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The Almighty Buck

Secret Service Raids Gold-Age 277

Posted by michael
from the real-world-meets-cyberpunk-fantasies dept.
Wired has a story about the Secret Service raiding one of the several firms that promise to exchange your old-fashioned greenbacks for even more old-fashioned gold - the idea being that E-gold is a better medium of exchange than those boring currencies backed by national governments. Unfortunately it seems that the primary use of e-gold seems to be turning stolen credit cards into cold, hard, ca.... errr, gold. (Update: 03/30 5:19 PM by michael : The headline has been changed to make it clear that the raided company is a company distinct from E-gold. The business relationship between the two companies is not entirely clear.)
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Secret Service Raids E-Gold Business

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  • by bjorky (78181) on Friday March 30, 2001 @11:51AM (#326232) Homepage Journal
    Does that mean my e-pyrite is worthless too?

    -----
  • by blazin (119416) on Friday March 30, 2001 @11:54AM (#326233) Homepage Journal
    The secret service should have to reimburse E-gold based on the average days' worth of business for each day that they had the equipment that kept the business from running.
  • Is it economically dangerous because they offer gold or were they stealing credit cards?
  • by bdowne01 (30824) on Friday March 30, 2001 @11:55AM (#326235) Homepage Journal
    Does this give new meaning to the typical "Gold Card"? And when do Platinum card holders get their share?
  • The same government that is slavering over the lucrative uses of e-currency doesn't like it when an old technology such as credit cards comes into contact with electronic currency creates crime.

    Well, fuck them. Go develop a more secure credit card system.

    Or get rid of credit cards all together.

    As I think about it, yes, please, do! The cred card has been one of the most abusable, fraud-prone forms of transaction since its inception. it creates lots of ways of creating debt that wouldn't otherwiose be there by encouraging people to spend money they don't have at exorbitant interest rates.

    I do not have a single credit card. Contrary to popular opinion it has never stopped me from renting a car or getting a hotel room. I do have a credit history, too, if I need REAL credit like the kind for buying a house or other major investments.

  • by Speare (84249) on Friday March 30, 2001 @11:59AM (#326241) Homepage Journal

    Before people ask, "why are the US President's bodyguards involved here?"

    The Secret Service are a branch of the US Department of the Treasury.

    A Secret Service [ustreas.gov] FAQ: The Secret Service has primary jurisdiction to investigate threats against Secret Service protectees; counterfeiting of U.S. currency or other U.S. Government obligations; forgery or theft of U.S. Treasury checks, bonds or other securities; credit card fraud; telecommunications fraud; computer fraud; identify fraud; and certain other crimes affecting federally insured financial institutions.

  • by Cranston Snord (314056) on Friday March 30, 2001 @12:01PM (#326243) Homepage
    The company in question is GoldAge, not e-Gold...if you take a look at the site, it does beg the question of legitimacy... http://www.gold-age.net/ga-post-index.html [gold-age.net]

  • It is entirely possible that some illegitimate clients are laundering thier money through the e-gold service. Especially if it's tax free - a very plausible way to dodge the IRS. The buisness is being investigated under the guise of credit card fraud - so they can look into clientelle that maybe using the service as a mony laundering scheme. Hmmm... sounds like a Tom Clancy novel.
  • So I type in some numbers off a piece of plastic into my web browser, and someone sends me chunks of gold?

    Yeah, okay.

  • Then how do you get a rental car, or get a hotel room? Short of giving them cash of course.

    I don't have a credit card either, but I do have a check card.


    --

  • You know, that was an idea doomed for failure. Sure, anybody can just come up with e-currency, but backed by gold? Did I miss something here? Doesn't Cryptonomicon say gold is the death of value? After all, none of the big world goverments find in necessary to back their currency with real goods (be it metals, produce, etc). It's a real problem to do so. When you base your currency off of a real item, you can't just print more and more with impunity whenever you need some. And man, that really holds you back with e-cash, 'cause bits are reproducable for free!

  • by deran9ed (300694) on Friday March 30, 2001 @12:05PM (#326251) Homepage
    Its no surprise the Secret Service has Gone too far [antioffline.com], but what I see happening is, they may be concerned with persons, embezzling money than using companies such as e-gold, as a means of hiding their traces.

    Regardless of what the company actuall does, for those who don't keep up on privacy issues I suggest you read up on James Bell and how his "Assassination Politics" [antioffline.com] paper landed him in jail for using the same kind of anonymouse untraceable methods in theory...

    As for the Secret Service using "credit card" fraud as an excuse, how come they never raid the businesses of adult sites all over the Internet? Or Amazon when someone cards them? Shady tacticts...

  • which i also hate, as it levies fees just to put my identity on my money when I spend it, which is not what I want to do anyway.

    I never spend money I haven't got, except for on a major investment. The only time I did that was for student loans.

    -perdida

  • by zpengo (99887) on Friday March 30, 2001 @12:06PM (#326253) Homepage
    People are trading credit card numbers not for gold, but for an electronic (i.e., imaginary) statement that their money went toward gold somewhere in the world? It's an absurd notion. Why trade something tenuous (a credit card number) for something even more tenuous (electronic gold)?

    The world is becoming disturbingly postmodern. In the beginning there was bartering. Then people started using precious metals to represent the value of objects. Then they started using pieces of paper to represent the metals. Then they started using plastic cards to represent pieces of paper. Now they're trading that in for a number in a database.

    Makes my head hurt.

  • My "check card" is actually a visa card. It just takes cashola out of my checking account. Works in any situation where you'd otherwise use a credit card (because as far as the business is concerned, it is a credit card).

    Great way to get rid of the credit card need...it's nice to have the credit card around for emergencies, though.
  • Just because they don't have a very professional looking website, doesn't mean it isn't legitimate.
  • by sacherjj (7595) on Friday March 30, 2001 @12:08PM (#326258) Homepage
    They actually have more coverage than just government protection:

    "The Secret Service was established as a law enforcement agency in 1865. While most people associate the Secret Service with Presidential protection, our original mandate was to investigate the counterfeiting of U.S. currency--which we still do. Today our primary investigative mission is to safeguard the payment and financial systems of the United States. This has been historically accomplished through the enforcement of the counterfeiting statutes to preserve the integrity of United States currency, coin and financial obligations. Since 1984, our investigative responsibilities have expanded to include crimes that involve financial institution fraud, computer and telecommunications fraud, false identification documents, access device fraud, advance fee fraud, electronic funds transfers, and money laundering as it relates to our core violations."
    Source: http://www.treas.gov/usss/investigations.htm [treas.gov]

    Seems to fall within their coverage to me.

    Joe Sacher
  • that still doesn't answer my question about renting a car or getting a hotel room..

    You give them cash?


    --

  • The interesting bit is the use of technology to set up a new gold-convertible currency (as when the Gold Standard [britannica.com] ? [everything2.com]was the rule).

    If enough people trust it (and if this is really backed by gold there are no reasons not to) then paper money will become less standard (it won't disappear since it's legal tender) with potentially important consequences such as reduced importance of monetary policy as decided by the Federal Reserve.

  • by pug23 (167080) on Friday March 30, 2001 @12:11PM (#326263) Homepage
    The world is becoming disturbingly postmodern. In the beginning there was bartering. Then people started using precious metals to represent the value of objects. Then they started using pieces of paper to represent the metals. Then they started using plastic cards to represent pieces of paper. Now they're trading that in for a number in a database.

    You say this as if it were something now. If you have a bank account, your money has been nothing more than a number in a database for tens of years.
  • ...Strongly opposes all forms of Alternate currency?
    Our Government loves the fact that the american dollar (and all electronic variants of it) is one of the strongest forms of currency in circulation today. They will always find a way around allowing anyone to question its value. If the federal reserve declared gold worthless, would it matter? I think the feds have their heads (guess where?) and their hands (in your pockets?) in the wrong place.
  • The Secret Service's electrionic evidence guidelines are located here. [ustreas.gov] and include the following information that seems pertinent in this case:
    1. * * Networked or business computers
    * Consult a Computer Specialist for further assistance
    * Pulling the plug could:
    * Severely damage the system
    * Disrupt legitimate business
    * Create officer and department liability
  • Crimes such as using a $200 bill with Dubya's face on it to pay a $1.50 tab at the Kwik-E-Mart? I about ran off the road laughing when I heard about that one.

    --
  • by StoryMan (130421) on Friday March 30, 2001 @12:18PM (#326276)
    Look, I know this is Slashdot and not f--kedcompany.com, but I think this proves my infamous August, 1992 hypothesis.

    Let me recap: I was a new graduate student at the University of Michigan in Ann Arbor. I was sitting in a coffee shop -- Amer's Cafe on State Street for you fellow Ann Arbor-ites -- and had just ordered an 'Amer's Cap' and settled down to a nice, grungy table with a copy of Wheelock's Latin (for the requisite foreign language requirement), a copy of Hannah Arendt's 'Eichmann in Jerusalem', and a copy of Raymond Carver's collected stories (I was in the MFA program there and dutifully reading through all the Carver, Richard Ford, Tobias Wolf, Bobbie Ann Mason, Joy Williams I could find) and suddenly got a pain in my stomach.

