A Practical Private Gold Money System

The reason why people don’t use gold as money is that after the governments ceased to provide this service, the gold industry also failed to provide it.

One way people could use gold as money is gold cash. The reality is that with the current technology, producing any bill or coin containing small decimals of gold grams is several times more expensive than the gold content. By intensive R&D,  low-cost, low gold content cash may be achieved anywhere in future but now we have to look for an alternate system of gold exchange. One solution is a world network of gold banks providing pool-allocated and segregated accounts.

The gold monetary system can be imagined only with the client requirements in mind:

Clients want trust: clients would not keep their money with depositories that they don’t trust. Clients need to recognize the name of a depository as a certified gold dealer or refiner, a well-known brand, a trustful financial services business etc.

Clients want proximity: people need to know that they can walk, drive or take a short-distance bus or train to their depository to redeem their physical gold any time they need. You don’t have to ask clients a reason for wanting proximity, nor to convince them that the gold location is not that important. Take it as it is, serve them what they want. Proximity adds to trust: a local business is more trusted than a foreign company.

Clients want allocated accounts: it’s not that the clients want the same bar or coin that they put in the depository (the same serial number). Gold is fungible. But they want to redeem preferably the same number of coins and bars, with the same weights and from the same refiners. Again, don’t ask for reason. Take that as it is.

Just as gold depositories (banks) are constraint by client needs, clients are also constraint by nature and by… other clients:

Clients have a strong incentive not to redeem physical gold (except in extreme cases of natural disasters, government nationalization, war, bank runs). As long as the gold bars and coins stay with trusted gold dealers, gold depositories and secure transportation, the gold assayed certification remains valid and the gold is accepted not only by any gold industry player, but also by any depository client in the world. When a person redeems physical gold, he or she will have to re-assay it for a cost in order to deposit it again or sell it to a dealer. A person having redeemed gold would encounter difficulties exchanging physical gold with another person, by lack of trust. Though clients will very rarely redeem gold for the above reason, clients still need to know that they can redeem at any time. It’s one of those situations when you suffer for not being able to do something though when you can, you’ll most probably not doing it. All the thing is to know that you can.

Clients have a strong incentive to deposit small coins and bars. If clients want to exchange gold for goods and services, they need to deposit gold in the most fragmented possible way: deposit many 0.5 gram and 1 gram coins and bars, keep a few larger size bars for long term savings. This incentive helps depositories since the demand for small weight coins and bars comes from the clients and it is served by the gold refiners and dealers. The depository may need sometimes to recast gold in other weights for daily operations but this shall not be a main activity.

How the system works?

John in Saskatoon, Canada, has 1.5 grams of gold registered with the local gold depository of the Alpha Gold bank in Saskatoon (he deposited 2 coins, of 1 gram and 0.5 grams respectively).

Endel has 1 gram of gold in the books of Delta Gold Bank, deposited in the local depository in Tallin, Estonia.

John buys a Photoshop image created by Endel who is a freelancer, for 0.3 grams of gold, by completing an exchange on an online marketplace priced in gold.

In the books of Alpha bank, the account John will have 1.2 grams of gold in the Saskatoon vault. In the inter-bank clearing table, Alpha Bank will have -0.3 grams in relation to Delta bank.

In the books of Delta bank, Endel will have 1.5 grams in the Tallin vault, and another 0.3 grams stored at Alpha bank. In the clearing table, Delta bank will have +0.3 grams in relation to Alpha bank.

There is no need for Delta bank to redeem the bullion from Alpha bank. Clearings may be applied at the end of each day or week between gold depositories. There are situations when a depository may consider necessary to redeem gold from another depository:

– When a depository faces an increased number of redemptions from clients or other banks so it needs to bring in its gold;

– When there is a high imbalance between two depositories so a problem of trust arises.

The clearance of accounts with less than 0.5 grams of gold could be done in nature (until economically feasible low weight gold cash will be invented). From a movie ticket to a dinner in a restaurant, banks could find solutions to compensate when small fractions of gold remain at the closure of accounts.

Finally, for such a system to work, the gold industry should make a list of globally acceptable assayed, standardized coins and bars, and to use a common notation of accounts (e.g. in the form of IBAN numbers).

I hope the gold industry will work together for the creation of a gold monetary system, otherwise there is little chance to see it happen.


