Using Gold As Online Currency

JerkyBoy writes "Salon.com has an interesting story about using gold for online transactions. One company that provides the service (goldmoney.com) describes itself as "an online payment system that combines the world's oldest money, gold, with Internet technology to provide a safe, easy and inexpensive way for anyone to transact business 24 hours a day. Payments are made electronically using GoldGrams(TM), which are grams of gold that circulate world-wide through the Internet." I wonder if I can configure the MIME types on my Apache server to send golden email attachments?" Hehe - this is basically the same thing as people have been trying to do with creating new online currency.

Comments

Re:wont last long here's why

[e-gold]

Here's more about Parker Bradley. Despite three months + having passed since the raid, Parker has yet to be charged with jack squat. *sigh* Parker Bradley is a friend of mine, and life isn't too nice for him these days...(get some e-gold and donate it to him). e-gold isn't anonymous cash like in Cryptonomicon or the Grabbe piece, it's just another flavor of money, but one that can be particularly useful, IMO (see below). e-gold provides a level of privacy exceeding credit cards (they don't sell, trade, give away, etc. customer info) but not exceeding bearer stuff, so it's not a good idea for the Jim Bell types.

e-gold (which has so far lasted since 1996) andOmniPay (I work for them, not e-gold, and I speak only for myself) are doing fine, actually. I'd like lots of Slashdot folks to try the stuff, because you tend to be programmers, and nice things happen when programmers play with e-gold. I'd like for Slashdot-like sites to sell mod points (a quickly expiring currency) so I've offered a ten-gram reward for it (about 80-90 bucks' worth, at the moment, so not much). I'd like for folks to think of e-gold for the cool stuff that can be done with it. Using the shopping cart as a tipjar and direct, voluntary donations to musicians might solve the Napster problem someday, IMO. e-gold is a bit tough to understand at first (grams as a currency?!?) although selling gold (a very emotional substance with humans, still, whether it's electronic or physical) can be a business where it's very hard to love *every* single customer...Mostly it's fascinating and lots of fun. The currency is growing pretty fast without much marketing budget, in part because of the "fan club" of sites like BananaGold and cool directories maintained by others. It's very nice for me.

Anyway, if folks on Slashdot want to try it, I have a promotional account, so just send me your account number and I can click you some (not much, I don't toss this stuff around like Paypal, but OTOH we're in the black...) gratis. Thanks.
JMR

Re:OK, but...

[Skald]

[Gorimek]: I don't have time to search my books for quotes, but as I remember it he never clearly comes out in favor of any monetary system. He observes that commodity based schemes have their problems, but they have shown to be pretty workable and safe over the centuries, and that fiat money systems are responsible for pretty much all monetary disasters in history.

Well, I don't really think he says that they're responsible for all the monetary disasters in history. He certainly regards political meddling in the money supply as a very bad thing, and governments are inflationary creatures. It might be safer to think he'd say that bad monetary policy is the common factor behind monetary disasters, and that fiat currencies make bad monetary policy easy.

A fixed currency would be something of a remedy to this. But he regards an exchange rate, pegged directly to a commodity, to be unworkable... and there have certainly been monetary disasters in partial reserve systems.

Overall I feel safe in saying that he advocates (for large countries) floating exchange rates, at the other end of the spectrum entirely. The common factor is that the role of government is limited.

There's a nice summary in a 1998 interview:

[Friedman]: 'a floating exchange rate is one in which the government does not intervene in the exchange rate market but allows the market to set its own values. [Here you find] one very interesting historical phenomenon. No nation that has had a floating exchange rate has ever had external currency crisis in international finance.'

[...]

'And I have always argued that for a large country, like the U.S., Germany, France, Britain -- none of them are going to be willing to give up their independent central banks, and therefore, the best course for them to follow is to have a freely floating exchange rate determined in the market. But for small countries, they will on the whole do better if they peg their currency, unify their currency with a foreign currency, and avoid having an independent central bank -- provided that they do it with a country which is one of their major trading partners so that a lot of their business is being done in that currency anyway.'

[...]

'The lesson for Asia is; if you have a central bank, have a floating exchange rate; if you want to have a fixed exchange rate, abolish your central bank and adopt a currency board instead. Either extreme; a fixed exchange rate through a currency board, but no central bank, or a central bank plus truly floating exchange rates; either of those is a tenable arrangement. But a pegged exchange rate with a central bank is a recipe for trouble.'

[Gorimek]: I'm sorry that I let myself get dragged down to that level, and I appreciate you correcting it

For my part, I think I was a little harsh. But it wasn't clear from your short reply that you were not a crank yourself, merely invoking a name. No offense intended.

Re:Who's the moron?

[Skald]

It's worth noting that many prominent economists, including Nobel price winner Milton Friedman, agrees with this "moron".

They have taken economics 101.

Um... no. Some of us actually have read Milton Friedman. To state Professor Friedman's conclusion first, for the impatient:

'My conclusion is that an automatic commodity standard is neither a feasible nor a desireable solution to the problem of establishing monetary arrangements for a free society.'

The following passages are excerpted from Capitalism and Freedom. It's really an excellent book, if you're into this sort of thing. Keep in mind, though, this was written in 1962, so the 'current situation' isn't very current.

'The fundamenal defect of a commodity standard, from the point of view of the society as a whole, is that it requires the use of real resources to add to the stock of money. People must work hard to dig gold out of the ground in South Africa -- in order to rebury it in Fort Knox or some similar place. The necessity of using real resources for the operation of a commodity standard establishes a strong incentive for people to find ways to achieve the same results without employing these resources.'

[...]

'But, as just noted, such an automatic system has historically never proved feasible.'

[...]

'It should be noted that despite the great amount of talk by many people in favor of the gold standard, almost no one today literally desires an honest-to-goodness, full gold standard. People who say they want a gold standard are almost invariably talking about the present kind of standard, [ed. 1962] or the kind of standard that was maintained in the 1930's; a gold standard managed by a central bank or other governmental bureau, which holds a small amount of gold as "backing" -- to use that very misleading term -- for fiduciary money. Some do go as far as to favor the kind of standard maintained in the 1920's, in which there was literal circulation of gold or gold certificates as hand-to-hand currency -- a gold-coin standard -- but even they favor the co-existence with gold of governmental fiduciary currency plus deposits issued by banks holding fractional reserves in either gold or fiduciary currency. Even during the so-called great days of the gold standard in the nineteenth century, when the Bank of England was supposedly running the gold standard skillfully, the monetary system was far from a fully automatic gold standard.'

-- Milton Friedman, Capitalism and Freedom