.kitco.com/charts/livegold.html (accessed 14 March 2009).

E-forexgold. n.d. debit cards. https://www.e-forexgold.com/efx2/debit_cards (accessed 14 March 2009).

Zetter, K. 2006. E-Gold Gets Tough on Crime. http://www.wired.com/science/discoveries/news/2006/12/72278 (accessed 13 March 2009).

E-gold. n.d. Security Recommendations. http://www.e-gold.com/security.html (accessed 15 March 2009).

Murphy, B. 2009. Defend the Gold Standard. http://www.lewrockwell.com/murphy/murphy152.html (accessed 17 March 2009).

WorldNetDaily. 2009. U.S. dollar replaced by ... digital gold? http://www.wnd.com/index.php?fa=PAGE.view&pageId=91190 (accessed 10 March 2009).

Williamson, S. H. 2008. Six Ways to Compute the Relative Value of a U.S. Dollar Amount, 1790 to Present. http://www.measuringworth.com/uscompare/ (accessed 16 March 2009).

Murphy, R. 2005. Return to Gold? http://blog.mises.org/archives/003539.asp (accessed 16 March 2009).

FFIEC Presentation by Jon Matonis

In April 1996, I was invited to speak at the Federal Financial Institutions Examination Council's EDP Symposium for Online Personal Computer Banking. My subject matter was Internet security issues for retail banking in the context of supervisory concerns relevant to the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency.

In Uncertain Times, All That Glisters is a Gold Standard

By Gillian Tett

The Financial Times
Thursday, April 9, 2009

http://www.ft.com/cms/s/0/d29f2728-249e-11de-9a01-00144feabdc0.html

A few months ago, Terry Smith, head of Tullett Prebon, the interdealer broker, chaired a panel at the World Economic Forum meeting in Davos which was asked to produce one concrete recommendation to fix the global financial crisis.

The top pick? Not anything on toxic assets or fiscal spending. Instead, this gaggle of leading financiers called for a new reserve currency, akin to an old-style gold standard.

"Two-thirds of the world's assets are denominated in a fiat currency issued by a country whose authorities are taking policy actions which seem inevitably to lead to its debasement," explains Mr Smith, noting that "it seems . . . the Chinese have now concluded that this is not acceptable".

Just a bit of pie-in-the-sky posturing of the sort that often occurs in high-altitude Davos? Perhaps. But Mr Smith is hardly a do-gooding, state-loving dreamer; on the contrary, Tullett Prebon is about as ruthlessly free-market as they come.

Moreover, these musings about a gold standard are currently cropping up in all manner of unlikely places. One savvy European property developer (who aggressively sold most of his holdings in early 2007) recently told me that he is now moving a growing proportion of his assets from government bonds into gold, even at today's elevated prices.

"The logical conclusion of where we will end up eventually is with some type of gold standard," he explains, arguing that future inflation will almost inevitably cause a future collapse in government bonds.

Half a world away in the Middle East, some sovereign wealth funds now say that they are stocking up enthusiastically on food and gold, due to similar reasoning.

Meanwhile, in New York a (still) formidable American hedge fund recently circulated private research that echoes the reasoning of Mr Smith. Most notably, this hedge fund points out that since the world abandoned the gold standard on August 15, 1971 credit creation has spiralled completely out of control.

But this four-decade long experiment with fiat currency is not just something of a historical aberration, it argues - but potentially very fragile too. After all, the only thing that ever underpins a fiat currency is a belief that governments are credible. In the past 18 months that belief has been tested to its limits. In coming years it could be shattered, particularly if the current wave of extraordinary policy measures unleashes a wild bout of inflation.

Hence that chatter about a gold standard. Indeed, as the debate bubbles up, some financiers are now even e-mailing each other an extraordinary little essay that Alan Greenspan himself wrote in support of a gold standard back in the 1960s, called "Gold and Economic Freedom"*.

In the years since he penned this essay, Greenspan has partly backed away from those ideas (and he blatantly ignored their implications when he was at the Fed) But now they look prescient.

"Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets . . . [but] in the absence of the gold standard . . . there is no safe store of value," Greenspan wrote back then, pointing out that without a gold standard in place, there is little to prevent governments indulging in wild credit creation. "Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."

Of course, for the moment all this muttering about gold is simply wild speculation. Even if western leaders suddenly were to decide they wished to turn back the clock, the logistics of embracing a new gold standard would be mind-boggling. UBS, for example, calculates that the US reserves of gold are so small, relative to its monetary base, that a price above $6,000 an ounce would be needed to reintroduce a gold standard. To implement that standard in Japan, China and the US, the price would be more than $9,000. Moreover, right now few western governments have any motive to even entertain the debate, given that inflation may soon seem the least bad way to tackle the current overhang of debt.

But what this debate does show is just how much cognitive dissonance - and utter uncertainty - continues to stalk the markets. It might seem almost unthinkable to propose a return to a gold standard, in other words. However, the key point is that the last 18 months have already produced a stream of once unimaginable events.

Given that, shell-shocked investors are increasingly reluctant to rule anything out, as they stare at such uncharted waters. So while I would not bet today on a gold standard returning any time soon, I would also not bet that the debate dies away. Nor would I bet that the gold price crashes too far from its current rate of $900, while so much fear continues to stalk the world.

*http://www.financialsense.com/metals/greenspan1966.html

Did the ECB Save COMEX from Gold Default?

By Avery Goodman
Seeking Alpha
Thursday, April 2, 2009

http://seekingalpha.com/article/129128-did-the-ecb-save-comex-from-gold-default

Excerpt:

"On Tuesday morning, gold derivatives dealers, who had sold short in the face of a fast rising gold price, faced a serious predicament. Some 27,000 + contracts, representing about 15% of the April COMEX gold futures contracts remained open. Technically, short sellers are required to give “notice” of delivery to long buyers. However, in reality, buyers are the ones who control the amount of gold to be delivered. They “demand” delivery of physical gold by holding futures contracts past the expiration date. This time, long buyers were demanding in droves."

"It is quite important to determine whether or not Deutsche Bank was bailed out by the ECB because that will answer a lot of questions about allegations of naked short selling on the COMEX. If the ECB knew that its gold would be used as post ipso facto “cover” for uncovered shorting, staffers at the central bank might be co-conspirators. At any rate, if the German bank did sell short on futures contracts without having enough vaulted gold it sold a naked short. It also means that the ECB has facilitated a major rule violation in a jurisdiction (the USA) with which Europe is supposed to have extensive joint regulatory agreements, any number of which may have been violated by this action of the ECB. At the very least, naked short selling is a blatant violation of CFTC regulations, which require 90% cover of all deliverable metals contracts. If the delivered gold came directly, or indirectly, from the ECB, it means that Deutsche Bank’s gold short contracts were “naked” at the time they were entered into."