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E-gold Owners Plead Guilty To Money Laundering
Ian Lamont writes "The three owners of Internet currency service e-gold have pled guilty to money laundering in the U.S. District Court for D.C.. The service is based in the West Indies, but the directors apparently live in Florida. They haven't been sentenced yet, but potentially face decades in prison and millions in fines. In addition, the principal director posted a blog entry yesterday saying that 'criminal activity will not be tolerated,' and pledging to eliminate the loopholes that allowed money laundering to thrive on the service. He also claims that e-gold has more transaction volume in a single quarter than all of the first-generation Web currency services like Cybercash, Beenz, and Flooz completed over their lifetimes. Ironically, one of the reasons that contributed to Flooz's demise in 2001 was rampant money laundering."
This royally sucks because e-gold was actually a very simple and easy way to purchase gold with very few and simple fees, and none of the tax burden.
Maybe that's another reason the Feds are going after them.
The higher the technology, the sharper that two-edged sword.
Don't worry they will. e-gold was just smaller and didn't have good enough lawyers. Now that they've got a precedent set, the government will turn its attention towards paypal. The government can't stand to have any "unregulated" exchange of goods, services, or capital.
"Ironically, one of the reasons that contributed to Flooz's demise in 2001 was rampant money laundering."
That's really just coincidental.
At least it isn't as bad as it was during the Depression. They made owning gold ILLEGAL back then. What a crock.
That ban was unconstitutional, of course. Not that that's stopped the federal government from doing whatever the hell they wanted since the Lincoln administration.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Now, I don't know how eGold operates, so there may be a valid point here that I'm not getting...
But I'm rather confused by what you say. Yes, the gold standard is dead -- that is, gold is not the underpinning of federal currency. However, it remains legal to trade in gold. You can even go to the bank and buy a gold coin (or several) if you care to. (Well, you can if you have that much money sitting around...)
So it's not clear to me what you're saying is wrong with eGold. They (claim to) hold assets in gold, and use that gold to back transactions... so what?
PayPal IS registered: See Paypal Liscencing page.
Test your net with Netalyzr
Don't worry they will. e-gold was just smaller and didn't have good enough lawyers. Now that they've got a precedent set, the government will turn its attention towards paypal. The government can't stand to have any "unregulated" exchange of goods, services, or capital.
While I do agree with you, I think there's more to this than just regulation.
The US government (actually the Federal Reserve but by extension their lackeys in the government) is terrified of "competing currencies."
They come down especially hard on physical currencies, ie. Gold/Silver. Look at the recent attack on the "Liberty Dollar," for an example.
At the risk of provoking the ire of the anti-Ron Paul people, he's been talking about exactly this for some time.
Of course, it's quite possible that there actually was money laundering going on (it sounds like there was.) My point is just that these chaps weren't taken down because a) they were too small and didn't have good lawyers or b) just because they were laundering money. If you believe that, I've got a bridge I'd like to sell you...
http://clightnirish.wordpress.com/
You do realize that basing a currency on the supply of an arbitrary resource is just as foolish, if not more so?
The reason people abandoned the gold standard was because of two things:
- random hits to the valuation of a currency due to influx of more resources
- static size of economy.
People who pine for the days of the gold standard either never lived through the problems, or have forgotten all about them.
Those who can, do. Those who can't, sue.
A gold-backed dollar is every bit as illusory as a non-backed dollar. The only thing that makes ANY currency worth ANYTHING is that people are willing to accept it and be sure they will be able to spend it themselves. Gold is no more immune to this than paper dollars in the United States - unless the fact that gold is shiny and malleable makes it carry more intrinsic value. The only reason gold has any value is that we assign it value, which exactly why money has value.
People who think returning to a gold-backed dollar would be in any way useful lack some extraordinarily basic economic education. If we were sticking to gold-backed dollars right now, gold's value would plummet just as much as the dollar's.
Few young people realize that until the 1964-1968 time period it was possible to bring your dollars to the government and get precious metal on demand. This gave the dollar real worth.
To paraphrase Terry Prachett: "This was true, so long as nobody actually asked for it." The government NEVER had enough gold on hand to back every single dollar in circulation. The last time I had a friend insist that we should be on the gold standard, I did a quick back of the envelope calculation. If you took all the refined gold in the world, all of it, and used it to back the US dollar only, then the price of gold would have to skyrocket to something like $2,000/oz. This assumes that the price would not go up as you try to buy more gold. There simply isn't enough gold, and the rate of gold production was not keeping up with economic growth in the US and around the world.
Further, I don't understand people who think that the rate of inflation should be pegged solely to the rate of gold mining. Gold isn't particularly rare in the earth's crust, but it is costly to extract. If someone were to develop new technology that extracted gold at significantly cheaper prices, your currency would collapse. This isn't unprecedented. Remember that aluminum was once considered a precious metal until Charles Martin Hall developed an inexpensive electrolytic process for extracting it. From what I hear, there is a new technology coming down the pipe to bring the price of extracting titanium down to the level of aluminum. If something similar happened to gold, a gold-backed currency would be destroyed. In an economy with a fiat currency, you'd just start using the new, cheap gold as a good roofing material.
