Cryptogon Readers Send Contributions
October 14th, 2008Thank you.
Pookie $75
MW $20
AF $65
PP $10
DT $20
RR CA$25
Posted in Announcements | Top Of Page
cryptogon.com
news – analysis – conspiracies
Thank you.
Pookie $75
MW $20
AF $65
PP $10
DT $20
RR CA$25
Howdy Kevin! It’s Steven from Deconsumption here.
Sorry to post this in the comments section, but if I still have your email it’s probably from back when you were a patriotic yankee-doodle-dandy. Also, I don’t think it’s at all off-topic for this post…
I’ve been trying to assess various alternatives for people (myself included) seeking a truly safe-haven for their savings, and I was finally enticed to check out Bullion Vault. First off I was so impressed that I’ve already opened an account (clicked thru via your site of course) and will be funding as soon as possible.
Now as you know I swore-off trading — and “virtual” financial assets in general — several years back. So I wasn’t even investigating gold-trading, I was looking for safer, more reliable alternatives to short-term treasuries and conventional banking. Eventually this led me to look at Bullion Vault more closely, and I’ve begun to see Bullion Vault in a completely different light. I’d naturally just assumed it was a combination precious metals safe-keeping account / Ebay for gold traders. But I’m having a dawning realization that the founders of Bullion Vault may have inadvertently stumbled onto a revolutionary business model for traditional banking.
First off, my chief issue with the traditional precious metals vault custodian-style business is simply the slow transaction times. Deposits & withdrawals invariably happen at snail-mail pace. You can find anecdotal complaints from people saying Perth Mint Certs, for instance, require weeks to months to process a withdrawal. I believe that if you can’t exchange funds as fast as possible, then you don’t have liquidity — and liquidity is a significant aspect of monetary security. Since Bullion Vault acts only as a transaction processor between customers and their third-party vault custodian, selling takes just a fraction of a second, and the funds are evidently immediately good as cash (which even beats ETF settlement-time). So if you can get a wire/ach processed that same day, there’s no reason you won’t have the cash in your settlement bank either the same day or next. Perhaps 2-3 days delay when going to smaller banks, but that’s banking industry standard. So even if I never trade within the account, Bullion Vault seems to be an extremely liquid way to hold allocated gold under professional safe-keeping.
Of course you could also hold precious metals and coins in safe-keeping at a number of large investment firms. But importantly, Bullion Vaults don’t appear to engage in any extraneous investment activities. Which means your savings isn’t jeopardized by the myriad forms of risk-taking that big investment houses engage in (so poorly, evidently). Not to mention that BV’s fees are ridiculously low compared to bigger firms.
And that’s when it occurred to me. Even though Bullion Vault appears on the surface just a niche trading-platform, I’m becoming convinced it might well be the ideal example of what a retail savings-bank is supposed to be. Exactly what people believe a bank should be.
I mean, isn’t our essential ideal of a bank that it be a place where you can give them your savings and they simply protect it? No leveraging of your depository assets, no extraneous market risk-taking, no fractional-lending pyramid-schemes, no boiler-room loan-origination products, no customer profiling and cross-selling. Just keep my money as safe as possible. And give it back to me asap when I ask for it.
It silly, but it suddenly occurred to me that banks stopped being “banks” a long time ago. They became “financial firms”. Their job slowly morphed, so that they began to use their privileged positions to “create” ever more sophisticated methods for passive-investment wealth, rather than simply safe-keeping people’s assets. And actual customer deposits became just an annoying overhead cost in this new business-model (banks have long held a love-hate relationship with the typical high-maintenance, low-balance “checking account”, and many banks have been reprimanded or fined for blatantly discouraging them in poorer areas where there was little hope of “farming” their owner’s other, outside assets.).
So anyway, I was hoping to get your take on this. I mean, at a time when virtually the entire Western World is wondering “where can I keep my money safe?”, I’m starting to feel that Bullion Vault may actually have stumbled onto a revolutionary business model: a return to the ideals of legitimate banking, providing safety and liquidity to the average person. By using a reputable third-party vault custodian there’s a fire-wall between BV and their customers assets. They make their vault-accounting transparent on a daily basis. And by adhering to a fee-based structure they are simply assuming the role of transaction processor, thereby not abusing their privilege.
Of course there’s always some element of risk in everything, it’s unavoidable:
–Certainly BV is still reliant on conventional banks for their cash holdings. But as long as your holdings are being held, dollar-for-dollar in physical gold there’s little or no need for “depository insurance” — should BV go under the assets are there to be assumed, liquidated and returned directly to depositors.
–Gold is subject to market-fluctuation, which means you may not have all your money available when you need it. But that’s simply an illusion, of course, because currency in a conventional bank savings account also fluctuates continually – we just forget that fact because people don’t pay attention to currency markets and if we get the same “number” of dollars back we assume it has the same “value” as what we put in, which is non-sense. Also, over the long-run, if gold increased in prominence as a transaction vehicle the volatility we see nowadays would be greatly smoothed out.
