Digital Gold...buying in "goldgrams" on line

Miscellaneous Current Events
1

I find this interesting that at www.goldmoney.com the members buy and sell to each other in a digital currency called “goldgrams.” If governments don’t go to something similar, will private citizens worldwide take it upon themselves to do this? This would be easier than carrying gold to make purchases, will keep the “velocity” of transactions high for efficiency, and I think could be self regulated.

Disclaimer: I have absolutely no vested interest in goldmoney.com but I find the concept of interest and I would like to hear from others as I respect the insight and opinions of the Mises Community.

2

I hope the gold money, silver money, any money folks using the quality of their money are completely successful and drive out the usage of fiat money of any kind.

That having been said, I realize that the benefactors of fiat money will go to great lengths to stop the proliferation of market based money. These lengths will include violence like what happened to the principals of the Liberty Dollar. I hope that it does not include the use of military forces or worse, the use of non-conventional weapons, but I would not be shocked if that was the case.

3

GoldMoney has been around for over a decade and while they had a good group of merchants using GM for commerce years back, they don’t have any real merchants now. It’s more of a business where anyone can easily buy allocated gold, it’s the best on the Internet. It is not yet a commerce model.

To get everyday people to use gold for currency, this type of GoldMoney digital gold would be ideal, they even have an iPhone app. However, after many years of trying to gain new market segments, this is a very difficult task…getting new everyday people to use gold as money. The advantages are many but people are still used to their plastic. It will take an almost total dollar collapse to force people to see gold and silver as money, but until then, I don’t see it happening on any wide scale.

With the accounts denominated by weight and prices in dollars, you have the first speed bump to overcome with ‘everyday’ thinking. Then you will need to beat Gresham’s Law.

Mark

Editor Digital Gold Currency Magazine

4

Mark, please don’t drop links in your post. You can add a link in the bio field of your profile.

Thanks.

5

Sorry mate, removed it. That was my first post so it won’t happen again, thanks.

6

I think credit cards could still be used. You just pay the credit card companies in goldgrams or some such digital gold method.

7

NO. Legal Tender Laws ensure FIAT money superiority. This is only good for investment, but you can hold a digital warehouse receipt instead of real bullion.

8

A little off the subject. This digital gold is an excellent example to show the absurdity of FRB proponents. According to them, if this Swiss bank that issues the digital receipts issues more digital receipts (with a clause) for gold then actual Gold in their vaults, then somehow the market would value these receipts as Gold substitutes.

9

“This is only good for investment…”

Thank you for the comments, but this phrase above is not entirely accurate. In reality, digital gold is an excellent method to make an investment.

(1) It’s liquid 24/7

(2) It is ownership of the allocated metal, the actual thing not a paper representation like an ETF. If you own more than a kilo or even 400ozs you can get the bar number which identifies that gold as yours… in the vault, you own the actual gold.

(3) You can buy and sell from the privacy of your own home.

(4) The gold can be stored in Switzerland if requested. (not London) So you have the security of living in one jurisdiction and your assets are stored in another.

Yes, I think it’s a very good way to invest in gold.

However, it is also an excellent way to engage in commerce.

(1) Entry into the market as a merchant is very inexpensive.

(2) Transactions can’t be reversed so there are no chargebacks.

(3) No currency conversion costs on international transactions

(4) Transaction fees are very low, cheaper than both bank transaction fees and credit cards.

So…while your statement above is sort of true, it is a good way to invest, it is also a great way to conclude business transactions and settlements. It is just not yet in wide use for this purpose.

If you can remember back to when the first ATM cards were distributed, that technology was so new and NO ONE wanted to use the cards. Today you can’t swing a dead cat without hitting an ATM machine. New technology takes times and the advantages of digital gold currency while obvious to me are not mainstream yet.

To say ‘this is only good for investment’ is not accurate. A more accurate phrase would be something like this, “business settlement and P2P transactions in digital gold currency have major advantages over banks, however, the DGC technology is so new it is not yet mainstream.”

Mark

10

Transactions in gold only make good sense if both seller and buyer have Gold accounts so that direct transfer of Gold can be achieved without converting to local currency. Once you convert to local currency, you must pay taxes on any of your gains on gold relative to your legal tender currency. This is why I said, legal tender laws are the problem. I don’t think it is even legal for a retailer to offer a discount on gold transactions as oppose to dollars for example.

11

Yes, all parties must participate in the digital payment system for it to function properly.

Secondly, if I’m reading you correctly, you are saying that end of the month if gold has gone up while I was doing merchant business, I’m now also paying capital gains on the upward price move in gold? How is that calculated? Daily? Monthly?

If you are referring to US Tax law, can you please direct me to any legal opinion which states or verifies this? I’ve asked this same question for a long time, in fact I was discussing it last week. No one I have ever done business with has stated this was U.S. Law or where I can find that info. I asked Dr. Jackson from e-gold and he did not know. The best guess at that time while waiting on a response from the accounting firm and IRS was an up or down move in gold’s price while doing business could be seen as a currency conversion and not a capital gain or loss.. I’m certainly no expert so if you can direct me to proof of your statement, that legal opinion or letter from the IRS which is published somewhere or verifiable would help me out and clarify things for our team. Either way, tax it, don’t tax it I don’t care what they say, we’ll pattern the biz around their statements, we just don’t know which way they are going on this yet. It seems you do, can you give me more info?

Thank you for your time and consideration.

Mark

12

I don’t know of any specific legal opinion, but I do know that investments in Gold bullion (or any precious metal) are subject to the same capital gains tax laws. I can’t tell you for sure that a digital gold account would be treated exactly the same, but if it is treated instead as a foreign currency investment, that is also subject to either income tax or capital gains tax. If you’re looking for a more specific answer, you’re going to have to investigate further.

13

Yes, thank you, we realize the tax issue. My problem is that no one has stated in any terms how proper digital gold accounting works, is it FIFO, LIFO, cost averaged etc. How that is calculated for a business person, or even if it needs to be done…these details should be sorted out, explained and written down for easy distribution.

All users need this info, especially the US ones, before retail merchants will pick this up on a wider basis. IMHO gold is a currency XAU so gold → USD is that a currency swap? Kind of a goofy question but these all need to be clarified in order to move forward.

Hopefully someone or group will take the lead and work it out with the IRS. What is more likely, is that a dozen or so tax ignorant users will get arrested before the gov tells us “how it is”, that seems to be how things are now working. We will definitely continue to investigate and eventually iron it out.

Webmoney Transfer has awesome detailed publications (small books) on how to account for their digital value using the Russian Accounting System. I have two of the books unfortunately the Russian system is much different than anything else on earth.

Even the Berkshares, a community currency (non legal tender money), offers accounting instructions on how local businesses and merchants should treat their currency use for the IRS. You can even see the PP presentation on the Berkshare web site …/toolkit/index.htm A simple explanation of digital gold currency accounting such as this would move us ahead. Just like Webmoney, Berkshares explains it pretty clearly online.

Finally, I’ll just say that perhaps with some lobbying and a favorable ruling from the IRS, I could see digital gold becoming much more attractive to merchants. (of course I don’t predict that happening in the U.S. but it’s worth noting as one possible path ahead)

Thank you again for your response.

Mark

14

I favour buying gold mining stocks at this time because there some that are trading at multitudes under book value per share.

15

That’s why GoldMoney is based in Jersey, not in a US jurisdiction.

16

Has anyone tried this Gold Money?

17

NM it’s considered as a foreign international investment by the IRS. I’d rather bury stuff in my yard.