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E-Gold Founder Launches New Gold Backed Currency
Submitted by Mike Krieger of Liberty Blitzkrieg blog,
It was only a matter of time before the success of Bitcoin led to a new attempt to create a digital currency backed by gold. It seems as if that day has now arrived.
Douglas Jackson is the founder of e-gold, which was shut down by U.S. authorities a little over five years ago under accusations of money laundering. While I fully think the ultimate monetary solution will be a decentralized payment protocol that merges Bitcoin-like technology with the ability to back it with gold, silver or whatever people want, I am of the view that it cannot be done from an overly centralized authority or protocol. There are several reasons for this.
First, when you have a centralized single issuer of a currency who also is responsible for vaulting the gold within the payment system you have an enormous degree of counter-party risk. The vault itself could be seized by “authorities” in whatever jurisdiction it is located in.
Second, the human beings or company behind any currency system can themselves be pressured or threatened in order to comply with more powerful interests. The beauty of Bitcoin is that there is no “Bitcoin corporation.” It truly is decentralized and anarchic in nature. It basically puts “the powers that be” in a position that if they want to completey destroy it, they’d have to destroy the internet itself.
That said, I do believe the evolution of money is headed to a Bitcoin type system with the ability to have whatever backing is desired by the market. So at this point my questions to Mr. Jackson would be:
1) How decentralized is this currency system intended to be if at all?
2) Will there be an open source protocol available to all?
3) Are the units of currency distributed to those that own gold in a particular vault or vaults under a the custodianship of a particular company?
4) Is the currency limited to those who own gold in the currency issuer vaults, or will they be linking vaults all over the world if such vaults care to be linked.
While I love the idea, it would have to be done right or it will be doomed to fail. I’m very curious to learn more about this and I’d also love to hear reader feedback on this.
From the Financial Times:
The founder of one of the earliest virtual currencies has re-emerged with a rival to Bitcoin, more than five years after his first venture, e-gold, was shut down by the US Department of Justice
Douglas Jackson is consulting for a membership organisation called Coeptis that hopes to launch a new version of his gold-backed currency, which attracted millions of users at its height.
Coeptis’s “global standard currency” would be fully backed by reserves of gold, held in a trust, in effect turning the precious metal into a medium of exchange.
Full article here.
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Update from Mike Krieger: *Since the publication of this article, I have been contracted by Douglas Jackson and he has informed me that he is not personally launching anything and that he is merely a consultant on this new project. I hope to have more details on all of this in the near future.
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Nice post. It really highlights the encumberments associated with the assumption that money must be physical. This goes back to the assumption that money must have "intrinsic" value. I.e., some supposed floor price/demand for a commodity that, while allowed to trade multiples above at times, "should be good enough to hope will not trade below?". What price per ounce are we to assign to gold's "intrinsic value"? It traded in the low $200s in the '90s. I estimate industrial demand for gold supports about $300/oz (while the lights stay on), the rest is faith. Faith with an historical track record, but faith nevertheless.
I believe "intrinsic value" is not objectively verifiable and not a requirement to complete a trade.
Yes. I am one of those folks who remains open and honest about weaknesses in my positions even as I adopt and support them.
One of the issues that you make me think about more is my preference that "money" serve as many purposes as possible (for example, accumulation of savings as well as trade). That is indeed very convenient, and make life much simpler, which is why I tend to favor that.
However, there is nothing about the nature of reality that says we can't save in a different good than we trade in. That is even implicit in the part of my post that talks about how virtual transactions need to be settled in some physical good with intrinsic value before more than a few days passes.
And, in fact, given that what nominally and "officially" passes as money today is completely bogus, I have behaved the way you talk for the past decade (the moment I finish a trade in which I received fictitious "money-units", I converted them to real, physical gold/silver/platinum and buried it where nobody could possibly ever find it. In other words, I did in fact adopt a different medium to "accumulate savings" than to "trade". Though I have to say, before I left the USSA ~3 years ago, I also ran an experiment to see how much of what I need to purchase in life I could accomplish with real, physical gold and silver coins. As it turned out, after a year of effort (meeting with landlords and store managers where I shopped most often), I was able to trade gold and silver coins for about 95% of everything I needed.
