Small Bank Accepting & Transferring Gold & Silver Ounces as Currency?

Economics Economics Questions
1

Competing Currencies Being Accepted Across Mid-Michigan: http://www.youtube.com/watch?v=JVArPiDebdY

Would it be possible for a small bank chain to hold gold and silver ounces and then transfer them between customers via checks? Let’s use Cape Bank as an example…

http://maps.google.com/maps?q=cape+savings+bank&hl=en&ie=UTF-8&tab=nl

https://www.capebankonline2.com/home/home

Could a joint effort between various small businesses and a small bank chain setup a system by which gold and silver could be electronically transferred via debit cards?

What type of electrical engineer or other specialist would one seek to help design such a system?

Could a small grocery store hypothetically list three prices for some of its most popular food items in New Jersey? Dollars, gold ounces and silver ounces?

Could a small bank with up-to-the-moment exchange rates for gold, silver and the dollar exchange them for any of the other electronically but for a percentage fee?

Let’s say I have 3.425 gold ounces on my card but I’m headed to a store that only accepts cash. Could I go to a Cape Bank ATM and immediately exchange my gold for dollars at a fair market exchange rate minus a nominal percentage free (like 2%). And then use that card at said store?

What special security issues would banks holding full reserves of gold and silver present? ’

What potential legal issues would arise?

Monetary Policy at the Local and State Levels

Could a town council pass an ordinance requiring every small business (or limited liability company) to accept gold and silver as payment? Or any other sort of legislation that would be favorable to competing currencies?

Could they issue local currencies? (http://en.wikipedia.org/wiki/Local_currency)

What laws could state legislature pass favorable to competing currencies? What legislation could be drafted such that when the dollar crisis does occur state legislatures can immediately act to pass this sort of legislation (if they can’t be encouraged to pass it beforehand).

Could states issue their own gold and/or silver currency? Not currency BASED on gold or silver, but gold and silver coins listed in ounces?

2

I think it’s a great idea. You may want to read this…http://www.lewrockwell.com/rozeff/rozeff339.html. The problem here is taxes you would be required to pay when converting back to fiat not to mention sales tax on whatever item you sell. With some creativity and no government meddling I think it’s doable.

3

Thanks Bill! Would this piece of model legislation being passed at the state level more or less solve that problem? Or might there be further complications?

http://www.tenthamendmentcenter.com/legislation/constitutional-tender/

4

Of course they could…and they’ve been doing it for many years (e-gold, etc.). What’s the point, though? It’s not a “competing currency”, it’s just another token substituting for fiat dollars. As long as businesses have to keep their books in dollars for tax purposes, they couldn’t do anything else even if they wanted to.

5

You can’t compete wth dollars as long as legal tender law is in place.

6

The e-gold guy got his pants pulled down and raped by the government if I recall correct. Its been a while since I read what went down but if I recall correctly the e-gold got big on the black market and among crime syndicates for money laundering, the guy was a little too naive for his own good, he finally figured it out and alerted the authorities, and they broke the criminals and charged him with complicity in the crimes he reported as soon as he found out about them. At the time of the article he was on house arrest and financially ruined. It’s a pretty good object lesson on just how far the rules can bend to screw anyone trying to get around gov bullshit.

7

http://goldmoney.com/ Here’s another site you may want to explore. Once you have established an account with this or a similar broker/bank it’s no big stretch for them to issue debit cards making transfers easy. The problem now is gold and silver are commodities priced in dollars subject to wild price swings. If a gold currency caught on and things were priced in gold or other commodities their prices would stabilize ie; a loaf of bread cost x units of silver.This would shift the wild mood swings back on the fiat money where it belongs.You’d probably use fiat money for paying taxes parking meters and toll booths until it was forced out of existence.

8

Part. 1

GREAT questions.

