Special Request:
Hi Bill! In the future I would like to make payment for Le Metropole in the form of GOLD AND SILVER instead of greenbacks.
Would you consider opening an e-gold account or other similar form of payment?
Thanks,
THC
What is e-gold?
e-gold is a monetary (payments) system which enables the use of gold as money. Gold & Silver Reserve, Inc. administers the system, serving as bailee for an inventory of gold coins and bars held in allocated storage by third party custodians. A quantity of e-gold constitutes title to a precise weight (fine) of this physical gold. The primary function of the system is to render payments, in gold (silver, platinum, or palladium), from one customer to another. A secure, convenient interface - Account Manager - is provided for customer entry of transaction orders (see Synopsis of e-gold Transactions). All cleared transactions entail an increment or decrement of one's e-metal balance. The system calculates exactly how much metal belongs to each particular customer by adding all such credits and debits.
*** To obtain or use e-gold you must create an e-metal Account. ***
Attributes of e-gold
e-gold is 100% backed by gold.
Click Examiner, G&SR's real-time audit utility. Examiner is an automated query which pulls live data from transaction tables and inventory records. It displays three tables:
total quantity (weight) of metal in electronic circulation,
total reserves; (fine) weight of physical metal serving as backing,
exact number of pieces of the various specie types comprising reserve.
All metal is held free of lien or encumbrance. G&SR does not mess with futures contracts or other leveraged derivatives. No physical metal is listed in Examiner until G&SR has rendered payment for it; cash purchase for immediate delivery. We are proud of Examiner and challenge all other issuers of payment media to develop mechanisms affording similar transparency.
e-gold is fungible.
The reserves backing e-gold are fungible in the conventional sense. If, for instance, a customer elects to fund their account by bailing some 1 oz gold Pandas to us and later, for whatever reason, elects to draw down gold balance by redeeming out some 1 oz gold Pandas - they likely wouldn't be the same ones. There is a very specific number of each particular type of specie comprising our reserve (see Examiner) but no specific piece is earmarked as belonging to anyone in particular.
e-gold itself is fungible in a further sense; analogous to H2O molecules in a glass of ice water. G&SR's obligation is to assure that the number of molecules in custody exceeds the sum of claims against those molecules in circulation. The claims specify quantity. Using the water analogy, the claims would not differentiate H2O molecules in crystals (the ice) from the ones in liquid form. Returning to the example of the Pandas (let's say someone sent three of them) - once they are logged in, the bailor's e-gold balance would not be 3.0 oz of Pandas. The increment to balance would be 3.0 oz of gold. The type of specie bailed to us is relevant only for determining basis for subsequent (FIFO) capital gains calculations (see Bailment: What about Coin Premiums?).
Spending orders exemplify fungibility. One does not order "pay 2 silver eagles to Account___" or "pay $15 worth of silver eagles to Account___". An order might instead specify "pay 2.8571 oz of silver to Account___" or "pay $15 worth of silver to Account___" (see Automated Conversion below).
e-gold is highly divisible
Since ancient Babylonian times, paying for a pizza with gold coins has been impractical. All physical coins come in fixed sizes. There is a limit as to how small a coin can be. e-gold, in contrast, is computerized; precise to 0.000001 oz (troy).
The e-gold system features automated conversion between weight and other accounting units.
Quantities of metal are accounted by weight and purity. With e-gold, weight units - decimal fractions of (troy) ounces or grams - are the ultimate units of account. The transactional unit, however, is discretionary. Transactions using e-metal as money - buying, selling - are priced using whatever unit of account the parties to the transaction mutually agree upon. If the price of a good or service is specified in terms of government currency units, such as US$, an automated calculation, using G&SR's posted exchange rate, determines the precise weight of metal which conveys.
Right of redemption is unconditionally guaranteed
To redeem means to relinquish some e-metal in order to take delivery of physical metal (see Redemption).
e-gold is not a negotiable instrument
A quantity of e-gold cannot be transferred directly from one customer to another. The payer enters a payment order, which is effected by G&SR's automated order processing program. An e-gold payment order differs from bank-issued negotiable instruments, such as checks or negotiable orders of withdrawal, which become drafts when endorsed by the recipient. G&SR offers no mechanism for honoring a draft, that is, no one can draw upon another person's account.