    It was an odd pain. And -- sorta like the Woody Allen character in one of his 1980's flicks (Hannah? Misdemeanors?) -- was convinced (beyond a shadow of a doubt) that the pain was, in fact, a tumor and that the death-watch clock had started.

    I tried to drink my Amer's cappucino (sp?) without much success. I kept wondering about this weird pain in my gut. I gave up on Wheelock, tried Carver, and decided the pain -- whatever it was -- was driving me batty. It wasn't a bad pain, just a little one. The sort of mild pain that always -- I was certain -- into the sort of pain that caused doctors to say, "Look, it's nothing. Don't worry. Just relax. Come back in six weeks if it's still there." Of course after six weeks you'd be dead.

    So I left Amer's, walked down State street, poked my head into Borders, bought a New York Times, and then headed straight for the doctor.

    The doctor was an old fat guy who immediately slapped on a rubber glove and told me to pull down my pants and roll on my side.

    After he'd done what had to be done he said, "Look, don't worry. You need to relax. Come back in six weeks if the pain is still there."

    I walked to the grad library, found an empty desk on the fourth floor, and started to read the Times. I was in a bad mood -- the rubber glove didn't help much -- and I couldn't concentrate. I flipped to the NYTimes business section -- a section I never read -- and there it was in black and white: companies were registering domain names for $70 bucks (it might have been more, I don't remember) and that some of the names were wacky: they were misspellings of common words but the registrants were sure that one day these domain names -- and the web in general -- would be big. Really big. They were like the speculators in the Wild West.

    I had a flash that maybe I should register Business.com (no kidding). But then I remembered I was a graduate student and seventy bucks was my walking around money for the *entire month*. So I let that idea slide. (That was my mistake.)

    But then I had a second flash -- sitting there in the Harlan Hatcher library and staring out at the campus from my tiny window -- and I said to myself: you know, I bet every business is gonna try to put 'e' before their name. We'll have eLiquor.com. eBeer.com. eCoffee.com. (Since everyone was talking about e-commerce and the promises it heralded.)

    And then I had my third -- and last -- flash -- the flash that would become my 1992 hypothesis: that any business with the 'e' in the title will surely be fucked. Maybe not in 1992. Maybe not in 1996. But one day, all these fucking eBusinesses are gonna be fucked. Fucked, fucked, fucked.

    eThis, Chief.

    And here, today, sitting at my desk, I remembered all this. Remembered my three flashes that morning on the fourth floor of the Harlan Hatcher Graduate library on the campus of the University of Michigan. Remembered my theory about the 'e' before the name. Remembered that it took me six weeks to get rid of that fucking pain in my gut -- three doctors, lots of aspirin and cranberry juice -- until one doctor -- the only one who didn't slap on a rubber glove and turn me on my side -- said, idly, "Have you tried taking some Pepcid?"

  • potential alternate currency systems.
    ----------
  • The companies claim to have actual gold. %100 in support of the currency. Whether they actually do or not is a relevant question, but the nature of the raid as described in Wired indicates that there is some political motive in the actions of the Secret Service. Namely, shutting down an alternative currency that they do not control.
  • "...anyone have any experience using one?"

    I was at a strip club once and was sitting at the bar drinking a Corona. The ATM was about 5 feet away from where I was sitting. These two strippers walk over to the ATM with a stumbling drunkard supporting himself on their shoulders. They, stone sober, 'helped' him use his CC to withdrawl what had to be at least $1000. The weird part about this machine was that like the one you saw, it didn't require a PIN and it only allows the person to withdrawl $200 each time. And there's a $5.00 fee everytime you used it...

    I swear what I saw was like watching someone getting mugged in an alley, but because it was two hot strippers committing the crime, it didn't seem so bad :)
  • This was about two years ago. We were sitting in the service lounge at a Honda dealership, and I was sporting my Espanol.com T-shirt. A guaranteed attention-getter back then, he started asking me all about the company, and I explained that we were an international e-commerce company, catering to Spanish speakers worldwide, etc, etc, etc. The company later bombed (reeeealy?), but that's obvious and unrelated.

    The guy starts in on this philosophical pitch about the portability of currencies, and how the internet is going to pose serious challenges to consumers wishing to make transactions on a global stage, and how gold, of all things, is the world's best bet to unify the online shopping experience. As such, he entered into the E-Gold pitch, and I started hoping that the work on my Prelude would hurry itself up.

    My initial verbal reaction to the E-Gold plan was "oh, yeah, that is an interesting idea", but in the back of my head, I was thinking "Yaaar MatEy, wE be KeeLhAuLin yEr GoLd" and I conjured up images of eyepatches and pirate ships. I wasn't even sure he was making any sense whatsoever, but then again, selling dog shit online [dogdoo.com] would get you VC money back in '99...

  • I'm not going to trust my money to an online company that doesn't have the professionalism to present a decent image. A con artist can have a professional web page too, so image isn't the only thing to look for. If the bank's web site code is sloppy, what makes you think their accounting software is any better? A sloppy website is the online equivilent of a back-alley business, or wearing torn jeans & a tee-shirt to meet a prospective client.
  • Hey, Slashdot, perhaps you will remember some of the articles youve had in the past about headlines that make wild claims and then give the special circumstances in the fine print? Well, what the fuck are you doing now? The main point of the article about e-gold was NOT the credit card fraud, the owner even states that he stopped accpeting credit cards because of the fraud problem, the point was "why did the secret service raid e-gold?".


    so...stop tossing around crap

    # Tom von S.
    # -------------
    # "Nuclear weapons can destroy all life on earth,
  • by Plum (253578) on Friday March 30, 2001 @12:25PM (#326286)

    If they really were in a raid, I hope it was raid 5.

  • has always hated the idea of some sort of personally owned monetary system, ever since (and now I sound like some sort of nutjob) they disconnected the pieces of paper called 'money' from gold or silver. (In direct violation of article 1, section 10 of the constitution, which forbids money from being anything but gold or silver, or exchangable for gold or silver.)

    There are several books about people who have attempted to set up private monetarty systems. Pioneers of American Freedom and Men Against the State are two title I remember off hand. In all cases the US has managed to crush such setups using FUD, harrasment, and basically making up charges against the owners. Neal Stephenson has a short story about this, also.

    Annoying, I have to get out the door before Atlanta rush hour, so I can't look up these URLs. But all you people who think this is about credit card fraud...it's not. In fact, it's a great thing if credit card thieves buy virtual cash. The credit card used to buy the gold was stolen? Return the cash to the credit card company, and take back the gold. It might be useful to impliment a 48 hour waiting period or something here, and that would be what the feds did if this was about credit card fraud. Of course, I have to wonder what it is people are buying with this, and why we just can't just track what the people have bought with the stolen gold? I mean, the turnaround time, no matter what, has to be faster with using the stolen card directly vs. using it to buy gold and using the gold to buy things. Why not treat it exactly like normal CC theft and arrest whoever pick it up where it's delievered?

    However, this has nothing to do with fraud, that's just the excuse. This has to do with threating the power base. The government hates the idea we could stick all our money in inflation free bars of gold. It completely screws up how they think the economy should work.

    Got to run, someone look up those URLs. I think disinfo.com has something about this, too. Long story short, the government has a very long history of trying to shut down private monies.

    -David T. C.

  • Isn't a bevy the official unit of measure for showgirls?

    A bevy of agents from the Secret Service, Postal Service and local police...

  • by ethereal (13958) on Friday March 30, 2001 @12:30PM (#326293) Journal

    ...Why does the Secret Service need the guy's birth certificate? How is that evidence of anything? I would be very wary of surrendering potentially irreplaceable personal documentation to any government agency, otherwise the government could quickly make you a non-person.

    And another thing: is it really illegal to own gold bullion in the U.S.? What possible justification is there for that? I'm hoping that's an urban legend...

  • Most places will take cash quite happily.

    When I first started working in the workplace I ended up doing a lot of travelling. Having just gotten out of college I only had a credit limit of $600 (don't get me started).

    Most of the hotels chains I stayed at (Marriott, Doubletree, Sheriton, etc.) were perfectly happy to accept Greenbacks in place of a creditcard. They sometimes fumbled through it a little (since they weren't used to it), but I never had a second glance. Most hotels will, at most, require a deposit. If they take a credit card imprint this covers them on the deposit.

    Don't know about Car rentals, since I was under 25 and they wouldn't rent to me :)

  • by Uruk (4907) on Friday March 30, 2001 @12:38PM (#326296)
    Does it bother anybody else that the article clearly states that they've raided this guys place and taken all of his stuff, and then follows it up with "We haven't yet filed any charges"?

    Whatever happened to "innocent until proven guilty?"

    I'll freely admit I don't know the details of the case, but even totally guilty felons have constitutional rights.