Dignity, Happiness, Independence And The State

There is a line of thought among the statesmen that the Government is responsible for the happiness and the dignity of the governed. The people should be aware of that. Each person in the society, they say, must know that there is a Government out there that will provide material assistance in case, for whatever reason, he or she falls in a state of poverty.

Thus, they say, the individual will rise from misery and it will recover its lost dignity. The individual assisted by the Government would be happier, more worthy and more independent.

Quite the contrary I think. Both happiness and dignity are the responsibility of the individual. They emanate from the inside out. If someone believes that the Government is responsible for its happiness and its dignity, it will expect the Government to come to its aid in case of need. This creates a state of dependency. The happiness and the dignity of the person will depend of the effectiveness with which the Government will answer to the person’s expectancy. “Will depend” is the opposite of independence.

An adult should know that the feelings of happiness and dignity come from within. This is the responsibility that comes with the advantages of being an adult. Ideally, this should be thought to a free child by an educator parent. Most often, this is not the case.

If the statesmen want to be helpful, they should repeat over and over to the people that each one is responsible for its own state of mind. In a given situation, the individual has the liberty and the power to choose its emotional response. To be successful with consciously choosing its emotional response and its state of mind, the individual must first know that it has the liberty and the potential to choose and second, to practice this liberty until it becomes good at it. The Government acts detrimental to this knowledge, hurting, maybe involuntarily, the society that it pretends to help.

While external circumstances like becoming very poor will shock and shake the affected person, the person will stabilize relatively fast if it has the psychological knowledge to do so. Given a state of misery and hunger and of being publicly humiliated for that, the individual still has the liberty to stand and to express its inner dignity.

That doesn’t lead to the conclusion that the Government shouldn’t continue to assist the individuals in trouble. There is another reasoning about this. Just remind to the poor that the material assistance is possible because everyone, including them, contributed to the budget allocated for social services. And make it clear to them that the assistance doesn’t make the Government responsible in any way for their happiness and for their dignity. Again, those come from inside.

Free Trade Is Communication

Without communication, humans are very little. Almost everything we do is related in one form or another to interactions with other persons.

We consider communication to be the exchange of sounds and gestures. The exchange of labor, products and services directly or by the intermediate of money as a medium of exchange, is labelled as trade or economic exchange.

The communication with the meaning of sound and gesture exchange is subject of enormous social judging and normalization but very weak Government interfering. The laws governing this communication do most often guarantee the free speech rather than restrain it.

The economic exchange is without doubt a social subject of interest and debate but the Government has the ultimate power of regularize it and it makes use of this power in abundance.

My idea is that all form of exchange between people is communication. It starts with a very simple exchange of a flower for a kiss, or a service for a “thank you”. Giving money or some object to someone else as a present is communication. It means we appreciate the role that the other person plays in our life. We give an amount of importance to its existence, we don’t ignore it.

The easiest way of seeing a trade of goods as a form of human communication is with children. How many times we see young children willing to communicate, to get to know each other, but being too shy to say the first words. We see them exchanging toys as a first “hello”. The material communication continues throughout our lives, just the needs that determine us to use it diversify.

We seek appreciation and gratitude, or forgiveness, for everything we do. This is also true when we use our hands, our minds and “our hearts” to do a labor or to create a product. The reward that we look for when we give our time and labor, or the product of our labor, is also a form of appreciation and gratitude for what we’ve done. That recognition can be a good word, an emotion that is shown to us or it can be very well a service, another product or money. But for some reason we call “communication” the reward in the form of words, gestures and emotions and we call “trade” the reward in the form of material things. Though the happiness that we feel for both forms of recognition can be at same intensity, the Government protects the first and taxes the later.

This is a call to all of us to be more open and more careful with our needs of interaction and to put free trade where its place is: next to free speech, in the common notion that is communication. Free, natural, unbiased, unrestricted.

Representation In Politics

Merriam-Webster Definition of represent
(1) :  to take the place of in some respect
(2) :  to act in the place of or for usually by legal right
(3) :  to manage the legal and business affairs of athletes represented by top lawyers and agents
b :  to serve especially in a legislative body by delegated authority usually resulting from election

My view is that what is currently perceived to be representation in politics, is not at all servitude. It’s all about several people who pretend to take decisions on the behalf of their constituents at the best, of the entire nation or world at the worst.

