Bullion and Bandits: The Improbable Rise and Fall of E-Gold
June 9th, 2009Via: Wired:
Jackson drew his inspiration from economist Vera Smith’s influential 1936 treatise The Rationale of Central Banking and the Free Bank Alternative, which challenged the tenets of banking. “She wrote in the depths of the Depression, and poses some of the most compelling questions about central banking systems,” Jackson says. “Central banks should attenuate monetary disorder and prevent fluctuations, but ironically they sometimes amplify it.”
His commitment started to pay off in 2000, when some 50,000 transactions suddenly passed through his system in just two months — more than the previous three and a half years combined. By that November, E-Gold, now with 20 employees, had processed 1 million transactions, and Jackson’s business reputation was growing. He was invited to speak at the prestigious World Gold Council conference in Rome, the gold mining industry’s leading event. In 2001, the growth continued, with customer accounts expanding from 134,000 to nearly 288,000, holding about $16 million in value.
Initially, Jackson stored the company’s reserves of sovereign coins and ingots in safety deposit boxes in banks around town. When this proved inconvenient for auditing, the company bought an office safe to hold the gold and platinum. “The silver was just stacked around the office,” Jackson says. Ultimately, he converted the sovereigns and ingots to bars and moved them to bank vaults in London and Dubai. At E-Gold’s peak, the currency would be backed by 3.8 metric tons of gold, valued at more than $85 million.
It was only a matter of time before e-gold got brought down. It worked too well, it got popular fast. Though it was not anonymous it had a good degree of privacy (before the government got involved). It was outside of the FED fiat-paper money system. You can’t compete with the FED and expect to get away with it, they’ll crush anyone who challenges the status quo.
I feel bad for Doug Jackson because he truly believes in what he’s doing and wants e-gold to be a legitimate player. However having been in the DGC community for a while, hardly anyone I know wants anything to do with e-gold after all that’s happened. All the libertarisns, gold bugs, and other privacy conscious folks have flocked already or will flock to an e-gold competitor which allows much stronger privacy, preferrably semi-anonymity.
On the other hand, there are truly anonymous digital gold money systems out there if you really want to use them – some of them run on the TOR network, but they are not popular at all. The people who run the systems have to take extreme measures to ensure their own anonymity and their customers’, so these systems remain underground and are limited to an incredibly minute number of transactions, mostly taking place between libertarians and other privacy lovers.
In other news: terrorists, drug dealers, criminals in government, and criminals in general continue to use the regular banking system.