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Is e-gold electronic cash?
No. The prevailing definition for electronic cash involves tokens (digitally signed files) which are negotiable (directly conveyed from payer to payee).
e-gold is not negotiable. It's simply a secure efficient method for transmitting transaction instructions to the Gold & Silver Reserve. e-gold functions as a payments system by enabling G&SR to post credits and debits in database tables for keeping track of exactly how much gold belongs to whom.
Would e-gold be better if it was an implementation of electronic cash?
There are advantages and disadvantages to both account-based money and electronic cash. Our preliminary plan in 1995 was to introduce electronic cash 100% backed by gold. We quickly discovered that fundamentally vital functions - exchange (to/from other forms of money), issuance, redemption - were not addressed by electronic cash per se. e-gold was born as a suite of interface utilities to facilitate eventual deployment of gold-backed (specifically e-gold backed) electronic cash (we trademarked the name DigiGold for this purpose). Meanwhile, it has become clear that account based money and electronic cash complement each other. We will continue to implement enhancements to e-gold such as client authentication and improved non-repudiation protocols. In the long run we expect digital tokens - current money or financial instruments payable in e-gold - to play a vital role in the e-gold economy.
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How can I be confident my e-metal is truly 100% backed by physical metal?
Examiner and redemption on demand.
No other payments system has ever featured a transparency mechanism as powerful and revealing as Examiner. It is a real-time audit utility which calculates and displays total quantity of e-metal in electronic circulation (all customer accounts combined) vs. total physical reserves held by G&SR. When you click the 'Examine' button the program automatically queries the e-metal transaction database as well as current specie inventory records.
Try this: Bring up the Examiner screen. Print it out. Enter a redemption order [Seeing and handling physical precious metal is a worthwhile experience. You gain a visceral sense of why people spontaneously adopted the use of gold and silver as money. If you decide not to retain it in your physical possession you can readily bail it back into the Reserve]. Bring up Examiner again. You will see that the inventory has already been updated reflecting your order. When your shipment of metal arrives by registered mail, note the date it was shipped.
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Why should I pay storage fees when I can have a bank account with free checking, no maintenance charges, and possibly even receive interest?
The banking system and the e-metal system (when complete), both consist of a payments system and financial intermediation services. With both banking and e-metal, the payments system is a cost center. In both systems, overhead costs of administering the payments system are ultimately borne by the customer. In both systems, part of the profits of money lending activities can be applied to defray these costs.
The revolutionary difference is that the e-metal system clearly differentiates and separates these functions. The Gold & Silver Reserve exclusively administers the payments system. At this stage, only the payments system component of e-metal is deployed and costs are directly apparent, as fees. Once there is more metal circulating as money, a market for financial intermediation will naturally arise. Money lenders — totally separate individuals and companies — will be accredited to provide financial services. Separation ensures that the risks inherent in money lending cannot affect the integrity of the circulating medium. Once we accredit money lenders, most e-metal will likely reside most of the time in the e-metal accounts which money lenders themselves maintain as customers of the Reserve. Whoever holds current ability to spend an e-metal balance pays the storage fees.
The costs of the combined system banks administer are hidden in their interest rate spread. The (eventual) superior efficiency of the e-metal system, and the absence of debasement risk, will manifest as a lower differential between the wholesale rate which money lenders pay for their deposits and the retail rate they charge end borrowers.
The bottom line: e-gold cannot be rendered worthless by a financial crisis, whereas paper money can.
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Isn't e-gold simply a return to banking as it was practiced under the gold standard?
No. The defining act of banking is to circulate more demand-claims to cash than there is cash to back the claims.
Under the so-called classical gold standard, the ultimate cash which people were entitled to was gold. The circulating forms of money - bank notes, non-gold coins, and checkable (demand) deposits - were all supposedly payable on demand, in gold coins. At no time, however, could banks redeem all their bank notes in the gold they entitled people to. It was analogous to an airline overbooking a flight. Redemption of all checking account balances was an even more ridiculous impossibility.