  • by phr1 (211689) on Friday March 30, 2001 @12:38PM (#326297)
    It was illegal in the US to own gold bullion from 1933 til 1974. So it's not completely an urban legend. But you're free to buy gold in the US now. Typing keywords like "legal gold bullion 1933 roosevelt nixon" into Google will find you a lot of references.
  • by GeorgeH (5469) on Friday March 30, 2001 @12:38PM (#326298) Homepage Journal
    Ironically, it was during Abraham Lincoln's term that the SS was created. Too bad he didn't think to include "protection of president" in their list of duties. IIRC, they were originally created to stem the ammount of counterfiet currency being created in the reconstruction era.
    --
  • is it really illegal to own gold bullion in the U.S.?

    I don't know. I first heard this when I was a kind in England. I think Carter was president at the time. Pretty soon after that I read something similar in Heinlein. It didn't make sense ("you can have as many guns as you want but not one gold brick?") so I stopped worrying about it.

    It seems to me that all the e-Gold is in London or Dubai, so it wouldn't seem that they can get this guy on that count.

    --
  • Keep in mind they *have* to take cash. As in can not refuse it. If you have the cash all they can ask for is someway to verify that you are who you say you are. Now they can also demand a deposit. But yes it is very possible to do with cash. Because to turn you away because you want to pay in cash would be against the law. This is the whole idea of legal tender.
  • It's worse than that... they started using pieces of paper to represent the metals, and then they dropped the whole idea of "backing" currency and started using those pieces of paper to represent a share of the value/wealth of an economy (unless anyone out there is using silver-backs?). Then throw the abstraction of credit on top of that, and the abstraction of "e-wealth" on top of that.

    Postmodern indeed. Is it any wonder every few years a politician shows up and talks about going back onto the gold standard? With the current system, one could get to thinking (rightly or wrongly) that their money is nothing but a consentual mass delusion...

  • Money Mischief, Episodes in Monetary History, [amazon.com] by Milton Friedman, is a excellent book on how money works, and the various ways it has been screwed up over the centuries. In the beginning of it, he talks about a (true) society which used giant rocks as currency.

    What you have to remember about money is that it is simply social contract. Instead of giving you a cow in exchange for your sheep, I'm giving you something that you know will allow you to obtain something of equal or lesser value from someone else. Gold, paper, computer digits, it doesn't matter as long as it's secure.

    The only "intuitive" interface is the nipple. After that, it's all learned.

  • Use a charge card, like AmEx or Diner's Club, instead of a credit card. The problem with a debit card is that it's exactly as fraud-prone as a normal credit card (and by "fraud" I include unapproved merchant rebills) - but if someone does something you don't like, YOU LOSE YOUR CASH until you fight it and win. Debit cards are horrible from an informed consumer's point of view.

    Charge cards, on the other hand, don't involve interest or revolving debt, yet if something goes wrong, it's the bank's money outstanding while the matter gets resolved. Also, charge cards often carry many or all the tangential benefits of credit cards: warranty extension, travel & rental car insurance, reward programs, etc.

    I have a Diner's Club card and it's worth every penny of the $80 annual fee, but I wish it was accepted at more places. What I'd really like is a charge, not credit, card that operates within the Visa or Mastercard network; i.e. it looks like a Visa or Mastercard but you have to pay your bill every month and there's no debt carried over. Does anyone know if such a thing exists?

    (Of course, I could get a normal Visa or Mastercard and just choose to pay your bill every month...and this is what I've done. I just don't like the idea that in a fit of drunken insanity [or whatever], I could mortgage my life for the next five years.)

    -Graham
  • I've been able to rent a car w/out a credit card in the past (granted, this was 10 or so years ago). When I did it, they had me write one check for the cost of the rental, plus another check as a security deposit ($500, IIRC). When I returned the car, they gave me the security check back and had me pay any extra charges. They don't deposit the security check if you return the car on time. Considering that they took a check as security, I'm sure they wouldn't have any problems taking a cash deposit. If you wrote a rubber check, they'd just sell it off to TeleCheck or another collection agency at a discount.
  • by servasius_jr (258414) on Friday March 30, 2001 @12:49PM (#326318)
    The world is becoming disturbingly postmodern. In the beginning there was bartering. Then people started using precious metals to represent the value of objects. Then they started using pieces of paper to represent the metals. Then they started using plastic cards to represent pieces of paper. Now they're trading that in for a number in a database.

    Currency is pretty useful stuff, though. When you come down to it, wealth is based on production. If you have wealth, it's probably based on something valuable you've produced, whether that's a good, or a service, or whatever. If you're bartering, you're trading whatever you produce, sheep or legal advice or whatever, for what you need, groceries for example. Obviously this isn't very graceful. Any other medium of exchange is simply something representing your power of production, in order to make getting what you need easier. (e.g., you don't have to find a grocer who happens to need legal advice or a sheep, and you don't have to get a whole sheep's worth of groceries at once.) So if the whole point is making things easier, why not use the medium of exchange thats the most flexible? Saying a shiny rock represents something valuable is, in the end, no more rational than saying a string of numbers represents something valuable. If the string of numbers works better, use it.

  • While it is true that the cash is gone now it is not true that you have no protection. This varies from bank to bank but I have had someone use my check card a couple of times. Both times the bank refunded my money. And both of them where under the $50 limit on credit cards. But of course my bank is well known for customer service. :) Just pick a bank with good terms.
  • That gives you a single point of failure, unfortunately.
  • And gold is worth money because??????

    It's just lumps of metal, you know.
    _____
  • The shiny rock doesn't represent something valuable, it is something valuable. Nobody decided by fiat that gold would be money, it's just everybody's favorite stuff. Many people spend a rather absurd portion of their wealth on gold ornaments.

    Similarly, copper, silver, and other coin metals are also much in demand, and small enough to be worth carrying around in your pockets for trade.

    There's nothing at all irrational about a market based on the trade value of shiny things.
    --
  • The US government started this modern paradigm when they stole the gold from the people in the 30's via the The Gold Reserve Act.
    e.g.
    http://www.diac.com/~bkennedy/Thorkelson/X0008_Who _Owns_The_Money.html [diac.com]

    --

    Don't steal. The government doesn't like competition [dictionary.com]
    ("Our tax system is based on individual self assessment and VOLUNTARY compliance." - M. Caplin, IRS Commissioner)
    ("Our tax system is based upon volutary assessment and payment and
    not on distraint" -Supreme Court Ruling, Flora v. U.S., 362 u.s. 145)
  • I can't speak about the value of e-pyrite, but e-pyreals [ebay.com] are thriving on Harvestgain [harvestgain.com] and Solclaim [solclaim.net] markets.

    It's scary what people will pay for pretend things [ebay.com]

  • It's scary that people will pay money to cheat at a game.

    --
  • by Uruk (4907)
    This is a Good Thing because it's nice that serial killers can't keep killing while awaiting trial. How else could the system be run?

    Accusing someone and holding them is a completely different story - the article says they haven't even been charged with anything.

    So the cops are saying: "We're pretty sure you've done *something* wrong. We don't know what it is yet, so we're going to take all of your stuff and sift through it until we can find evidence of *something* to charge you with."

    There's nothing wrong with detaining people and seizing something if you've got a leg to stand on. The article makes it sound as if the cops don't even know what these guys have done wrong. Something vague about credit card fraud. But they haven't been charged with that. If the cops don't charge you with something, it's pretty clear they don't think they can make a case of it. Why should people have their stuff taken if the cops don't even have enough evidence against them to file a charge? Do you realize how bad that could get?

    Son, come over here and empty your pockets. I'm *positive* you're doing something wrong. And once I search you, I'll find evdience to charge you with something.

  • by Zeinfeld (263942) on Friday March 30, 2001 @01:14PM (#326340) Homepage
    Fact: Gold has about the same approximate buying power today as it did 100 years ago. US currency has approximatelybi 1/100th the buying power today as it did 100 years ago.

    Not true actually, an once of gold used to buy a hand made suit, today it buys about a quarter of one.

    Moreover the value of a dollar invested in an account paying 6% interest a year would be worth 3.4 times the buying power of a 1900 dollar.

    Interest rates rarely fail to keep up with inflation over the long run.

    Gold plays a very much reduced role in the world economy since Nixon abandoned the gold standard in the 1970s.

    Fact: The current monetary system is illegal according to the US constitution

    Fact: there are a lot of wierd loonies arround talking utter drivel.

  • So what happens if in a fit of drunken insanity you charge more than you can pay in a month on your charge card? I.E. if you put $15,000 on a credit card, how is that worse than $15,000 on a charge card?
  • What a misleading article! Even the Wired
    article clears this up. The Secret Service
    did not raid them for credit card fraud. This
    is obvious. The secret service is trying
    to interfere with their operations. They are trying to thwart digital cash! The guy who
    runs e-gold even said that he stopped accepting
    credit cards long before the raid. No, I'm
    not a big conspiracy theorist. The issue here is obvious.
    Digital cash thwarts taxes, government regulation,
    and government monitoring. Whoever approved this
    article is doing a disservice to Slashdot readers
    by stating that, "oh, it failed because
    of credit card fraud." NO. This is a raid designed to stop our RIGHTS.
  • No. They send you an email saying your gold is now in their vault in Dubai. Or London.