In my opinion, your comment is worded inaccurately. There is no doubt that real, physical goods have "intrinsic value". What is not "verifiable" is the appropriate exchange rate between any real, physical good (including gold, silver, eggs, lumber and everything else) and any other real, physical good (including gold, silver, eggs, lumber and everything else). And indeed, there is no reason to imagine that ANY real, physical good ever SHOULD have a fixed exchange rate. Why? Because ALL real, physical goods involve variable amounts of time, effort and resources to produce from time to time (and location to location), and also find more applications from time to time, and are also replaced by other materials in certain applications from time to time, and so forth.
So real, physical goods do indeed have intrinsic value (if you can do anything useful or desirable with them), and the only question is how to establish "exchange rates". And the answer to that is fully free markets.
BTW, the supposed "problem" with the price of gold in the past decade and century is almost entirely manipulation by predators with diabolical, destructive agendas and the power to manipulate via corrupt fiat, fake, fraud, fiction, fantasy, fractional-reserve re-re-re-re-re-hypothecated paper ponzi scheme mechanisms. The problem isn't gold itself.
Intrinsic value is NOT a required attribute for money. Value is assigned to objects by humans based on their personal utility for the item combined with the objects scarcity. Such items are traded and have "economic value". The most valuable item in the world, breathable air, is still abundant and has no economic value, until it becomes scarce, then it will have economic value, a very great deal of it. Anyway back to money. An object needs to possess certain key attributes to be a suitable candidate for money. 1. It should be scarce 2. It should not be duplicatable 3. It should be divisible 4. It should be durable 5. It should be authenticatable 6. It should be compact and portable 7. And of course it should be adopted by a critical mass of people as a medium of exchange for goods and services, a store of value, and a unit of economic value measurement. When an object meets these criteria and becomes money then it INHERITS intrinsic value by virtue of the fact that it is money and has the UTILITY of money. The utility of a money object for use as money gives it intrinsic value. Things like wheat that have intrinsic value may be barterable but they are not money. Gold meets money criteria but really has no significant intrinsic value and would be a lot cheaper if it were not money.
If you had to store value for a period of 40 years, and your top requirement was wealth preservation (i.e. NOT getting rich), would you pick bitcoin over gold?
No?
Then the only holders left are speculators.
I would not store wealth for any meaningful period in any form of money. To me money is a transient asset on the road to deploying other productive assets. All assets have volatility based on the prevailing economic climate. Watch all your assets yourself all the time and stay understood as much as you can of economic affairs. Keep moving the assets around as conditions dictate and keep them sheltered and diversified whilst doing so. Various types of money go in and out of fashion at different times, use the ones that are real money and are in fsshion, don't become enamoured with any of them least they blind you. Gold, silver and bitcoin are all ok at this time and will probably all go parabolic as they come into fashion and fiat loses fashion, they are all real money and real money will soon be in fashion.
I would diversify. Real estate, precious metals, gems, art, these new crypto-coin thingies, stocks maybe.
Anyways, the topic of this whole thread, "E-Gold Founder Launches New Gold Backed Currency" implies perhaps there can be improvements on Gold as Currency. I.e., actually circulating in the economy. Gold as a currency is hard to compete with Bitcoin's ease and low cost of transfer. Bitcoin is attempting to go toe-to-toe on this with the big boys: credit cards, paypal/western union, banking. Not to mention divisibility and authenticity issues.
Hoarding gold is a solved problem and off topic.
"the only holders left are speculators."
In order pay a transaction in gold, one must first acquire said gold. If I thought more commerce would be switching to gold in the future, would Adam Smith condemn me for acquiring gold right now?
If I thought more commerce would be switching to gold in the future, would Adam Smith condemn me for acquiring gold right now?
Commerce switching to gold? That doesn't make any sense. Gold is good for saving and specially over long periods (e.g. retirement), because you can rely on it retaining its value for a long time.
If you don't want that, you're either looking for a medium of exchange or speculating. If you're speculating, good luck when the other speculators are gone and you're left with the bag. Perhaps Bitcoin could be a fine medium of exchange, but watch out for velocity. When each Bitcoin changes hands 1000 times every second, you'll see what 21 million of the fastest moving currency ever made can do to prices.
You one of those strong believers in using Gov't fiat for actually participating in an economy?? What's the whole point of Tyler's post? If you want gold for hoarding, get gold. Nothing newsworthy about that.