From: Chris Rasch (crasch@openknowledge.org)
Date: Thu Apr 26 2001 - 10:18:25 MDT
-------- Original Message --------
Subject: [e-gold-list] Excerpt of Barron's article mentioning e-gold
Date: Thu, 26 Apr 2001 10:03:58 -0500
From: "James M. Ray" <jray@free-market.net>
To: "e-gold Discussion" <e-gold-list@talk.e-gold.com>
This is a "fair use" excerpt (I hope) but please go out and buy the
current issue of Barron's, which will be on sale until the new issue
comes out on Saturday. The article is titled "Making New Money"
and it's by Jack White and Doug Ramsey. Any typos are mine. It's
on page 59 of the current (April 23, 2001) issue in the Editorial
Commentary section.
...
...Financial innovators will create new stores of value
and new legal tender for e-commerce. Ultimately, those
digital currencies that offer the best combination of tech-
nology, utility, liquidity, transparency and long-term value
will outshine the euro, the dollar, and the yen.
The surprising thing is that it's taking so long. The
decline of the gold standard, competitive devaluations
and tariff hikes dried up international trade in the 1930s
and should have destroyed the world's faith in fiat money.
Instead, after World War II, the major economic powers
devised an international monetary system at Bretton
Woods that left central banks with the discretion to print
money--a discretion most countries abused frequently,
even after the collapse of that system in the 1970s. Since
the 1940s, the dollar has lost 90% of its value.
There are dozens of current experiments in online
currency: DigiCash, e-money, iDollars, cybermoney,
e-cash, eBucks, virtual cash, cyberbucks, CyberCoin,
cybercash and more. Their sponsors, however, have
put more thought into the brand names than the prod-
ucts. They have attempted to create e-commerce pay-
ment systems that are easy and secure but based on
the dollar. They have created proxies for a traditional
currency, rather than a new currency in its own right.
But it may be only a short distance from virtual
money to a full-fledged electronic currency, which we
might call Electronic Trading Units, or ETUs for short.
Good as gold
ETUs would have to be immune to political pres-
sure, and either fully or largely backed by tangible
assets. E-currencies of the future will be only as
strong as the groups issuing them. The ideal e-cur-
rency might even be backed by gold. Encrypted digital
units of the precious metal, even in tiny quantities,
could in principle be used to pay for anything from a
soft drink to a jet plane.
One company, E-gold, already allows online users
to settle payments using its currency, which is 100%
backed by gold. Ownership of the gold changes, but
the physical bullion stays put with the company, which
is based on the Caribbean island of Nevis. The system
also is transparent: Holders have real-time access to
the total amount of e-gold in circulation, and the compa-
ny's total bullion reserves.
If gold remains a "barbarous relic," there still are
other sources of strength for e-currencies. International
trading companies such as Cargill, Mitsubishi and Jar-
dine Matheson handle large shares of international
trade, so they could give an e-currency the strength it
needs to get off the ground. After-hours trading systems
and electronic communication networks such as Instinet
and Optimark have already created virtual markets that
could easily match buy and sell orders for e-currency as
they do for stocks.
....
Remember, folks, please go out and buy the dead-trees version of
this whole issue of Barron's if you can. The rest of the article is also
well-done (the authors 'get' frequent-flyer miles as a privately-issued
currency, for example) so it's worth buying the issue. Thanks.
JMR
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