    --
  • by Rupert (28001) on Friday March 30, 2001 @01:35PM (#326357) Homepage Journal
    Not that I necessarily disagree with any of your other points, but when you say:

    Fact: Since ~1950 the Federal Reserve note has not been backed by ANY hard currency; it is worthless fiat paper.

    I get all worried about the fact that there are apparently intelligent people who think that gold has some intrinsic value, or that the amount of gold I have in my vault determines in some way how wealthy I am. Value is entirely determined by humans, and varies according to circumstances (mostly supply and demand).

    Backing up, you also say:

    Fact: Gold has about the same approximate buying power today as it did 100 years ago. US currency has approximately 1/100th the buying power today as it did 100 years ago.

    Buying what? Automobiles, computers, real estate, bread? None of these things cost the same amount as they did a hundred years ago.


    --
  • Are you saying that buying someone else's account is somehow against the rules of the game? Or was the account raised up by cheating?

    (Just wondering...I don't know much about Asheron's Call.)

  • what a Beowulf cluster of Hunt Brothers [buyandhold.com] could do with e-commerce.

    Maybe, being a New Englander, he wasn't Texan enough. *smirk*

    --

  • That's not exactly true... Here is more information [snopes2.com] at Snopes.
  • by DeepDarkSky (111382) on Friday March 30, 2001 @01:51PM (#326369)
    More likely, though, the Secret Service is concerned about e-gold, not GoldAge. As for the question of legitimacy, someone else already addressed that better than I could. However, it did say that the company was run by the couple from their home - meaning, they were trying to save cost anyway.

    Besides, I think that in a sense, this is better - it's more honest. You could see that it's a small-time operation and not some professional corporation. Some people deceive by having really cool looking websites fronting a company that is run by one or two people only. Which one is more legitimate? Which one would you feel safer with? What about when you know about the truth behind the image?

  • ...because the State's monopoly on currency is a very important part of its control over citizens. As some posters have already pointed out, currency is just a promise that you can exchange for other goods and services. Barter is limited - few people in your neighbourhood are likely to swap what you're giving away for something they have that you want.

    Now along comes encryption, fast enough desktop PCs to perform such encryption and a connection to the Internet. Bingo: all of a sudden people can trade with other people anywhere else in the world, using secure channels and valid e-units of currency (including but certainly not limited to e-gold). Lots of advantages: untaxable, untraceable and divisible down to the smallest fraction. The current disadvantage is that State organs like the US Treasury don't like it much and will start cracking down in whatever ways they can.

  • by e-gold (36755) <jray.martincam@com> on Friday March 30, 2001 @01:56PM (#326376) Homepage Journal
    Oh gods. What a day/week to be slashdotted (finally). Also, I wish that wired and /. headline writers respectively would either read the actual story they're referring to, or share their drug stashes with everyone else. *sigh*

    Ok, I'll start with my standard offer of a small spend to any slashdotter interested in creating an e-gold account & sending me the number (goodbye promotional account balance!). I'll also try to answer any questions sent to me (but please poke around on the site and find out about us first, the concept of grams as money can be a bit strange but it's fun to discover). Alright...

    So far, law enforcement AFAIK (and I'd know....) has not contacted either e-gold or OmniPay regarding this case. I am in touch with Parker [gold-age.net], and he has set up an e-gold account with a publicly viewable balance at: http://www.e-gold.com/pub-bal.asp?pubid=280478 [e-gold.com]

    I doubt the SS will do anything like what you say, the experience of my friend, the artist J.S.G. Boggs (who is the yin to e-gold's yang, IMO) speaks to that, although Parker [gold-age.net]'s isn't a counterfeiting case (and neither was that one IMO). Both are political. It's sad, frankly.
    JMR


  • Fact:
    Congress's authorization of the Federal Reserve in 1914 is unconstitutional, but no one has enough resources or incentives to push this around in the Supreme Court.

    Fact:
    Because Gold is FINITE substance, it has stable value. Paper's value can change, because you can print more of it very easily (hence inflation). Paper money in effect allows the bankers to make money (valuable) out of trees (not nearly as valuable, try bartering some amount of trees for your next computer/car/house).
  • The Euro is 15% backed by gold. Usually it eventually inflates to that point, then they abandon even that peg.

    It happened in the '70s when Nixon had to break the peg because the market price was above the $35/oz official price because we were inflating.

    Gold can't easily be inflated (given the mine supply and jewelry demand), doesn't rust or otherwise decay, but doesn't pay interest. It is a store of value and medium of exchange.

    That is why it works as money and probably will after the fiat currencies blow up. Check the inflation rate in Brazil or Turkey recently?

    As long as you are going to set up an e-currency infrastructure, you either need to be the government to declare the bits to have value, or have the bits as a claim on something that does.
  • by Wreck (12457) on Friday March 30, 2001 @02:08PM (#326381) Homepage
    Regarding ownership of gold: yes, under the Roosevelt administration gold was nationalized in the USA. (And you thought the Constitution prevented "takings"!) The reason for this was rather simple: the government, mainly via the Fed, had horrifically mismanaged the (gold backed) dollar, creating a boom that was based on paper.

    The (real) interest rate serves a market function, as other prices do: as a means to clear supply and demand. High prices call forth more of the good with the high price. Low prices get less of it.

    In order to inflate the currency, however, the Federal reserve scheme uses bank-created money. Banks have certain amounts of real assets; they are allowed by law to loan out many times that much money (and they do). Thus each dollar saved becomes multiplied, sending a signal to the economy on the whole that not just $1 (plus interest) worth of goods are demanded in the future -- rather, that $6 (plus interest) are demanded. Hence, increased savings calls forth overinvestment, which results in a boom. But the boom is not based on anything real -- real consumer desires, that is. Remember that it is based on paper -- banks creating essentially fraudulent money. So in the long run, the massive future demand that the low interest rates predicted, fails to appear. And then the economy tanks. Businesses fail; capital is liquidated; people draw down savings (again with amplified effect). This is a recession; one must inevitably follow each inflationary boom.

    Nowadays, there is no pretense that the dollar is based on anything (other than possibly the ability of the US government to tax a vast number of rich western citizens). But back then, the dollar was still tied to gold. In theory, you were supposed to be able to march in to a bank, hand it $20, and get an ounce of gold. That exchange rate ($1 == 1/20 gold ounce) had never changed. But after the inflation of the young Fed, it was not realistic, either, and could not be sustained. The bank failures early in the depression were a part of the adjustment.

    The main response was to take the US off the gold standard, domestically. Banks no longer had to repay in gold, but only dollars. But the US government (along with foreign governments) still wanted to use gold for the international money, and so the demand for gold as the ultimate backing for money remained. And so in 1933, Roosevelt revalued the dollar to 1/35 gold ounce (for foreigners) and in order to boost its own supplies of gold the government simply banned its private possession and confiscated it. One of the biggest robberies of all time.

    Not a great year for liberty.

  • "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized."

    That's the 4th amendment. Not that it hasn't been gutted to some extent (take, for instance, Carnivore), but it's still there and basically supported by the laws.

    Hence unless I'm told otherwise, I'll assume that the secret service first aquired a search warrant and spelled out approximately what they were looking for (records of credit card transactions or whatever) before taking all this guys stuff.

    The fact that they haven't changed him yet is not necessarily surprising. It's important to charge a person with the right charges, and as many as he or she is believed guilty of. If they don't get the charges right, then they might miss the conviction, and double jeapordy laws (based on "nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb" from the 5th amendment).

    And come to think of it, amendment 6 says "In all criminal prosecutions, the accused shall enjoy the right ... to be informed of the nature and cause of the accusation..."
    i.e. they have to charge him before they can try him, but not necessarily before they aprehend him (or search his house).
  • I fail to see what the big problem is. It's a simple economic transaction. You expend resources (time and effort) to get something, and you sell it for remuneration. In the case of a magic weapon, you could sell it for virtual currency to another character in the game, or you could sell it for real currency to another player. Either way, an exchange of value is taking place, with each party getting something they want in exchange for something else. That's one of the founding principles of economies, and it's foolish to think you can create a new, working economy within the confines of a game without it interfacing with the genuine economy in a substantial way. If something has value, someone will trade something else of value for it.

    That being said, while I have no problem with people selling virtual items or money, I personally think that selling whole characters goes just a little too far. A character is supposed to be something personal, something that you put yourself into, not just a more powerful interface to hacking and slashing. My character for Neocron [neocron.com], whenever it comes on-line, will be something unique and special to me, and I'll never sell him (or her). Though, if I get high level enough that money and items start coming to me easily, I might just sell a few of them. (So far, Reakktor [reakktor.com], the company putting the game together, have said they don't plan to forbid such sales unless it becomes a problem in the game.)
    --

  • The business that was raided was not e-gold, but a 'broker' for them which was based in Syracuse. I imagine that the SS is leaning on the broker because they can't easily get to e-gold since they are off-shore.