I do consider each voting person a mature individual, with its own character, will, desires, aspirations, ideas, beliefs, principles, all these changing more or less in time. Though people find common points with others, rarely two individuals match on almost every aspect, and rarely their agreements last as long as several years. One person sharing the same positions with thousands or even millions other people on each subject, serving them by only acting on their will and doing so for several years, is an absolute utopia.

Most of the people do believe that what’s good for them is good for the nation or for the world. Most of the people are looking for means to somehow impose their “good” on the society and they consider this legitimate.

Part of the people acknowledge that they don’t know what are the right actions to undertake for the “good” to be achieved so they are looking for knowledgeable people sharing their goals but better knowing what to do. They are ready to invest their power in those knowledgeable people, to act in their names.

Part of the people believe they know the actions to undertake for their “good” to happen. Most of them are reactive, they only talk about those actions. Few are pro-active, they step forward and compete for a position that grant them the power to act.

During election, a candidate can receive letters and messages with wish lists from thousands of people expressing their views on what decisions the future “representative” should take once elected and what fields of interest should be prioritized. The requests are diverse, many times different and even contradictory. Candidates receive contradictory advices even from their own staff, both in campaign and once elected.

The candidate in election usually sustains the ideas of the majority of the supporters of its party. It does so to win the election. Once elected, the chances that the “representative” will vote according to the will of the majority of its constituents is even lower. Either the elected person votes according to the party line, or in the case of strong personalities, according to their principles and disregarding both party directions and majority of constituents.

What kind of “representative” an elected person becomes is unknown at least when first elected. Statute and power changes people. A strong, independent candidate can be overwhelmed by its position once elected and align behind its party as well as a humble party player candidate can differentiate once elected, to become its own voice.

During a mandate, an elected person takes dozens of thousands of decisions. Considering a member of a Parliament, the field and the importance of their decisions are immensely varied. From a vote on a treaty to a choice of a secretary for the cabinet, everything has some impact on the life of every person of the nation.

What I think to be a good picture of the reality follows. Very few, pro-active people with a strong desire for statute and power, with a strong conviction that they know better what is to do for the “common good” of the Society and sometimes truly believing that they act in the name of their constituents or of the people, compete for a role in power. Once in power, they take decisions: rules that apply for everyone and change the life of every person in a nation. They act solo or in group, organized in camps called “parties”.

The actions of the elected are watched closely and diffused to the entire world by individuals named “journalists”, or on the whole, “media”. Some un-elected people form so called “civic associations”, “non-governmental organizations”, “syndicates” and “industry associations”, with the intention of influencing the elected towards decisions that they consider to be in their interest or of “common good”. The elected are very careful with their image as presented by the media and interpreted by the electorate. They use their relations and their influence to get positive reviews by the media and to score high in popularity.

The re-active people interested in politics spent 99.93% of their time acting outside of the decision-making scope. They do talk a lot about politics, expressing their frustration about what was or their hope for what could be. Once every several years, they vote to choose representatives. Though they are overwhelmingly disappointed by the elected ending their mandates, and despite their recognition of the fact that the actions of the elected in power are very much different than their promises as candidates and different than the will of the electorate, the people interested in politics will continue to vote and will be very critic with the people that don’t vote. They accuse the non-voting people of being guilty for the election of the opponent of their preferred candidate, that opponent often representing the definition of evil. They also accuse the non-voting people of putting in peril the stability of the social construct, causing chaos.

The non-voting people acknowledge that chatting, commenting or complaining is loss of time and energy. They also acknowledge that acting 00.07% of the time by voting, will only give power to someone who most of the time won’t do what they want anyway. Non-voting people tend to be more apathetic in relation with politics and political behavior. That doesn’t necessarily means that they aren’t pro-active or interested in other non-political fields like business, science, arts or entertainment. Part of them express a genuine interest for social affairs by protesting when necessary: that is when the elected take decisions that severely impact liberty and justice.

To return to the definition of represent, “delegated authority usually resulting from election” is well said. It’s not representation meaning that the elected will act per elector request. It’s more like a wild card for the elected to act as it wishes. Once this is understood, the fear of chaos is overcome and the excessive need for laws and regulations is healed, we can move over politics, delegate less authority, and spent more time and energy acting ourselves inside the decision-making scope.

Capitalism And Socialism

So many times people disagree on random subjects not because they have different views, but mainly because they understand differently the terms of the discussion.