–Obviously there are arguments for holding physical gold in your sock-drawer vs. “supposedly” owning physical gold in a safe-keeping program somewhere (i.e. unallocated, “pooled” holdings may be loaned-out, there’s often little or no audit-certification or transparency, etc…). I certainly appreciate those arguments. But ultimately I think most people value liquidity & peace of mind in regard to their financial security. Holding tens of thousands, hundreds of thousands, or more, in physical gold doesn’t give anyone peace of mind (if it did, why did the wealthy of yore invent the castle and the private-militia?) Nor is it in any way liquid. So as long as I feel my assets are reasonably secure, the costs are agreeable, and as long as I’m confident I’m able to exchange my stable gold holdings back into the convenient-to-spend-yet-rapidly-devaluing currency of choice at a moment’s notice…well, I’ve pretty much found the perfect bank, haven’t I?.
I’ll probably pose a couple questions to BV staff regarding their investment activities and custodial relationship, but first I was just hoping to find out whether, in your personal experience in your dealings with Bullion Vault, have you found them to be reasonably fast and reliable? Do you feel there’s anything in the above that I’m misreading?
Right now the vast majority is grasping at short-term treasuries as the safest game in town, but I’m starting to think Bullion Vault should definitely be one of the several baskets we should all be carrying our eggs in.
Cheers, and I hope all is going well,
Steven
Hi Steven,
I’m glad that you’re finding BV as impressive as I have found it to be. The service performs exactly as expected and I don’t have any complaints at all.
Initially, there was a delay in my funds reaching them from the U.S., but this had nothing to do with them. The ACH facility from the U.S. was just slow. Wired funds go through much faster, according to Cryptogon readers I’ve been in contact with.
Paul Tustain, the Director of BV, is very willing to respond to inquiries. I’d encourage you to get in contact with him directly if you have any questions or concerns at all.
You wrote:
I mean, isn’t our essential ideal of a bank that it be a place where you can give them your savings and they simply protect it? No leveraging of your depository assets, no extraneous market risk-taking, no fractional-lending pyramid-schemes, no boiler-room loan-origination products, no customer profiling and cross-selling. Just keep my money as safe as possible. And give it back to me asap when I ask for it.
I don’t know enough about banking history to know if we should think of BV as a bank, in a traditional, historical context.
First of all, BV cannot be used as a payment system. The way I understand banking, historically, is that the banks came about to facilitate transactions between large commercial interests for which the exchange of physical gold was becoming cumbersome.
Interparty payment functionality was expressly left out of BV’s business plan, almost certainly to avoid any possible assertion by state authorities that the service is being used for illegal purposes.
I don’t know which bank first started the hocus pocus trick of exchanging paper “promises to pay” for the gold they had on deposit, but we are certainly going back a long, long way. Banks have profited from interest payments for, I don’t know, someone help me here… hundreds of years, let’s say.
So, BV doesn’t allow payments, and it doesn’t lend anything to anyone with the expectation that profits will be derived from the collection of interest. (They may make a pittance from interest on cash in people’s accounts; cash that hasn’t been used to purchase any gold. I don’t know.) If ever there was a bank that functioned like this, I’d like to read more about it.
However, when you write about the “essential ideal of a bank” as a place to simply safeguard savings, yes, assuming price fluctuations of gold as denominated in national fiat currencies, I’d say that BV fits that bill. I just don’t know what to call it… From what I know about banking, though, I don’t think “bank” would be a good term to use.
Good point, Kevin, about payments. I guess I was only thinking about banks in relation to the typical savings account, not whether BV would be issuing check books, processing third-party payment transactions and such. I figure for those things I could wire/ach back to my checking account and let the bank handle the payment processing.
Anyhoo…I’m putting a little money in today, to test the waters. I can always move more in as I become more confident. What excites me is having found one more reasonably-reliable basket for my eggs, so that I can have liquidity over the short-term….we’ve found our little dream-plot and are ready to build next year, and I don’t want to find by then that the financial system is locking-up and I don’t have at least one account to draw on. Even if we’ve only got enough to buy a yurt, we’ll at least own our house and our land outright, which is about as much financial destiny as anyone can reasonably control. After that whatever comes can come.
And as an FYI, there’s a great interest in homesteading around our area, and our best friends here built a yurt home themselves and lived in it all through last winter. They didn’t find it much of a hardship at all, even with four children. This year they’re going to add a second yurt, though, mainly so the kitchen-space can be separate from the bedroom-space. As the wife pointed out, the difficulty living in one room is that if you burn the bacon, all your clothes smell like burnt bacon.
I sent small amounts initially, too. Yep, take it slow and easy. The first time you buy, consider buying just one gram. I use the market depth thing, just to be sure that I’m hitting the best ask, but I don’t know how necessary it is to use that.
Re: getting funds back out: Be aware that there’s a $30 fee to send money back to your account. This is because they wire it. I wasn’t aware of that until I did it with a small amount, and someone at BV emailed me and asked, “Are you sure you want to do this?” HA
Yeah, so ACH in for free, but there’s a wire fee back out.
Re: Yurts:
When I was going to move to Oregon, I was planning on living in a yurt. I was looking at doing that soup to nuts 30 footer from Pacific Yurts. But yes, as you say, the burnt bacon issue would apply even to that one.
One of the best treats for any yurt freak is to go to Pacific Yurts and look through their photo albums. Man, there are A LOT of outlaw yurt freaks around!