I would like to try to clarify a question that Claude Cormier raised with regard to GoldMoney versus e-gold or any other gold currency, including E-Bullion.
All of the gold currencies other than GoldMoney claim that their account system represents promises to pay a certain quantity of gold (or other precious metals) to the account holder. In some cases the physical gold is held in 100% reserve and is owned by a trust. In others, such as Standard Reserve, the reserve asset is in the form of an e-gold balance. The beneficiary of the trust might be the issueing company, or it might be the account holders. In either case the system is designed to insulate the gold asset from risk as much as possible so that the depositor's claims can be satisfied by fulfilling the promise to pay upon demand. GoldMoney claims to have a custodial system, where instead of accounts, users have "holdings". This refers to the user having title to gold in the vault, as if there are no intermediaries. As I have pointed out in my article "GoldMoney - Title or Claim?" the existing GoldMoney system does not actually grant true title to specific gold assets in the vault to the "holder" so in effect, GoldMoney today is just a deposit currency like the rest of them. But in theory, GoldMoney could go the extra mile and create a system that meets the claims of their patent so that each holding is a digital title to a specific, known piece of gold in the vault. I mentioned in my article a grid system using 1 gram gold coins that would meet that requirement. For the sake of argument, let us assume that the GoldMoney system really does meet the claims of the GoldMoney Patent, and holdings really are digital titles to specific gold objects in the vault. In that case a judge could not place a lien against the assets in the GoldMoney vault as a judgment against anyone but a holder, and in that case it would only be against the particular piece(s) of gold owned by that holder. (Of course we are assuming that the judge is not corrupt.) In the case of e-gold, E-Bullion and others, the gold is held by a trust so that the benefiaries are the account holders. Suppose for sake of example that GoldMoney won their suit against e-gold, highly unlikely as that may be. If the judge awarded GoldMoney a judgment of $30 million against e-gold, Ltd. the gold held by the trust for the account holders would be completely safe from that judgment. The same would be true if e-gold CEO Barry Downey went on a wild spending binge around the world using his e-gold corporate credit card. The debts of e-gold Ltd. could not attach to the assets of the e-gold bullion reserve trust. If however, the title to the gold were held in the name of e-gold, Ltd, then there would be significant risk that the gold asset could be taken by a judgment. As things stand today, there is virtually no difference in the risk between a GoldMoney holding and an e-gold or an E-Bullion account. GoldMoney is listed by Viamat as the agent for the owners of the gold asset. E-Gold Ltd, is listed as the operator of the account system that keeps track of the beneficiaries of the "e-gold bullion reserve special purpose trust". E-Bullion also uses a trust to hold title to the gold on behalf of the account holders. All three companies are far safer than keeping your money in a fractional reserve system. (Though I won't comment about the safety of gold in a JP Morgan Chase bank vault.) TITLE OR LIABILTY - BOTH ARE CURRENCY According to the Austrian School of economics, "money" is a tangible asset that fills the function of being universally traded for goods and services because it has the highest value to the most people. Gold and silver have functioned as money in most human societies since almost the beginning of recorded history. A "money substitute" is something that represents money, is redeemable for money, and is usually more convenient to use than the actual money it represents. Money substitutes are called "currency". Currency can be physical, as in the case of paper money and Perth Mint certificates. Or it can be abstract, as in the case of debits and credits in an account ledger. These two forms of currency are referred to as "book-entry value" and "bearer held certificates of value". Let us again assume for the sake of argument that the GoldMoney system actually fulfills the claim of its patent and is therefore a system of transfering titles to gold bullion objects (coins or bars). I would call this type of system a "custodial gold currency". e-gold, E-Bullion and the rest of the existing gold currencies are systems that transfer liabilities payable in gold bullion coins or bars. I would call these "gold deposit currency". The main disadvantage of gold custodial currency is that it is only as divisible as the smallest gold object in the investory. You cannot own clear title to an indivisible fraction of an object. Two or more people can share title to an object, but in that case the group has the title. Neither individual has clear title. This is not uncommon in real esate. In order to gain clear title the property must be divided by a judge. For all practical purposes, a gold custodial currency would have a lower divisibility limit of 1 gram since that is the smallest minted bullion object available on the market at this time. Silver, being less dense, could go smaller. In effect a gold custodial currency has no real advantage over a gold deposit currency where the governance of the reserve asset is properly configured. In other words, if e-gold or E-Bullion has properly protected the gold reserve assets so that a lawsuit against the company cannot seize the asset backing the account holder's claims, then those systems are JUST as safe as the custodial gold currency system that GoldMoney claims to have invented. The other primary difference is that gold deposit currency has been in existence for centuries in the form of bullion banks. Indeed, the very first banks were gold deposit currency institutions whose receipts circulated as currency. This makes gold deposit currency non-patentable, even in electronic form, because bullion banks have been using computers to keep balances and make transactions for at least thirty years. That means that the GoldMoney Patent poses no threat to a free market in gold deposit currency. As long as GoldMoney holds the patent to custodial gold currency, there will be no free market in that field for another twenty years or so. But that doesn't matter that much because custodial gold currency is functionally inferior to gold deposit currency due to its limitation on divisibility. Deposit gold currencies can go down as low as the lower limit of measurement of mass. For all intents and purposed gold deposit currencies can be divisible to .00001 grams. I hope this helps to shed some light on the subject. Kind regards and good luck to all, Ken Griffith --- You are currently subscribed to e-gold-list as: [email protected] To unsubscribe send a blank email to [EMAIL PROTECTED] Use e-gold's Secure Randomized Keyboard (SRK) when accessing your e-gold account(s) via the web and shopping cart interfaces to help thwart keystroke loggers and common viruses.