Now the ultimate cash (in the US) is Federal Reserve Notes. The demand-claims are Federal Reserve Notes themselves, base metal coins, and checkable (demand) deposits. Banks, as always, remain unable to cough up enough cash to cash out depositors with checkable balances.
In a real systemic crisis, where increased liquidity preference means "give me folding green" instead of "sell Microsoft and send me a check" the hallowed central bank function of "lender of last resort" could easily degenerate into printing press of last resort. All the PhD's who baffle you with discussions of "Fed Funds" and "injecting liquidity" are describing mechanisms which work only when you don't desperately need them.
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How do I create an e-metal Account?
Review the e-metal Account Agreement. If you accept the terms of the Agreement, (signified by clicking the "Agree" button), an on-line Account Creation form is presented. It takes about 2 minutes to complete.
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Is there an initiation fee?
Opening an account entails no fee or obligation. G&SR only charges fees for transactions and for storage (see Fees and Commissions).
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How do I fund my e-metal account?
(Funding your account means getting metal into it).
You can exchange government-issued money for metal, or
Arrange a Direct Bailment (send us metal), or
Simply accept e-metal payment(s) from other e-metal account holders.
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What if I enter a transaction order accidentally?
Accidental entry is unlikely. The system gives you a preview of all transaction orders prior to confirmation. Previewing allows you to review applicable Exchange Rates, calculations, and other order information, to be certain the details are acceptable to you. Only after previewing are you presented with an explicitly identified confirming button.
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How do I check my e-metal balance?
An e-metal Account consists of up to four separate subaccounts; gold, silver, platinum, palladium. Balance is expressed in troy oz., truncated to nearest 0.0001oz , of metal of 100% purity.
To check your balance, click on the Account Manager screen.
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How do you spend e-gold?
Entering an e-metal Payment Order is similar to writing an (online) check: specify recipient and amount. There are some differences:
you must specify which metal you are paying with,
amount can be expressed as weight (rounded to nearest 0.0001 oz) or in terms of familiar national currencies' worth, and
you must know your recipient's e-metal Account number.
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To spend e-metal, click on the Account Manager screen. Incidentally, you don't need to worry about making an accidental overdraft... the system won't let you.
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Where can I spend e-gold ?
You can spend e-gold to any recipient who opens an e-metal account with G&SR and indicates willingness to accept payment in gold (silver, platinum or palladium). Any payment which you might ordinarily make by cash, check or with a credit card can be an e-gold transaction.
As of March 1999, there are over 2000 active e-metal accounts. See Selected Links
Many people initially find e-gold handy for use within families. It is much more convenient than writing each other checks (which require a trip to the bank to be deposited).
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How do you implement e-gold into online shopping carts?
e-gold is excellent for online shopping carts. In less time than it takes to receive an automated credit card confirmation, you receive confirmation of cleared payment. There's no such thing as a "charge back". [Refunds, if appropriate, are entirely under your control - no one can pull from your e-gold account]. The fee for receiving payment in e-metal [1%, in metal, deducted from payee, subject to maximum of 50 cents (equivalent value)] is much less than what credit card companies charge for fiat money. In fact, even if you OutExchange all the metal you receive, the combined fees/commissions are still likely to be significantly less [see demo.e-gold.com/docs/CreditCardComp.xls for cost comparison model]. Unlike the hassles of setting up a merchant credit card account, there is no application process, no initiation fee. We don't even distinguish a so-called merchant account; an account is an account. You can implement and test the protocol entirely on a self-service basis. Download our Shopping Cart Interface specification demo.e-gold.com/docs/e-gold_SCI.doc We frankly can't imagine why anyone would accept credit cards when they can be paid in gold... at lower cost!
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I like the notion of spending gold and silver, but I can't picture myself trying to explain all this to my landlord or the electric company.
You are rendering a kind and beneficial service if you help someone see the advantages of a non-bank payments system involving non-fiat money. You are also doing yourself a favor - November 1998 we introduced a simple incentive system which earmarks a portion of all e-metal payment processing fees to reward those who introduce others to the system. See Referral Incentive Program for details.