Would it be possible for a small bank chain to hold gold and silver ounces and then transfer them between customers via checks? Let’s use Cape Bank as an example…

Yes, possible but not likely. This account also would not be FDIC insured. This type of digital system(no checks) in already in use around the globe, but now sort of banned from the U.S. unless licensed and monitored. (MSB, Money transmitter etc. E-gold.com is now attempting to get all those and follow the rules)

Here are some of those digital gold currency systems that are currently in operation:

http://www.goldmoney.com http://www.e-dinar.com http://www.c-gold.com http://www.igolder.com http://www.gold-pay.com http://gbullion.com http://www.pecunix.com http://www.libertyreserve.com http://www.wmtransfer.com (WMG is gold purse)

there are about a half dozen more smaller operations. Each of these operates in a very different way, there is no standard model. GoldMoney is the largest.

Could a joint effort between various small businesses and a small bank chain setup a system by which gold and silver could be electronically transferred via debit cards?

YES

What type of electrical engineer or other specialist would one seek to help design such a system?

Software designer and this software is already available. Several versions are even Open Source. https://github.com/FellowTraveler/Open-Transactions/wiki

Could a small grocery store hypothetically list three prices for some of its most popular food items in New Jersey? Dollars, gold ounces and silver ounces?

Yes, it would be expensive to set up but simple to operate, it’s just a Db of products and prices updated several times a day. Not difficult to do at all.

Could a small bank with up-to-the-moment exchange rates for gold, silver and the dollar exchange them for any of the other electronically but for a percentage fee?

With the proper licensing in the U.S. YES, but there are many factors that come into play for such a business like taxes and a version of Gresham’s Law. (people tend to spend the paper and hoard the metal) The big question you must ask yourself is “who would use such a service and why?”

Let’s say I have 3.425 gold ounces on my card but I’m headed to a store that only accepts cash. Could I go to a Cape Bank ATM and immediately exchange my gold for dollars at a fair market exchange rate minus a nominal percentage free (like 2%). And then use that card at said store?

Yes, this is 100% possible with some minor changes in the process you describe. You would want to make that exchange before you left the house --that is “load” cash funds onto the card for spending or withdrawal. The gold account that the card is "linked to… would maintain the gold balance. The card is a tool for accessing this account. This product has already been perfected and is in use today for many DGCs and funded through a network of independent agents around the globe. (no more in the US)

What special security issues would banks holding full reserves of gold and silver present?

Not sure.

What potential legal issues would arise?

This is a complex question but one that can be worked out in one or two days and does not require years of debate. There is nothing that forbids a savings institution from backing an account offered to the public with precious metal. Very few banks do this but one such product previously offered through Everbank. It is a Diversified Metals CD called “MarketSafe DC”. –““MarketSafe Certificates of Deposit offer market driven returns on maturity with the safety of 100% Principal protection. For this Gold Bullion issue, you are guaranteed return of 100% of your Deposited Principal on maturity. Plus, if the Spot Price of Gold improves, you may earn a Market Upside Payment equal to 100% of the percentage change in the average Spot Price of Gold, calculated as an average of ten semiannual Pricing Dates.–”” https://www.everbank.com/personal/marketsafe-cd.aspx?linkID=Search

I can address the other questions later today or email me anytime editor@dgcmagazine.com or Skype “digitalcurrency”

9

When you say “no checks”, do you mean like “checks and balances” or the money substitutes (“cheques”, in proper English)? A few years ago, there was some e-gold-based cheque service…you could also get debit cards based on 1MDC (which was based on e-gold) that worked with any ATM, etc. The US government destroyed 1MDC when it stole all their customer’s gold, though.

10

But they wouldn’t have three independent prices; they’d have one price (in dollars, for sure), and the current spot prices of gold and silver, and would calculate the price in gold in silver from the dollar price. (And nobody in their right mind would spend metals, because minted 1oz rounds are worth considerably more than the spot price, which is for rough 400oz (gold) or 1000oz (silver) bars. You’d think people might spend “electronic” gold, but they don’t seem very willing…)

11

No paper cheques or checkbook, a purely digital account with Net and mobile device. Paper cheques clear and remote capture through the banking system, this is a private non-bank, Internet operated account

The only e-gold based cheque services that have ever been offered were operated like this. Transfer e-gold to me and I’ll send out a personal or company check from my account. Now there was also the electronic money order (EMO) from Emocorp an excellent operation. Anyone could sell e-currency and print out a money order from their personal computer. The printed MO that could be printed on regular paper, worked just like a Western Union MO, you could walk to any bank and cash it (that system was awesome). This gave everyday use to e-currency accounts as you could print the MO and mail it to pay everday bills and stuff. That was the closest we ever got to a cheque account.

