[Dave Birch] More stuff in the news recently about gold. Is it the future of money? Well it’s hard to make predictions, as the tedious conference cliché says, especially about the future. Noted inventor Thomas Edison made this prediction for 2011:

More amazing still, this American wizard sounds the death knell of gold as a precious metal. “Gold,” he says, “has even now but a few years to live. The day is near when bars of it will be as common and as cheap as bars of iron or blocks of steel… Before long it will be an easy matter to convert a truck load of iron bars into as many bars of virgin gold.

[From Paleofuture – Paleofuture Blog – Edison’s Predictions for the Year 2011 (1911)]

Oh well. If someone as smart as that gets it wrong, I don’t have much of a chance of getting it right. In my bones, though, I just don’t feel that gold is the way forward. The future of money is bits, not atoms. Of course, there are plenty of people who feel that they need to hold the actual, physical, bullion and that no piece of paper or string of bits can adequately substitute for the cold, hard truth of the metal itself. Political visionary Hugo Chávez (who announced EMV migration before the reactionary imperialist lackeys of international capital did – Viva El Presidente!) for one. He has decreed that all Venezuelan overseas gold holdings must be repatriated.

Mr Chávez has rejected doubts over whether the Venezuelan central bank has sufficient vault space to store 365.8 tonnes. “If there isn’t enough room to store the gold in the central bank vaults, I can lend you the basement of the Miraflores presidential palace,” he said.

[From Traders prepare for Chávez gold transfer – FT.com]

Yeah, seriously. Personally, I’d be worried about burglars, light-fingered tradespeople and so on and would therefore prefer the bank vault to my basement for my store of value. And I can see another practical problem: what happens if they put the gold in the basement and then forget about it? It’s easy to do when you’re busy out and about establishing the worker’s control over the means of production.

Over the past week, on orders from the country’s Supreme Court, a panel has found a treasure estimated to be worth $22 billion in the underground vaults of a Hindu temple in Trivandrum, India.

[From About $22 Billion In Gold, Diamonds, Jewels Found In Indian Temple : The Two-Way : NPR]

Still, I’m sure the grateful citizens of Venezuela would be pressed to think of anywhere safer than Hugo’s house. After all, there the gold will be under the personal care of the father of Bolivarian socialism.

The wife of Tunisia’s ousted president fled the chaos-stricken country with one-and-a-half tons of gold worth more than £35million, it emerged yesterday… The chief of Tunisia’s central bank initially refused but Ben Ali, 74, personally intervened, and she flew out with the bullion as she joined him in exile in Saudi Arabia

[From Tunisian president’s wife Leila Trabelsi fled riots with £35m in gold bars | Mail Online]

You never know when you’re going to need it, do you? Mind you, given that much of Venezuela’s gold appears entrusted to the safekeeping of perfidious Albion, Hugo might be well advised to double check inside the care packages from the Bank of England.

Ethiopia’s central bank had shipped some consigned gold to South Africa’s central bank, only to learn that much of it was gold-plated steel. The Ethiopian central bank sustained losses in the millions of dollars. A number of people were prosecuted, including the assayers who reported that the bars were genuine.

[From Numismaster.com]

Whether gold is the future of money or not, it’s certainly a future of money. And if customers want to use it then we should be providing products and services for them to do so. I know I keep harping on about this, but it’s a good ten years since I first discussed with a client the idea of offering gold charge cards that were actually in gold rather than fiat currency. As I recall, this was an idea for targeting emerging Islamic markets and I still think it would have been a good idea, even if was a little radical for the time (when financial services customers ask you to “think outside the box” they generally don’t really mean it!).

A Malaysian state is allowing people to use gold and silver coins at stores and restaurants to revive a practice from early Islamic societies, an official said Friday. The gold dinar and silver dirham coins provide an alternative to Malaysia’s currency, the ringgit, in northeastern Kelantan state, which is governed by the Pan-Malaysian Islamic Party, a conservative opposition group that promotes religious policies in its rule.

[From The Associated Press: Malaysian state introduces Islamic currency]

There are other ways to work gold into payments, aside from the spreading gold ATMs, goldmoney and so on.

Garanti Bank, Turkey’s second largest private bank by asset size and Atasay Jewelry, one of Turkey’s biggest jewelry companies, today announced the launch of the world’s first credit card that allows consumers to redeem their bonus points in gold

[From Turkey’s Garanti Bank Introduces World’s First Gold Reward Card – pymnts.com]

If we are going to think outside the box on this one, then perhaps one direction to explore might be to stop thinking about actual gold (e.g., Dirham coins) or electronic claims to actual gold (e.g., Goldmoney) and start thinking about virtual gold instead. Instead of matching up a credit card with physical metal, what about matching it up with the virtual version. The first steps have already been taken.

Earn game time with every qualifying purchase. The World of Warcraft Visa® Card is the only card that pays you to play.

[From World of Warcraft VISA Credit Card]

There is one important difference between mundane gold and virtual gold, though, which is that (pending an undiscovered experiment by Thomas Edison) virtual gold is much easier to copy. If you’re interested in the overlap between cash and criminality, take a few minutes to read this interview with a Chinese “gold farmer” and look at the effect on virtual worlds.

* no way to determine if gold you buy is from “legitimate” sources, not “account cleaning”
* more account cleaning. After cleaned, account is sold to gold spammers used for spam until banned
* tens to hundreds of thousands of dollars a month in customer support cost due to dealing with “account hacked” problems

[From Annotated Chinese Gold Farmer Interview via Markee Dragon – PlayNoEvil – Game Security, IT Security, and Secure Game Design Services – Contact Us at ceo@secureplay.com]

It’s all about identity, as you’d expect me to say. We need cryptography, not nitric acid, to assay the virtual gold and I suspect that this is where the breakthrough is going to come from. We’re looking into a big cooking pot and throwing in Bitcoin, Goldmoney, World of Warcraft, Facebook Credit, EMV and mobile phones. Who knows what this recipe will turn out like. All we can say with any certainty is that the future is going to look a little different from the past.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers

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