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I don't see the point of the restriction that e-gold can only be spent to payees with e-metal accounts. e-gold won't have broad acceptance until you can spend it to any payee.
e-gold is about cost, and safety. There is no fee for you, the payer, when you click an e-metal payment to someone. A processing fee is deducted from the recipient, but it is a fraction of the fees which credit card merchants pay. For instance, for a $1000 (equivalent) payment, the fee for receiving payment in gold is less than one twentieth the cost of accepting plastic.
There is also (since November 1998) an additional option. You can direct the proceeds of OutExchange to any recipient, in any of the national currencies we accept for exchange purposes. Enter the OutExchange order, tell us who/where to send the check. We call this OEDP, for OutExchange with Directed Payment. It is not nearly as efficient as using e-metal as money, since fulfillment of OEDP orders involves the postal and banking systems. You, the payer, are charged a commission, reflecting our overhead in offering this facility. Nevertheless, this option enables you to protect yourself from the credit and systemic risks of the banking system. You can keep a higher proportion of your net worth in e-metal but still instruct us to render payment to those unfortunates that accept only national currencies.
It should be noted, finally, that any third party may elect to provide currency exchange; national currencies from/to e-metal. demo.e-gold.com/docs/OEDPModel.xls models the cash flows for one such independent arrangement which would be very useful and profitable. We welcome the prospect of competition on the basis of exchange rates and value-added services.
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I own a small business. I'd like to accept e-gold, but all of my revenue must go right back out to meet expenses.
There are at least three categories of expense which would likely allow you to spend all the e-metal which comes in without needing to promote or explain the concept to anyone.
Odds are your biggest expense is your own salary.
You probably also have a system for reimbursing yourself for business expenses paid using personal funds.
Chances are one or two of your employees would also like to get a small part of their salary in metal.
The accounting and tax considerations are surprisingly simple. You could also simply do frequent OutExchanges (have G&SR exchange it back into dollars). We'd love to take it off your hands - OutExchange is our lowest cost source of metal (no middleman, no shipping - since it's already in our vaults).
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My business isn't on the web - How do I implement e-gold into my billing and collections protocol?
It's easy to integrate e-gold into the bills you send out by mail. You already have a system which presents the customer with payment instructions, which includes information such as total payment amount and invoice (or order) number. Simply add a statement like:
If you are paying with e-gold, please enter this invoice (or order) number in the memo section of your Payment Order. Our e-metal Account Number is ######.
If you accept phone orders your customer can pay you in realtime! You can receive payment in gold in less time than it takes your order clerk to punch credit card data into a terminal. Unlike a credit card confirmation that payment will eventually occur, you verify that your incoming payment has already cleared by clicking History in the Account Manager.
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What are the advantages of holding and using e-gold, compared to existing forms of money?
Advantages for businesses who accept payment in e-gold
Nearly instantaneous clearing and funds availability
Low processing fee - 1%, debited in metal
The maximum payment processing fee, deducted from the recipient of an e-gold payment, is USD 50 cents (equivalent value). Confirmation of payment is nearly instantaneous and the metal received is spendable immediately. No special accounting procedures are required - the History screen (payments received) details all information normally found on a check, including national-currency-equivalent value of payment.
Credit card payment processing fees are considerably higher and the money received cannot be spent immediately. Personal checks often take a week to clear and some of them bounce. It is impossible to generate an overdraft with the e-metal system.
Advantages for non-US customers
stable store of value
diminished exchange rate risk
Government currency in many countries is debased. An unsound currency adds uncertainty and complexity to economic calculation. Exchange rates are subject to large and rapid variation. Consider an international deal which involves a 15% gross profit margin, rendered unprofitable by a 20% exchange rate fluctuation in a disadvantageous direction. Clearly metal/currency exchange rates can fluctuate as well but there has never been hyperinflation involving gold or silver.
Advantages of e-gold vs. physical gold
divisibility
If a shirt costs $41.35 (inclusive of sales tax) you can't pay for it with physical gold, without making change in some other medium. Gold coins can only be made so small (less than 1/10th of an ounce is impractical). Our computer display of e-metal |