  • "If you wrote a rubber check, they'd just sell it off to TeleCheck or another collection
    agency at a discount. "

    Careful there. If you wrote a rubber check in
    AZ, the Marshalls would be there to take you
    to jail for 30-90 days when you bring back the car.

  • > In the beginning there was bartering. Then people started using precious metals to represent the value of objects. Then they started using pieces of paper to represent the metals. Then they started using plastic cards to represent pieces of paper. Now they're trading that in for a number in a database.

    Call any broker and ask what it means to hold securities "in street name".

    I trade bits for numbers in a database that represent ownership, not of chunks of gold, but of bits in other databases that represent ownership of corporations.

  • Doesn't Cryptonomicon say gold is the death of value

    First of all, no, it didn't. And second of all, what is cryptonomicon your bible or something?

    Rate me on Picture-rate.com [picture-rate.com]
  • by ahem (174666) on Friday March 30, 2001 @02:54PM (#326400) Homepage Journal
    Based on a recommendation found here @/. I've recently finished reading this [amazon.com] book.

    The theme of this book to me was constrasting how the open sourcing of the mechanisms of the abstraction of capital have led to the success of capitalism in the west, and the balkanization of capital abstraction systems in the third world and formerly communist countries has been the foundation of the failure of capitalism there.

    This seems to bear directly on how the US government cracks down on alternative capital formation schemes. I think that anything that reduces the fungability of the product of my labor is bad. I also think it may be unconstitutional from a search & seizure perspective.

    Capital wants to be free, just like source.

  • Give this article a gander. [thelouisvillechannel.com] Good luck, it sent me to a French news site the first time I accessed it, which immediately sent me back to the "Louisville Channel" home page. If that happens to you, search for "Dairy Queen", and you'll find it.

    --
  • I'm surprised the rental agency would do that (unless they did call your bank or something). If someone was planning to steal the car, they'd certainly provide themselves with a faked check that could not be traced back to them -- and if somehow they ever did catch up to the criminal, chances are the car would be in pieces, he would have received only about 10% of the value, and he'd have blown it already. With the credit card and similar cards, the agency can dial into a database to check that at least the name on the rental contract belongs to a person with a history of paying bills. (There is still some risk that the guy driving the car away isn't really that person, but it's fairly small. Most pickpockets and muggers aren't able to rush right over to the airport and use the card before it's been reported stolen.)
  • Fact: Article 1 Section 8 Para 5 gives the (exclusive) power to the federal govt to 'coin' money. Art 1 Sec 10 Para 1, limits the states to *only* allowing gold or silver 'coin' as legal tender. Thus the monetary system is illegal because the federal govt ceded it's power to 'coin' money to a seperate (private) entity, and that money is not backed by any hard currency as specifically required by the federal constitution.

    Yes, heard that one before. If you think you have a case then take it to the supreme court. Not that Renquist and co are particularly credible these days. But the fact that the US monetary system has not been successfully challenged for the hundred and fifty years since they started using paper money issued by the federal government indicates that this is pretty settled law.

    At best you have identified a quaint inconsistency between the US written Constitution and the actual administration of the country. The Brits have hundreds of similar inconsistencies, all sturgeon caught in British waters are the property of the crown - why? Not because Brenda likes sturgeon but because of a 16th century belief that a narwhal tusk was a unicorn tusk and thus an antidote to all known poisons. Or more recently in 1977 during the silver jubilee a man was briefly charged with usurping the royal coat of arms after he sold a bed spread with the silver jubilee logo (which includes the Windsor royal arms) on it. The prosecution was dropped after it was discovered that the crime still carries the death penalty which might be considered somewhat excessive considering the circumstances.

    It is one thing to point out that according to the Bible the value of PI is 3. It is quite another to go arround claiming that the value of PI actually is 3 and that it is reality that has it wrong.

    Fact: Stupid people find it a lot easier to call someone crazy then to make the mental effort to attempt to understand their point of view.

    Fact: Crazy people find it a lot easier to call someone stupid then to get a dose of reality.

  • Not to mention that the US dollar has been backed by precisely nothing ever since 1935... So your bank account is essentially an electronically recorded promise to give you pieces of paper on demand, even though they have promised many more pieces of paper than they have in the vault. The pieces of paper have the intrinsic value of very rough toilet paper, but as long as the rest of the world doesn't realize that, you can swap them for things of real value.

    E-gold is an electronically recorded promise to keep a certain amount of gold in storage and deliver it to you upon demand. If you trust them to actually do it, that's got to be a lot more secure than a bank balance in $. However, there are laws specifying how banks are to be audited, most accounts are also insured by the FDIC, and unless the federal gov't collapses together with the banking system you can be pretty sure the bank will be able to cough up your pieces of green paper eventually -- whether or not it is still worth anything. I don't see any way I can get an equivalent assurance the the e-gold people really do have enough gold in the vaults... I'm not accusing them of anything, but in the early 19th century before banking regulation, every bank in this country was printing paper money supposedly backed by gold in the vaults, and a fair number of them turned out to be frauds.

    Note that with e-gold or any other money that is really backed 100% by gold in the vault, you've got to pay the expenses of the bank. They can't make money by renting your money out. So e-gold clips you for 1% up front, and then charges 1% a year storage fee. Actually, I'm surprised they can keep the costs so low.
  • Forgot to mention: the value placed upon gold is almost as much of a social construct as the value placed upon pieces of paper printed by the US Mint. Gold is good stuff for plating electronic contacts and making pretty jewelry, but what runs it up to 200+ an ounce is that people think it's money. At least it's a social construct with a very long history -- but in a society of rational geniuses gold would probably be worth a tenth as much. Steel and aluminum would retain their value, but storage would be a real pain. However, I wouldn't worry about most people becoming rational or smart...
  • If you look at payscales: I'm not sure about 1901, but in the 1880's a hard day's work (12 hours) would get an semiskilled laborer 1 dollar or less. A dollar was 1/16 ounce of gold. So 192 hours of work = 1 ounce of gold, then. Now 1 ounce of gold might pay for 30 to 50 hours of labor.

    Of course, 30 hours of labor in a modern factory will produce much more than 192 hours would in 1901. 30 hours on a farm will produce more food than thousands of hours on a farm in 1901. So in food and mass-produced goods, an ounce of gold is worth much more than a hundred years ago. But when you need personal services or hand-made goods, it is worth less.
  • Gold does have value as plating on electronic contacts, pretty stuff for jewelry, etc. It would make better heatsinks than any other material, but it's priced too high for that use. It's worth $200/ounce or more only because some people think it's money, but it is always going to have more worth than pieces of paper with green ink... Admittedly, if people ever became rational, the supply/demand curve might drop the price to the point that other uses such as heatsinks became cost-effective (increasing the demand to match the supply), but there's not much danger of that.
  • The clause just specifies that the states cannot create their own currency, outside of that that could be redeemed for gold or silver. That means, that unless a state wants to mandate the use of "hard" currency for taxes, etc., it must use currency authorized by the federal government. However, if a state does want to issue gold or silver certificates, it is more than welcome. In any case, to make interstate commerce easier, each state has chosen to accept federal currency as legal tender.

    The constitution is completely silent on whether or not the national currency should be pegged directly to precious metals. If the framers wanted that way, they almost certainly would have said so. The ability to regulate the money supply (which cannot be done with hard currency) comes in quite handy to facilitate economic stimulus in times of hardship.

    SirWired
  • That I speak my own views, not those of OmniPay as implied in the story.
    JMR

  • Argh! Declan McCullagh is at it again. It's important to understand why it matters that e-gold the company wasn't raided. One company which used the services of E-gold was raided. When the article states:
    One possibility is a broader investigation directed at some users of e-gold, which is less anonymous than cash but more anonymous than credit cards.
    This is a complete speculation based on the politics of the reporter. There's absolutely no evidence to support it at all. It's just used to insert a generic biolerplate to insinuate about how
    ... it's possible that the feds don't exactly approve of a system that's more privacy-protective than the heavily regulated banking system.

    But it's utterly certain that there was no evidence to support claim. In fact, the evidence argues against it, because E-gold the company wasn't raided. ONE service company ("Gold-Age"), a single solitary company that resells e-gold, was raided, for alleged fraud. Hyping this up into a federal attack on anonymity is sensationalism at its worst.

  • Many rental car agencies will take debit cards and/or cash. However, they may require a larger deposit or some other extra upfront fees. Travelocity will include a car rental agencies cash and debit card policies. So should any good travel agent. I do know from experience that Alamo and Enterprise will take debit cards.

  • They will add lots of nasty late payment fees, suspend usage, and will call you up just about every other day (at least it seemed like it) to harrass you about payment. I know this from experience when my wife decided that my company provided AmEx card would be perfect for her spending sprees.

  • E-gold is nice packaging, no doubt about that. But there is nothing especially revolutionary, global, anonymous, or e-commerce world-changing about it.

