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Here's something a little different.
I was asked in the comments section [1] to watch a video and to offer my thoughts
when considering virtual currencies and freegold. Well, the video turned out
to be quite good! [2] So here are my thoughts...
That was a great video! I finally watched the whole thing. Of course my
thoughts are from a market perspective, and not from a NWO "oh noes,
they is gonna control us and enslave us fohevah" perspective. [3] I hope
that's not what you were hoping for. (And I don't think it was ;)
Anyway, he talked about the divergence of technologies, and I think it
applies to the virtual monies they create as well. Yes, technologies diverge
and diverge, branching out like he says, but then a lot of branches die off
and only the strong survive. Only the most credible!
And in the virtual money world, virtual money must be backed up by a credible
company, that will back up your money, that will sell you a real stuffed
animal (or whatever) for your points. And without physical backing of any
kind, what can make it credible?
Well, we already have virtual money. We have bank credits. And they are
backed by certain institutions that are credible because they have the
backing of being part of the Federal Reserve system, which has the backing of
the Fed, which can legally print dollar bills. So credibility traces back
down the tree to its originating branch of credibility.
But today, the ultimate backing we have does not mean any thing of
real value is exchanged at the source. Today, what makes institutions
credible is how they go about DEFENDING the value of your virtual bucks.
Because today, you cannot get anything from the institutions (like a stuffed
animal or something), but you get stuff from everyone else who trusts and
uses those bucks because the institution DEFENDS their usage value, their
short term purchasing power stability!
Now think of the Fed and the ECB as diverging branches, one of which will
eventually die like the Game Cube. They each have their offspring of virtual
currency circulating out there in neverneverland. And none of it is backed by
the exchange of ANYTHING from the source. It is only backed by the DEFENSE OF
USE VALUE at the source.
The ECB has set up gold in its forex reserves. [4] That means that it plans
to use gold to DEFEND the value of a euro at some point. That's what forex
reserves are for. The Fed uses other means to "defend" the dollar.
The Fed actually prints MORE dollars to buy debt outright to force down
interest rates to fantasy levels to make the dollar appear strong. So it
debases the dollar outright in order to have some dollars to trick the barometer.
That's how the Fed defends the dollar.
Eventually the ECB plans to use its gold reserves to manage the value of the
Euro. Not to exchange euros for gold, but to use the gold to manage the euro,
manipulate it if you will. But the big difference is that it will not start
doing this until it is competing in a physical-only marketplace for gold. So
in a way, even though it will be manipulation from TPTB, it will be fair
manipulation! It will be "hard trading" with "hard
opinions" available to everyone. [5]
The ECB will print money and buy more gold into the reserves if it wants to
weaken the euro (raise the price of gold and debase the currency at the same
time). And it will sell gold into the market if it wants to strengthen the
euro (lower the price of gold and lower the money in circulation by taking
some in). Of course gold will be at about 50,000 euros per ounce before this
even starts.
This is how "forex" gold reserves are much more powerful than the
gold backing the dollar once had. [6] They require less gold, they never run
out, and they don't require the currency to compete in an unfair way with
gold. And they can be managed at one central location yet their affect will
be felt wherever virtual euros exist. Under the dollar's gold standard the
Treasury had to restrict the entities that could come to the gold window.
Under freegold, everyone in the world can come to the gold window! Everyone
that uses your "virtual euros" has the confidence that you are
DEFENDING their value against the most versatile real world physical trading
thing; gold. And also that you are allowing gold to float freely, so that
anywhere in the world, they will be able to buy physical gold with your
euros. They are perfectly convertible at all times and places, because the
ultimate institution backing them makes sure they are credible against gold,
and that there will never be a physical shortage of gold priced in euros.
That's the plan they came up with. And you can apply the credibility test to
any competing virtual point system by tracing it back to the credibility of
its ultimate defender. And
that's my take on your video.
Sincerely,
FOFOA
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