By simply defining the confusing words from the beginning, it’s much more easy to follow a reasoning. Taking for example of one the current common misconceptions that generate social conflicts:

Capitalism = a model of economic behavior characterized by the fact that the capital produced tends to be saved for future use.
Opposed to Consumerism, characterized by the fact that the capital produced tends to be immediately consumed.

Capitalist = a person with a capitalist behavior (it saves for later use).

Socialism = a model of social organization in which all the existing and newly created capital belongs to no one in particular. A central planner, be it a person or a group of persons organized according to an hierarchy, takes all decisions regarding to the production, the distribution, the exchange and the consumption of capital.
Opposed to Free Market, where all the capital is privately owned and only the owner can decide on the production, the distribution, the exchange and the consumption of its capital. In Socialism, the exchanges are planned and compulsory. In Free Market, the exchanges are voluntary.

A central planner under Socialism may very well have a capitalist conduct. The central planner may be rational, fair and kind, or totally the opposite; one cannot know what it gets. An individual in a Free Market may very well have a capitalist or a consumerist conduct.

In Socialism, there is only one entity taking decisions while in Free Market, there are billions. If in Socialism one individual or group opposes the central planer, it becomes not more than a “cancer cell” in the body of the Society, being forced to obedience or eliminated.

For that reason, the Socialism is not a model of social organization between individuals but more likely describes the interior organic functioning of a multi-cellular individual entity.

In Socialism the economic calculus is difficult lack of information and means of comparison between individuals. The Socialist societies fail the same way an individual would find it very hard to survive alone. The theory was confirmed by all near-Socialist societies that ever existed. It’s that simple.


Confidence and security are essential for the well being of humans. If stealing would be stranger to mankind, there would be no time and money spent on guarding. Should people be more respectful of contracts and promises, we would worry less about mediation or risk assurance.
Imagine currencies would keep their value over time: getting rid of the mess and the stress of pension funds, risky investments and useless depreciation calculus. Hopefully we would be more mindful of our human relations, innovation, arts and leisure.

Beyond emotional feelings and life struggles, we want things to please ourselves; to make it easier. The necessary resources and the means of production of these things stay on the other side of our desire.

The entrepreneur is the person who takes this shift between needs and means as an opportunity and acts. Entrepreneurs invest their savings, or borrow on promises of return with an interest, in order to produce the desired goods and to move them from the production facilities to the location where they will be consumed.

The entrepreneurs balance the mental unrest caused by the possibility of loosing their investment, versus the excitement of satisfying their needs by the return on investment. They proceed from thought to action only when acting brings them more contentment than not acting. There is a mix of material and emotional reward for the entrepreneurs’ action. It’s not the wealth in itself that makes many of them happy, but the possibility of investing the profit in other exciting ideas and the reassuring mental feeling of being covered in case of material troubles.

The thing is that the entrepreneurs may not even begin their business if they aren’t sure that:
– the needs of their potential clients are genuine;
– producing the desired goods with the given manufacturing processed and with the given resources is feasible;
– the buyers will be able to pay the minimum gainful price once the products will be ready for use;
– the profit will be safe from any kind of confiscation;
– the goods will not be stolen or destroyed.

All the above mostly rely on confidence in the regulatory institutions: Central Banks and Governments.
Confidence is the foundation of development. It builds in years but it can be lost in a flash.

Preventing entrepreneurial action by Government compulsory measures not only leaves some needs unsatisfied and some people less happier, but also halts the technological and scientific improvements that the competition between entrepreneurs favors.

Media, Markets, Crises And Human Evolution

There is a common myth spread by the left-wing media for decades now: the free market economy (randomly called capitalism in the US or liberalism in Europe) is bad because unregulated markets fall. According to them, the culprit is financial engineering – some kind of voodoo science that capitalists practice during work, when they aren’t yachting in exotic paradises. When markets fall, crisis happen: sudden bankruptcies in the private economy, insolvency of commercial banks and Government defaults. The people pays. The left-wing media mixes all these in a big evil soup, giving us the magic pill that removes all the pain: strong regulation of the economy and nationalization of some (if not all) industries and services.

On the other hand, the right-wing media tells us that small bankruptcies and small debt is harmless and that some unregulated markets are useful because they are a source of debt (re)financing for Governments. However, Governments must not accumulate too much debt because the markets will stop trust them. The same Governments must exceptionally intervene to prevent big bankruptcies, even by nationalization if necessary.