    It's a gold-metal mutual fund. That's all it is. You pay dollars (or something else) to buy shares of the fund. The fund uses those dollars (or other) to buy gold. You redeem your shares. The fund sells some gold.

    This happens every day. Calling the shares grams doesn't change this. But there is nothing earth-shaking about it. The mutual-fund industry has existed for decades (and gets along quite nicely with the Feds, and even other governments).

    E-gold will allow you to buy or redeem small amounts of shares, electronically. That's nice. It's even useful. More power to them. It's a service that other mutual fund companies would do well to adopt.

    But this doesn't change the world, or even matter dramatically for privacy

  • The shiny rock doesn't represent something valuable, it is something valuable.

    But the value we assign to the shiny rock is no more absolute than the value we assign to, say, an Internet stock. Back a few months, tech stocks were everybody's favorite stuff, so people paid more for them than their intrinsic worth.

    The intrinsic value of gold is actually probably fairly low, and it's not "backed" by anything. Personally, I don't see the attraction of gold - it appeals to people with unrehabilited caveman sensibilities - ooh, shiny thing, me want! If gold went out of fashion, then it would lose value as surely as Amazon did when tech stocks went out of fashion.

    There's nothing at all irrational about a market based on the trade value of shiny things.

    Why couldn't you say the same thing about, say, tulips? (cf Dutch Tulip Mania) The difference is a perceptual one. As you said, "it's just everybody's favorite stuff". And it's only valuable as long as it stays that way. You're betting on fashion, like buying Armani suit futures.

  • One would think that attempting to serve a writ though Sashdot would rate a score higher than one eh?

    Barry K. Downey
    U.S. Counsel to e-gold Ltd.

    Looks like you left out your full title there "Vice President of huffing and Puffing".

    So you are running a site out of an obscure caribean island offering financial services whose principal attaction appears to be being beyond the reach of US regulatory powers.

    If I were in such a situation my first plan of action would not be to initiate libel lawsuits in the US which not only makes libel lawsuits almost impossible for plaintifs, but also empowers litigants with sweeping powers of discovery.

    Everyone knows that if you want to piss Declan off you simply go to Pittsberg and buy officers Haven and Hammond-Schrock [cmu.edu] a drink.

  • Because Gold is FINITE substance, it has stable value.

    Untrue, the gold supply has fluctuated significantly from time to time. The 1849 gold rush threw Karl Marx into a fit of depression because the additional gold supply would inflate the capitalist economies.

    The industrial revolution was possible in large part because of the additional liquidity introduced through the shipments of spanish gold and silver from the 'new world'. The Industrial Revolution might have happened in Spain if Francis Drake was not such a clever pirate.

    Today very little value is paper value. Printed money is a tiny proportion of the total in circulation. Modern economies grow at a rate of about 1% to 4% a year. If the money supply fails to keep pace the growth stops. Deflation is a very bad thing.

    Another way liquidity is increased is through banks. I put $1000 in a bank who lends it to someone else. As a result both myself and the borrower have $1000 available to spend.

    If you don't like modern finance then go to Afghanistan and join the Taleban. Not only can you live in a medieval society they will let you marry four wives.

  • If gold went out of fashion, then it would lose value as surely as Amazon did when tech stocks went out of fashion.

    Which it is, these days gold is no longer the standard for high end jewelry, go into Tiffanys and you will see much more platinum than gold in the wedding rings section.

  • If you look at payscales: I'm not sure about 1901, but in the 1880's a hard day's work (12 hours) would get an semiskilled laborer 1 dollar or less. A dollar was 1/16 ounce of gold. So 192 hours of work = 1 ounce of gold, then. Now 1 ounce of gold might pay for 30 to 50 hours of labor.

    That might reflect a difference in living standards rather than a difference in value. But what it gets back to is whether there is any comparison between value over such long periods.

    In any 30 year period it is almost certain that the value of a dollar invested in a bank account will be worth more than an 'investment' in any valuable metal.

    The few exceptions to this are times of hyperinflation following major wars. I'll take that risk however since the risk of a war devaluing the US dollar is probably less than the risk that whoever is behind E-Gold simply absconds with the cash one day.

    The value of investing in highly regulated markets is that the risk of fraud is very low and at the end of the day the government will be forced to make good any loss - remember savings and loans anyone?

    Obscure offshore banks do go under from time to time, and when that happens it is not unusual to see a queue of irate pensioners complaining to the government whose taxes they were evading. This only really came to an end when the major UK banks started offshore outfits whose liquidity was tied to the liquidity of the main bank. I'll take the risk of Barclays going under.

    The e-gold business model makes no more sense to me than that of E-Toys. I don't see how the transaction fees can carry the business. I have made more money shorting e-money schemes than anything else (Cybercash, ZixIt, First Virtual, etc.)

  • by Baldrson (78598) on Friday March 30, 2001 @09:13PM (#326461) Homepage Journal

    Federal Reserve + IRS = The Protection Racket Coup of 1913

    by Jim Bowery [mailto]
    Jim Bowery [geocities.com], January 13, 2001 -- The author grants the right to copy, without modification.

    INTRODUCTION

    Federal Reserve money buys protection from punishment. You are punished if you don't pay taxes. This has become the Federal Reserve's primary monetary authority. The moral hazard of basing monetary authority on punishment has now been realized in the systemic and out-of-control gang rapes of prisoners in the US. All other unlawful acts by US governments are now overshadowed by the murderous, sexually sadistic character of governmental authority that has developed in US penal systems. Federal Reserve money is now protection racket money, or, if you prefer "punishment protection money". Calling it "fiat money", "debt money" or even "legal tender" obscures its true character. The transition to this form of money began in 1913, when the 16th Amendment [house.gov] dramatically expanded the potential need for legal tender in the form of taxes while, in that same year, the Federal Reserve Act [simplenet.com] started the process of removing from legal tender any backing value other than the protection it affords against punishment. That the redefinition of "legal tender" was unconstitutional(1) [geocities.com] has become only a minor dimension of the massive decay in legitimacy and moral leadership during the 20th century triggered by these acts of 1913. These acts were largely in the interest of continental European banking concerns doing business under the name of J. P. Morgan. As vital interests of the United States were sacrificed on their behalf, those foreign interests are reasonably called "enemies of the United States", the acts of U.S. citizens on their behalf "treasons", and all such citizens "traitors".

    THE MORAL HAZARD OF GOVERNMENT AND MONEY

    Legitimate governments provide assurance that we are secure in our lives and properties by protecting our legal rights in exchange for taxes and other duties. The most legitimate governments will even back up their commitment by providing some sort of compensation if our legal rights are breached, much the same as insurance companies do when they pay out on an insurance policy. But there is a fine line between protection rackets and insurance companies. Indeed, gangsters frequently call their protection rackets "insurance" and the payments they extort from their victims "insurance premiums". That fine line between protector and protection racket is crossed when "moral hazard" tempts the "protector" beyond the limits of his character.

    In conventional insurance terminology, "moral hazard" is the temptation to artificially increase hazards. A classic case of moral hazard is an otherwise unprofitable business buying lots of fire insurance and then hiring an arsonist to burn down the place of business.

    Insurers, too, can profit by increasing hazards if it is the uninsured who suffer the exposure to risk. A classic example of an insurer's moral hazard is the temptation to parasitize a productive business by threatening it with destruction unless the owners pay regular "insurance premiums".

    And that brings us to the morality of governance.

    The most profound moral hazard for governance is the penal system combined with taxation.

    The framers of the US Constitution included prohibitions against cruel and unusual punishment under the 8th Amendment [house.gov]. They also made it difficult to parasitize productive States. This they did by requiring that taxation on a State's citizenry be proportional to the State's population under Article. 1. Section. 2. Clause 3 [house.gov]. and Article. 1. Section. 9. Clause 4. [house.gov] Making taxes proportional to State population helps control the moral hazard of governance at the Federal level by making it difficult for the Federal government to transfer wealth to States that are politically active from States that are economically productive. Also, States are more capable of defending themselves from the Federal government than are individuals. Unfortunately, the requirement for taxation proportional to State population ("with apportionment" and "with regard to the census") was removed by the 16th Amendment [house.gov], thereby promoting political porkbarrel at the Federal level and punishing productivity. In the same year the Federal Reserve Act [simplenet.com] gave license to gradually reduce legal tender's reliance on gold and silver as backing value, leaving the protection legal tender afforded against government punishment it's primary backing value. (Shortly thereafter, the 17th Amendment also removed from the States the power to elect Senators, further eroding the States' ability to protect their citizens from the federal government.)

    These acts of treason have produced profound moral hazard at the Federal level, and set the stage for the relentless and radical decay of moral leadership during the 20th century.