--
The internet is the greatest source of biased information in the history of mankind.
I know this is not the main thrust of the comment, but it's not practical for money to be backed by gold, diamonds, beads, or fragments of mirrors. Money is backed by what you can buy with it. Then, you say, "what if the economy collapses and no one trusts the dollar anymore?" Well, I don't know about you, but I can't eat gold. Or any other precious metal for that matter. "But you can use the gold to buy food." Ah, only because people trust gold as having value while paper money doesn't. Stepping back a step further, each seems to me to be about as useful as the other for its intrinsic physical properties.
But I got off track. The main reason precious metals don't make sense as money is the fact that they don't account for the growth of the economy. To simplify things, let's create a little thought experiment and take it to the extreme. What happens when there is no more gold left to pile up in Fort Knox? Does the economy stop growing at that instant? No. People continue to innovate and create value out of nothing using only their minds and bodies. What do we do then? Switch to another precious metal of which we have more? Switch to commodities?
Or we can just trust eachother. You make something cool and sell it to someone. I make something cool and you use the money you got in your last transaction to buy my cool thing off me. We're just bartering in a huge pool with a little bit of paper to smooth the process.
To address the concerns of the last poster, all we can do is try to be as transparent as possible. And even then, the economy knows what's happening. The government increases the money supply and the inflation numbers will show it, whether they tell us or not. Just like with anything else we buy and sell. Increase supply and the money value of each individual unit drops.
Citation, please.
Some economists believe that America's current financial predicament was brought about by deregulation of the banking system, allowing banks to create currency by lending far more than they owned. Some economists believe that the current predicament is due to huge federal budget deficits. Some economists believe the current predicament is due to trade imbalance. I'm sure there are other theories out there.
However, a gold standard is not some magical cure to ecnonomic woes, it carries its own host of problems... and the biggest problem is that it removes the ability to correct for currency valuation issues.
Gold is a commodity, and thus is not a safer store of wealth than currency -- if anything, it is less safe, since there are fewer controls over the world supply of gold then there are over the supply of currency. Apples to oranges -- one cannot compare a commodity to a currency, they are by nature two different things.
If you really want to consider the problems of a gold standard, look to history. There are reasons the gold standard was abandoned, and no protestations by any number of goldbugs will change the fact that a commodity-backed currency leads to frequent boom-and-bust cycles that are devastating to economies.
The current system is not perfect, but a commodity-backed currency is a nightmare we should not revisit.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
You answered your own question with your qualifier. The USD is not oil-backed... if anything, it is backed by one thing only: trust.
Effectively the US earns 1-2% annually by nature of the USD being the world's reserve currency. The fact that oil is priced in dollars (for now, anyway) contributes to this. The biggest factor, however, is the fact that the USD is relatively inflation-resistant. This is not because it is effectively oil-backed (and I'm not sure what you mean by that statement, anyway -- USD cannot be redeemed for oil with the organization that prints it), but because of the Federal Reserve's actions to maintain a low level of inflation... i.e., a fiat-based currency.
What maintains trust in the dollar is the idea that the US will maintain low inflation.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
Ah, the fresh smell of slashdot paranoia in the morning. Are you suggesting that the only reason the dollar is worth anything is because of oil? Think about this: the WORLD spends 3.7 trillion dollars on oil a year (2008 estimate). The US produces $13 trillion worth of stuff each year. Even if suddenly everyone tried to get rid of their petrodollars at the same instant, it would not destroy the dollar (hurt it, yes, but not destroy it). There is much more to the US economy than the 'power of the dollar.' There is real production going on there.
Consider this: is the Euro safer? No, remember that the European bankers didn't change the interest rates this month because of inflation worries.
Furthermore, you are making a very bold accusation here, that the US will attack for such a small reason. Why not attack Venezuela then, or Columbia, for that matter, when an attack on either place would reward us greatly?
Qxe4
I've seen a theory that the reason for invading Iraq was that in late 2000 Saddam switched to using the Euro. Iran's promoting the same switch, and the talk of war with them keeps popping up.
Scarily enough, that makes more sense than most every other theory for the 'real reason for invading Iraq'. Either I need to get some tinfoil, or the world is really that convoluted.
No, US Dollars are backed by (some) gold and (mostly) US Treasury bonds held by the Federal Reserve. US Treasury bonds are backed by the federal government, which has met its obligations to its creditors consistently for a long time through its unlimited power of taxation over the entire US economy.
I have seen the future, and it is inconvenient.
Why, praytell, have so many otherwise intelligent people been lured onto the gold bandwagon lately?
They understand the nature of money and what inflation really is, while you, don't.
