Governments Declare War on “Digital Gold” Services by Mark Nestmann

by Mark Nestmann - http://www.nestmann.com

I’m a “gold bug.” I distrust paper money of all kinds and am particularly suspicious of my own domestic currency, the U.S. dollar. Plenty of people share my antipathy toward the greenback. And it’s no surprise why. Measured in terms of gold, the dollar has lost more than 95% of its value in the last 100 years. Another way of looking at it is that during that period, the price of gold has increased more than 20 times in dollar terms—from an official price of $20.67/oz in 1908 to more than $900/oz today. With a record like that, you’d think no one would own U.S. dollars. But unfortunately, the U.S. government gives us few practical alternatives. Among other compulsory means, the government’s “legal tender” laws force us to accept dollars “for all debts public or private.”

However, the government’s monopoly on money is beginning to end. In the last decade, the Internet, combined with massive advances in data processing technology, has made it possible to own “digital gold,” through companies like GoldMoney.com. The basic idea couldn’t be simpler. You open an account with GoldMoney or similar service in much the same way as you do at a bank. But instead of holding dollars, the account holds gold. You can then use the gold in the account to pay other GoldMoney accountholders for goods or services they provide. Instead of having those goods or services priced in dollars, euros, or pesos, they’re priced in grams of gold. In return for facilitating the transaction, GoldMoney receives a small fee.

And, guess what? There’s no need for any government to intervene in the process. Indeed, services like GoldMoney are a seductive way of getting ordinary people accustomed to doing business outside the fiat money system. In the not-too-distant future, you may see the equivalent of a gold money market account.

You might receive a debit card that can draw on this gold account. When you buy goods or services, you could pay for them in gold, rather than in a paper currency. Naturally, governments don’t like this one bit. Any threat to the paper money monopoly must be crushed, by any means necessary. And the war against digital gold has now begun. Today, one of the first digital gold services, Nevis-based E-Gold, pleaded guilty in the United States to money laundering charges. It didn’t have much choice. As I described in a previous blog entry, in May 2007, the U.S. Department of Justice seized over US$11 million worth of gold held by Omnipay, E-gold’s payment system. The gold confiscated in this civil forfeiture had a then-market value exceeding US$11 million. (Today, a little more than a year later, the seized gold would be worth more than US$16 million. Which currency would you rather have?)

Naturally, the attack on E-Gold wasn’t couched in the terms that this kind of service is a frontal assault against increasingly depreciated national currencies. Instead, the indictment of E-gold painted a lurid picture of the system being used by child pornographers, identity thieves, and investment scams. Who knows? Maybe E-Gold was guilty as charged. But the E-Gold takedown is unquestionably a warning to other companies in this business that they might be next.

It should thus come as no surprise that one of the highest priorities of national “financial intelligence agencies” is to investigate the connection between digital gold services and (you guessed it) “terrorist financing.” In the United States, for instance, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is studying ways to “close the regulatory gap” surrounding digital gold currencies. Canada’s financial intelligence agency (FINTRAC) warns, “criminals may be exploiting Internet-based companies that convert cash into electronic gold, exposing a new front in the international effort to restrict terrorist financing and money laundering.”

So, there you have it. The stage is set for governments hooked on fiat currencies to try to quash this quiet revolution. You can do your part to make sure they don’t prevail by opening your own account at GoldMoney or a similar service. (For the record, I have no connection, financial or otherwise, to GoldMoney, other than knowing its founder, James Turk.)

GoldMoney, but the way, insists on the same type of documentation that a bank demands when you open an account. Obviously, it doesn’t want to suffer the same fate as E-Gold.

Mark recommends - http://www.sovereignsociety.com