    WARRIOR INSURANCE

    The proper role of government is protection against force and fraud. Therefore, to keep it honest, government's source of revenue should be insurance premiums against loss due to force and fraud. Said premiums could be payable in notes issued by the insurer/protector, but the insurer/protector should merely cancel the insurance policy and cease protecting those who do not pay. An insurer/protector should not generate the market for their own notes by threatening to punish those who do not pay -- as that is a protection racket, even if the insurer/protector honorably indemnifies those who do pay in the event of a covered loss. Such insurance premiums and corresponding insurance coverage would, necessarily, stipulate other conditions under which the insurance/protection continued to be provided at the agreed upon rates. This amounts to taxation on asset value, adjusted for various conditions that may affect risk -- with the added guarantee of indemnification in the event that asset value is lost due to force or fraud.

    Such a system actually eliminates governance, as we know it. I call it "warrior insurance".

    Under warrior insurance, reinsurance networks take the place of existing international treaties and alliances. Intelligent warrior reinsurance networks will check loss of asset value resulting from gang, or "protection racket" formation well in advance of any need for warfare. Warrior insurance premiums eliminate taxation. Competition between warrior insurance companies creates checks and balances supporting liberty. Formation of mass armies on ideological/political grounds is suppressed by exposing the underlying quid-pro-quo of reciprocal altruism that actually exists between people and their sovereignties -- over-extended kin identification, the basis of political and religious warfare as well as one-world ideology, is rendered less viable. Warrior insurance companies are much like the original sovereignties that defended newly formed civilizations -- they are, in fact, quite traditional. Empires subsumed the original sovereignties because trade, communication and literacy were so centralized. In the information age, this is decreasingly the case. What is increasingly necessary is a strong, distributed militia living lives bonded to their communities and lands from generation to generation, who value honor above their own lives. Unlike systems of taxation, warrior insurers will compensate those who are bonded for conscription in time of war, or deputized in times of civil emergency. Those so bonded would naturally demand a vote, or representation, in declarations of war or civil emergency.

    Under warrior insurance, the citizens' militias traditionally enjoy tax relief, since they are in effect, protecting themselves. In Scotland, rather than forming a Yeoman class from the "kindly tenants", "feu fees" were imposed to pay for foreign war debts during the Protestant Reformation, thereby dispossessing ancient families of their lands to make way for revenue generating land use such as wool-producing sheep. Kindly tenants were kindred or clan members who had traditionally been given relief from economic rent/taxation in exchange for sworn allegiance to their clans' militias under the command of their chiefs. But the clan chiefs were corrupted by the royalty which had become more interested foreign adventures than they were in allowing the clans to support and protect themselves and their families on their own lands. The royal war debts began consuming the livelihoods of the folk. Many were forced to flee for their lives. This was the primary origin of the Scotch-Irish pioneers who attempted to create a society in "the New World", free from such betrayals of clan loyalty. The earliest pioneers suffered a 25% mortality rate in the first year of migration in their desperation to create that "New World". This was not merely the moral equivalent of war -- it was death on a massive scale in a struggle with nature herself (war with natives was not the primary cause of these deaths), on the one hand, and tyranny on the other. As usual mostly men went to the frontier to risk everything for their new lands, but many women and children also suffered similar fates. As a consequence, the founders of the United States, folk memory still fresh, thought the avoidance of foreign wars to be common sense. This gave rise to the Monroe Doctrine and the avoidance of foreign wars.

    Compare and contrast such a system to the internationally adventurous protection racket posing as a government we have today.


    THE MURDEROUS, SEXUALLY SADISTIC BASIS OF THE FEDERAL RESERVE


    The US Federal Government, by basing its monetary authority on punishment protection with the treasons of 1913, has degenerated into an irredeemably murderous and sexually sadistic regime operating without lawful authority.

    When Pennsylvania Quakers established the original penitentiaries, they were places where a man was to spend time alone in a room with a bible to contemplate the error of his ways. Now they are the source of most acts of rape in our society as well as a primary dissemination point of the deadly Human Immunodeficiency Virus that causes AIDS(2) [geocities.com].

    This is so much the case that a standard book on preparing for prison life "You Are Going to Prison" by Jim Hogshire [barnesandnoble.com], answers the question "Will I get butt-fucked?" quite simply and in the affirmative. Government itself routinely uses the EXPLICIT threat of gang rape in 'crime prevention' programs aimed at youth, such as that depicted in the public television broadcast of "Scared Straight"(3) [geocities.com] where youth offenders are warned about their fate as sex slaves if they go to prison. Awareness is so widespread that Hollywood movies routinely make light of the pervasive nature of prisoner rape. Until recently, federal officials have avoided, like the AIDS epidemic they help spread, any indication that they are conscious of the fact that their authority relies, in large measure, upon cruel and unusual punishment. But even that taboo may be crumbling(4) [geocities.com].

    Any reasonable man must ask and demand an answer to this question:

    "How has the Quaker conception of the penitentiary been so perverted that the threat of HIV-infected gang rape of prisoners is now a primary component of the government's authority?"

    The answer is simple yet profound. It lies in the distinction between the two bases of money:

    Reward VS Punishment protection

    Everyone is familiar with the concept of reward money -- money issued with a promise from the issuer to reward the bearer usually with some commodity, such as gold or silver, upon presentation to the issuer.

    The concept of money backed by punishment protection sounds unfamiliar to all but a very few scattered individuals. It is unfamiliar even to Nobel Prize winning economists, let alone the vast pool of PhDs from whence they are chosen.

    Yet punishment protection money is as simple and obvious as it is pervasive:

    Money issued with a promise from the issuer to protect the bearer from punishment upon presentation to the issuer.

    > Forget the Clothes --The Emperor is a Murdering Rapist Run Amok

    Many critics of President Clinton accused him of being a murdering rapist. But President Clinton was simply the by-product of an epic perversion that has overtaken the lawful government of the United States. It would be understatement to call this perversion a criminal gang. Criminal gangs only occasionally commit rape and murder against their own community. They don't pretend to be a lawful authorities in public. They don't issue their own currency as protection racket money and then demand it as "legal tender". They may rationalize their criminal conduct, but they don't convince themselves that what they are doing is lawful. They admit to themselves that they are gangsters. At least they are that honest. But, perhaps this is simply because gangsters are afraid to compete with the most massive criminal organization in history, whose roots extend back at least to 1913 when the Income Tax and Federal Reserve were created.

    The Federal Reserve was created in the same year as the Income Tax for one simple reason:

    The US Federal Government was shifting from Reward to Punishment Protection as the basis for its monetary authority.

    Federal Reserve Notes are promises to reduce the bearer's risk of punishment for tax code violation, upon presentation to its collection agency, the IRS, in the form of Income Tax.

    Note here that it is impossible to reduce the risk of punishment for violation of the income tax code to a level commensurate to the threat of prisoner gang-rape(5) [geocities.com]. This has become the foundation of the IRS/Fed's all-pervasive aura of fear(6) [geocities.com] upon which their punishment protection money is based. The Income tax code is so complex that not even the IRS with all its private contractors from law and accounting firms, can reliably and reproducibly interpret it. This makes it possible only to _reduce_ the risk of punishment -- no matter how much wealth you turn over to the IRS.

    In this manner the federal government creates demand for the Federal Reserve's otherwise worthless paper(7) [geocities.com]. Under the evil monetary basis of punishment protection, the government's monetary authority is limited only by the degree to which it can create pervasive terror of its prison system in the hearts of nonviolent potential tax code "offenders" -- and that means you.

    With punishment protection as the basis of its monetary authority, and therefore its ability to buy votes, it was only a matter of time before the US Federal Government, as though an animal trained by operant conditioning, would find ways of increasing the severity and cruelty of its punishments.

    But like rat in a maze, the US Federal Government had a problem to solve:

    How to impose cruel and unusual punishment without arousing the wrath of a people whose ancestors had risked a 1 in 4 chance of dying in the first year of migration to the New World in order to escape just such evils?

    The solution, reached without conscious intent (conspiracy) of individuals was a form of punishment so cruel and unusual -- SO TABOO -- that no decent human being would even want to think about it, let alone use freedom of speech and the press to talk about it:

    Gradually cultivate prisoner rape as the basis of government authority.

    By replacing pillory, open corporeal punishments and work restitution, so common before the 20th century, with an environment in which Mafiosi and other gangster types are protected from prisoner rape while the American pioneer cultures, less prone to prison gang formation, are systemically gang-raped, an ethnic bias was created against the very peoples who founded the country to escape government predation. The actual bias is apparent as at least 3 out of 4 prisoner rapes involve blacks victimizing men of Protestant heritage while Mediterranean Mafiosi are somehow immune.

    The ruthlessly pragmatic and sadistically sociopathic genius of this is that its very intensity, both as physical trauma and moral outrage, rendered it invisible.

    Such is the mentality of the child molester who relies on the traumatic nature of his crime to cover his tracks -- seemingly unable to control his subconscious urges. Such was the mentality of those men who, in 1913, gave us the Federal Reserve and the Income Tax.

    CONCLUSION

    As with a molested child whose shame and guilt compound his trauma, so the American people have come to accept as, as fated, a life lived with this filthy family secret(8) [slashdot.org]. The US Federal Government, now basing its authority on cruel and unusual punishment, cannot be considered legitimate by any reasonable man . The fundamental role that the application of force against citizens plays in defining legitimacy demands such a radical conclusion.