Between left and right, there are more similarities than differences: subjective affirmations with no foundation; a lack of principles; exceptions from the rules and exceptions from the exceptions. Like there would be no reasoning behind the affirmations, emotional speech at its best. Left and right politicians say that exceptions, subjectivity and compromise are signs of flexibility. Objectively relying everything on strong and rigid principles is a characteristic of isolation and radicalism. Though in opposition, the left and the right can work together for the common good of the society.

Let us be the Devil’s advocate for a short exercise of imagination: how do free markets fall? How are the crisis of a free market?.

Crisis in a free market can happen when a new material or process is discovered or when a new product is invented, which better satisfies human needs than the existing goods. It can also be a new, innovative service. It can even be a material which better realizes the function of money. The demand for the new product, or service, or money, will increase while the demand for the old ones will fall. The fall cannot be as sudden as one could think. There are ongoing contracts. Changing a technological process may take years and not all the people can afford new gadgets and services as soon as they arrive on the market. The mass production of a new technology is not the same thing as discovering it. It takes time for transformations, from mining new materials to training the workforce with new skills.

In some situations, changes can occur very fast: rapid lost of interest for specific services, natural disasters, bankruptcies, owners that suddenly move or end their businesses for any reason. Local or personal tragedies happen. To lose your job or to lose your business after tons for energy, money and time invested can be horrible. Changes are difficult but they are necessary if we want to ever consider moving on to a better future. What can we do when we are billions, each one of us being unique and having always changing needs?
The free-market only falls when it ceases to be free. Otherwise, it is stormed by events that we could rarely call crises other than at a personal or local scale. This is a natural phenomenon, relatively slow and vital for the human evolution. It allows us to continuously refresh our lives with new solutions for old problems.

Now what about the crises of our real world? Today, money is not a commodity (like gold), naturally selected by people for its adequacy as a medium of exchange.
At present, money – or better said currency – is an arbitrary unit created by the Treasuries of the States, Central Banks and Governments. The monetary base is not a quantity of a commodity limited by nature – like the quantity of gold in circulation. The monetary base is the quantity of currency created in cooperation by the three institutions previously named.
The Governments run deficits each and every year. They consume more than they produce – which is the opposite of a capitalist behavior – and they really don’t produce very much. Governments collect money through taxation, which is in opposition to a free-market where the State receives rather than it takes. Government debt is financed by loans from other Governments, Central Banks and from private but well regulated markets (commercial banks, private investors). Governments pay yesterday’s debts with today’s loans which they will have to pay back tomorrow.
When creditor’s trust that a Government will be able to pay back the debt is lost, because of excessive loans and poor economic indicators, that country is at high risk of going bankrupt. The private investors are usually the first to notice such a situation and to cease lending to a Government by buying its bonds. Global organizations such as the International Monetary Found (IMF) or the World Bank replace them in lending to that uncertain Government. They sometimes give Grant Loans (currency that the Government doesn’t have to pay back), which increases the monetary base in that country. In extreme situations, the Central Bank of that country creates currency (debases it by inflation) to help the Government finance its debt. In any case, everyone wants to get rid of the devalued currency. Businesses are moving abroad. Private banks with reserves in the devalued currency aren’t able to lend, nor to give money to the people queuing at their closed doors. Private enterprises doing imports cannot pay for the goods to import. In the end, the Government faces debt-default. The entire population of that country will have to pay for it.

To answer to the left-wing media: huge crises with bankruptcies, insolvencies and debt-defaults are inherent to the present real world in which the monetary system is totally created and regulated by Governments. Too much ink is consumed to combat a free-market that doesn’t really exist.
To answer to the right-wing media: there is no such thing as small bankruptcies and big bankruptcies, small debts and big debts, small interventions and big interventions. Science is objective. There are just bankruptcies, it happens. There are just Government interventions to cope with them when they shouldn’t. And there are just debts, because the present state of currency inflation and deficit-driven governance allows them to exist and to accumulate.

The natural solution is not the left, nor the right. It could be a change in the line of thought for every one of us. We should give ourselves more freedom, but also assume the responsibilities that arise from it. We should bear in mind that with each election we recruit servants, not rulers. We should put an end to the biggest fraud of our times by dissolving Central Banks and restoring sound money like gold. Finally, we should educate ourselves and our children in the spirit of peace, liberty, responsibility and honesty. We should write our knowledge and transfer it from generation to generation. We should move on instead of repeating the same old mistakes.