The debit cards were issued from North York Credit Union which lost their card license some years back. They were just standard debit cards, but that awesome system offered an API so anyone could sell 1mdc or a few other e-currencies and instantly load those funds minus a fee to the card. Again this was awesome, sell e-gold from our PC and moments later the funds appeared on the card. This is no longer available however, today Webmoney offers a similar MasterCard product in euros. You sell the WME digital currency from your WM account and moments later the funds appear on a Payspark MasterCard debit card.

12

Correct no one would trade a fine Silver Eagle at spot, however, if you had a mobile device like iPhone, you could easily walk to the check out, receive you total bill and make the payment using your iPhone. Today GoldMoney has a super iPhone app, which permits just this action. Here is the link, http://www.concentricsky.com/products/iphone/goldmoney/

What you request could be accomplished two ways. Since GoldMoney and other DGCs permit you to spend a dollar amount, then calculates and transfers the actual metal amount…you would not have to do any conversion at the checkout. If your total was $93.69 you would send that amount to the store’s account. GoldMoney automatically calculates that metal amount based on that moment’s spot price (so the conversion is very fair, no markup, it is spot at the time). This method would be the most consumer friendly way to pay, just like if you were sending PayPal from your iPhone at checkout time. [of course the PP transaction is reversible, the GM transaction is final–another plus for the merchant)

The second method, as I was describing before, is ----in the store ailse, as in like a WalMart, the item prices are ON the shelf, not the item. Consequently that price would have to be shown on a simple digital display, not a printed piece of plastic. As you walk by, you read the digital display for prices shown in gold or silver. Or priced in $, gold and silver. This is a simple database that takes the daily spot price, or hourly, and converts it to a weight in metal, then displays that weight. As an example the prices might read: Item costs–$27.27USD - 1.0AG - .6256AU (silver priced in Troy ozs. Gold priced in grams)

or [$27.27 in dollars] [1 oz Silver] [.6256 grams of digital gold]

Now, if the price of the item changed overnight, or the price of the metal changed, the Db software would simply recalculate that day’s sale price each morning or something similar

THIS IS VERY EASY TO DO. Any store big or small could use this type of configuration and it can be set up with min. costs, no bounced checks, no card fraud etc.

The API for such a system is already active and has been online for many years. http://dgcsc.org/goldprices.htm

If you kept your money in digital metal like I do, and only withdraw it to pay a bill, then a system like this in wide operation could take a big chunk out of the plastic card business over time because it is so convenient, robust and highly configurable. I don’t know how many times I’ve heard from new DGC users, “Wow, Goldmoney is so easy to use if I could pay my bills with this, I’d close my bank account.”

13

Digital gold currency would also be highly beneficial for state and local government tax collection. The original GoldMoneyBill written by Dr. Viera and put up in New Hampshire circa 2005 included a digital gold currency account for the payment of certain taxes.

Now, imagine today that local and state sales tax is collected and paid in DGC.

At the time of checkout, you paid a total of $94.27 which was $90 for the merchandise and $4.27 in sales tax. During that checkout the store accepts your DGC payment and instantly $3.87 is routed into the state’s tax collection account, and $.40 goes instantly into the city’s tax collection account. ALL DGC TRANSACTIONS ARE FINAL so there is NO possibility of a card chargeback. DGC makes this type of instant tax collection possible.

14

I like SovereignStateDepository.com since their gold and silver will be saved in a U.S. depository unlike goldmoney which stores their customer’s gold and silver abroad. That’s risky business.

15

On the contrary, having it in the US is what’s risky! That’s what led to the downfall of e-gold, and the losses of their customers. Basing any DGC in the US is a recipe for disaster.