Deleted
The government can't stand to have any "unregulated" exchange of goods, services, or capital.
Like, say, cash. I really feel that the government would eliminate currency in a heartbeat if they could get away with it. Millions of cash transactions take place every day between private citizens, and the government would dearly love to have a piece of the action (as in taxes) as well as the information (who sold what to whom, and when, and why). Not to mention the IRS. (If I pay my neighbor $20 to clean my gutters because I cannot, or he gives me $50 for my old grill when I get a new one, that's income and we're supposed to be honest and report it! Yeah, right...) Cash transactions with businesses are a bugaboo, too, as the government can't easily track your purchases or link you to them. The powers that be are very upset when they can't snoop into your financial affairs.
The trend away from cash is slow, but steady. The marketplace helps: we have things like the Green Dot debit cards pushed on the lower classes, painting cash as "old fashioned," inconvenient and risky to carry around. Many government payments at all levels, like welfare/unemployment/etc. are now being paid to people not in the form of a check, but on reloadable debit cards. And the fearmongers are doing a great job associating large cash transactions with crime and terrorism -- obviously if you use an untraceable form of payment, you must have something to hide. Just try paying for an airline ticket in cash, or any large transaction (car, etc.) and you will set off at the very least raised eyebrows, and in some cases alarm bells. You can't even purchase above a certain amount in money orders at the post office now without them having to get more details from you (what they are for, where they are going, etc.). The government would adore having every single financial transaction done electronically so that every cent you spend and the recipients of your payments are trackable.
I own no plastic, save for an ATM card, and make all my purchases in cash. It's just a matter of time before this brands me as an "enemy of the state..."
"Every great cause begins as a movement, becomes a business, and eventually degenerates into a racket." -- Eric Hoffer
From the article:
A systemic flaw in the e-gold design, present from the very beginning, made it vexingly difficult for e-gold to expel a User, in a truly effective way, for criminal abuse of the system. e-gold investigative staff might detect suspicious activity, block or freeze the offending account, and later discover the same perpetrator had created additional accounts.
One element was logic that allowed an e-gold account full privileges from the moment of creation and only revoked those privileges in the event of suspicion that the account holder was seeking to mask their identity or actually engage in illicit activity.
Um, systemic flaw? How about important feature? Really charming exercise in doublethink there. "We're crippling the anonymity features that made this product worth a damn in the first place, but we're going to *call* it correcting a 'flaw'".
This is a bloody show trial, that's what it is. It's not good enough to just prosecute their victims, the Almighty State has to ensure they repent publicly, presumably on pain of being fucked over a lot harder during sentencing. "A systemic flaw in the e-gold design...". We have always been at war with Eastasia.
I'm not a US citizen, or an economist, or some financial genius, so feel free to ignore the following:
;). Consider that Iraq started selling oil in euros, the US took it over and Iraq is back to selling oil in USD. Now Iran is selling oil in euros... Saudi Arabia the top friend of the USA has stuck to selling oil in USD.
Summary:
Right now the USA is like a casino where the rest of the world uses its casino chips to buy and sell food, oil, services. Can you not see the advantage for the USA? Why should they want to switch to the gold standard, or any other standard? That would be stupid for them.
Details:
The US Dollar as a global trading currency, that's _controlled_ by the USA is a good thing for the USA.
Because what that means is all the countries around the have to keep reserves of US dollars to buy and sell stuff - like _petroleum_ for instance.
So you have trillions of US dollars, outside the USA, in _foreign_ hands.
Whenever the US Gov decides to print more US Dollars, it in effect taxes ALL the other countries in the world holding billions of US dollars, and countries lending the US Gov money in _USD_. Because their USD becomes worth less, and therefore they become _poorer_.
It takes time for the countries to change their prices in USD e.g. random Chinese stuff will still cost USD19.95 for a few months or more, so in that time the USA can still buy the same amount.
It is thus easier for the US to retain its position in the rich-poor country hierachy.
In contrast if my country's gov decided to print more of its own currency - its citizens would become poorer, the rest of the world would just laugh and very quickly adjust the exchange rates, then any loans in foreign currencies will become more expensive to pay back, foreign stuff will be more expensive to import nearly overnight.
Thus as long as the USD is the defacto trading currency and the US Gov gets to control it, the USA gets a free ride and can print USD with relative freedom.
There are other ways the US prints money - The USA buys goods from Japan, China, Mexico etc, and pays them in USD. If it does not have enough USD, it issues IOUs and sells them to Japan, China et all, who buy it with USD they just got from the USA (Japan etc use the rest of the dollars to buy wheat, oil, other commodities).
It may appear a strange system, but it has worked reasonably well for quite a while.
IMO, trouble is the USA has spent a fair amount of the printed dollars in recent wars, so there is a massive "leakage" out of that system, making other countries more likely to notice the USD isn't quite worth so much, and thus forced to change their prices.
A possibly unrelated note