    Warrior insurance will be a crucial tool in the triumph of honor over the political will that has so corrupted the rule of law. But honorable warriors need something to protect. Pioneers risk their lives creating new lands. Women then risk their lives giving birth to new folk. Finally, warriors risk their lives protecting their lands and their folk.

    The burden of leadership falls, as it did after the feu fees that so motivated the Scotch-Irish, on pioneers.

    The dilemma, facing those of us who value the heritage of those early Americans who risked so much to escape sadistic authority in the old world, is not whether we are willing to risk our lives for freedom from such tyranny, but whether we can pioneer a 'New World' where our love of freedom can bear fruit in the face of death.

    References

    (1) This is a consequence of the unlawful declaration that Federal Reserve Notes are "legal tender". "Legal tender" is called such because courts are required to accept it as money for legal purposes (by far, the largest legal purpose of money is payment of taxes). The US Constitution, under Article 1, Section 10 requires the States to use only gold and silver as payment for legally recognized debts. Article 1, section 8 does not give Congress power to make legal tender. Therefore, the declaration that Federal Reserve Notes are "legal tender for all debts public and private" is unlawful. The best counter arguments to this generally ignore the fact that the paper currency issued by the original central banks were presumed to not be backed by legal tender's value as protection against punishment, let alone cruel and unusual punishment.

    (2) See http://www.spr.org/docs/stats.html [spr.org]

    (3) The "Scared Straight" program from the 1970s is still going strong as evidenced by this April 5, 1997 article from the Lubbock Avalance- Journal: http://www.lubbockonline.com/news/040697/prison.ht m [deja.com]

    An excerpt:

    "DALLAS (AP) - A grand jury has refused to indict prison inmates in connection
    with a ''scared straight'' prison visit during which several boys claimed to have been molested."

    (4) Assistant U.S. attorney Gordon Zubrod from Harrisburg, PA made the following public statement to 3 suspects who fled to Canada (this statement was captured for the public record during a Canadian Broadcasting Corporation interview):

    "You're going to be the boyfriend of a very bad man if you wait out your extradition."

    (5) Look at the classic paper on the value of human life by Nobel prize winning economist George Stigler of the University of Chicago School of Business. He measured the effect of danger on wage rates in different professions. Prison is more of a danger in some lines of activity than others. We should be able to apply similar analytic techniques to the relationship between taxation and the prison system.

    (6) "Prison Rape: Every Man's Greatest Fear", August 1995, Penthouse.

    (7) Although the thesis of this paper does not necessarily predict it, an increase in the rate of prisoner suicide negatively correlating with the rate of inflation would be supportive.

    (8) A final anecdote on silence: When the author of this white paper was called in for an audit by the IRS in 1994, he sought a tax attorney to represent him. During an interview with a prospective attorney the author told the attorney he thought the audit might have been politically motivated. When asked for details, the author related that the author had published articles on the Internet advocating a judical review of the legitimacy of the ratification of the 16th Amendment about one month prior to the notice of audit. The attorney then told the author that he could not represent the author. According to this tax attorney, he had attended a seminar given by the IRS in which the distinct impression was given that "tax protesters" were not to be defended and that any attorney who defended a "tax protester" would be subjected to a lifetime of audits. This was later confirmed during an interaction with a prominent southern California tax attorney when it became known that the IRS auditor had verbally admitted to his consulting accountant that the author was being audited because of his advocacy of a judicial review of the 16th Amendment's ratification.

    In a related situation currently ongoing in China, a spokesperson for the Falun Gong Practitioners in North America has stated that: "lawyers in China have already been told not to defend these innocent civilians unless they agree with the government propaganda." The U.S. House and Senate unanimously passed resolutions on 1999-NOV-18 and 19 which criticized the Chinese government for its crackdown of the Falun Gong.

  • According to my bank (and a couple other businesses), it is possible to determine whether a card is a real credit card or a debit card. Now that I think of it, I've had a few transactions held up because of it.

    Actual theft and transaction policies vary from bank to bank. With my bank, a transaction doesn't happen immediately. There is usually a lag of 2-3 days between the time the purchase is made and when it's posted. So if one looses the card or it's stolen, there is enough time to contact the bank and they will cancel any charges. They also usually have a limit on how much can be taken out each day and how much can be taken out over a given number of days. Also, if there is an error, they will reverse the charges. I've had that happen a few times and it's not that big of a problem.

    I really like prepaid credit cards like those that used to be offered by pocketcard. They would offer the standard credit card protections, but instead of paying off a statement every month, you would load the card via an ACH bank transfer or check. They would also email account activity statements daily. Unfortunately, they've gone out of business and VisaBuxx cards are expensive.

    I don't have a problem with restraining purchases. The wife does and the only way to cure that is a 2x4 to the head. But since that would put me in jail, I"ve head to weather bankruptcy and all the crap that goes along with it because an adult woman acts like a spoiled brat when it comes to money. Needless to say, the only real credit cards that I could possibly get are from the companies that require cash up front and screw you over with tons of charges. A VisaBuxx card would be cheaper! The work around? Get the bank to set the limits low and move the money back and forth between savings accounts when needed.

    In a race between who to drain the account faster, my wife could beat any crook. The idea of having a credit card for 'safe' purchases is nice, but many people use them as a short term way to increase their buying power. That's why show's like Dave Ramsey's [daveramsey.com] exists. My attitude now is that if I don't have the money to pay for it, I either save up for it or do with out.

  • The reason that charge cards are not as universally accepted as credit cards is simple: the charge cards don't pay up as quickly as the credit cards. Generally, AmEx/Diner's Club will pay out on a quarterly basis. Visa/Mastercard pay out much more quickly, and debit cards are even faster. This is the main source of income for the charge card people: float. They collect from you an average of 6 weeks before they pay the merchant. With a few million in assorted safe bonds, you can make a lot of money in 6 weeks.

    Also, charge card fees to merchants (the charge card company in effect gets a discount) tend to be larger than credit card fees.

    And finally, due to the small number of Diner's Club and (to a lesser extent) AmEx members, the benefits do not necessarily justify the costs.

  • You have to go back to 15th century Italy to find the first instances of something resembling modern banking. Interest was generated by finagling exchange rates... ie: I pay you 10 Genoan units and in 3 months, you pay me 20 Venetian units.

    It could also be argued that the Knights Templar ran a predecessor to the savings/checking account in the 12th-14th centuries. In their system, you would give gold to a Templar Preceptory, and they would give you a sheet of paper with a code on it saying that you had deposited xxx amount of gold. You could then go to any Templar preceptory and receive that amount of gold in exchange for the sheet of paper.

  • That's a manifestation of the main reason that people invest in gold.

    Let's say you buy some bonds (of any type). Interest rates rise. This implies two things:

    • Your bonds decrease in value. Because they pay less interest than the bonds being issued, someone looking to buy a bond would be better off paying for a new bond than an old one, unless you discount your bond. There is a correlation of -10 to 1 in this relationship (a 1% increase in the interest rate leads to a 10% decrease in value)
    • Because interest rates more or less track inflation, it is reasonable to assume that inflation has increased.
    This implies that: when inflation goes up, bond values go down, and will go down by a 10:1 ratio. Thus, by finding an investment that's value tracks inflation, and placing at most 10% of your bond investments in that investment, you have a nice hedge position. One investment that, over long periods, tends to track inflation is gold, as this [google.com] from the Cleveland Fed says.
  • I should have defined what I meant by intrinsic. As you point out, gold has useful industrial uses. As long as that continues to be the case (which of course is also subject to change), gold has what I was referring to as intrinsic value. However, the premium placed on gold because of its perceived value for non-tangible purposes such as you refer to when you say "I dunno about you, I'd still want a few ounces of gold, even if I couldn't sell it or trade it", I do not consider to be intrinsic, since it is subject to irrational prejudices that have more to do with psychology than utility. As for me, you'd have to explain to me why I would want a few ounces if I couldn't sell it or trade it, unless I were planning to fabricate some PCB edge connectors...

    As for the intrinsic value of paper money and stocks, we should distinguish between different risks. I've been referring to the risk of the commodity used as a value store losing its perceived value. When you say "abstractions such as shares in a company do not have intrinsic value", I think you miss the point. The abstraction entitles you legally to something with intrinsic value - an ownership interest in a company's assets and profits. Certainly, if the legal system that underlies this abstraction breaks down, you have nothing - just as you would if Dubai decided to nationalize e-gold's holdings, for example.

    So the benefit you claim gold has is that it might retain its value even when other systems and mediums of exchange break down. I respect your paranoia, but frankly, if we get to that point, whether I have a pile of gold in my garage probably isn't going to make a difference. At that point, if I really needed gold, I'd just go and find someone who had some and steal it - I mean, we're talking about the breakdown of civilization here, and I won't be pussyfooting around!

    As they might say in a cheesy beer commercial: I am my own gold.

  • It's amazing how people are willing to trade money backed by the government of the United States for money backed by a dubious dot com.

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