Interview With Free Market Money Guru, Jim Davidson of Vertoro 3 of 4
When building a larger and stronger online digital gold economy, which comes first the merchants or the users?
The merchants come first. But, the users are easy to bring. The reason e-gold became the leading digital gold currency is very simple: they had a referral program. Their referral program split the revenues from the payment receive fee between the person referring the spender and the person referring the recipient. It worked. And the leading merchants were the ones who did the most to promote e-gold.
As long as I have been online and touting the benefits of digital gold currency, not too many people have put away their plastic and replaced it with e-gold or Pecunix.
I wouldn’t expect all forms of plastic to go away. Fiat money is actually in circulation rather than gold and silver because of Gresham’s law. So, it is well to have systems that inter-operate between gold and fiat. One of the projects I’ve been asked to consult on is a digital gold card where the balance is held in gold but the payments are in local currencies. Even with all the CC fraud, high rip off interest rates people still use their plastic when shopping online. About 90% of all US online transactions are paid with plastic.
What’s it going to take to get people to change?
The same thing it always takes, Mark. It is going to take a collapse of the world’s reserve currency. Fiat money inflation in France lasted seven years or so. The fiat money in Weimar Germany lasted four years. The experience in Yugoslavia was something like five quadrillion percent inflation in one and a half years. The Republic of China had hyperinflation for sixteen years while they fought the Japanese and then Mao. The United States dollar untied from gold in 1971, or 36 years ago. There have been amazing things in those three dozen years, that have kept the currency alive.
But the end result is always, always, always the same. People won’t change while they think they are prosperous. One of the side effects of monetary inflation is the illusion of prosperity. But, people always go back to gold and silver when it matters, when the currency collapses.
But won’t people just switch to some other currency?
They might, but it won’t do a bit of good. There is no paper currency that works.
What is the largest ‘thing’ you would like to see changed about the United States fiscal policy?
Myself, I would like to see the USA adopt a policy of voluntary donations rather than coercive, confiscatory taxes.
How about the Canadian dollar?
They sold all their metal reserves in 2005, as I recall. So, the Canada dollar is backed by their reserves of USA dollars.
And the EU euro?
My friend Doug Casey likes to point out that if the USA dollar is “an I owe you nothing,” then the euro is a “who owes you nothing?” At least with the “full faith and credit of the United States” you can pin someone down. With the EU euro, which of the member states is responsible for your money? Any and none.
I’ve heard people say, “I’d start using digital gold currency if there were more places to spend it.”
I really haven’t. I’ve wanted to hear that, but I don’t. Mind you, it is easy to adopt. Merchants can use the gold-cart.com software to accept any number of digital gold currencies.
Then 2 minutes later I hear from a merchant “I’d accept digital gold if more people used it.”
Right. But, that’s the Catch-22. The merchants have to accept currencies if they expect anyone to buy from them, or use those currencies. It is up to the merchants to choose free market methods or not. And the same crisis that is going to impel everyone to move into gold and silver from fiat money is going to work its magic on merchants much sooner. Hyperinflation is always hardest on the least prepared merchants. Harder than it is on anyone else.
If you look at the chart of gold price moves, it really has jumped recently. Do you see higher prices in the years to come and if so, why?
Yes. I believe we’ll see $1000 gold in early 2008, and $10,000 gold or higher before the dollar collapses. At the same time, the Dow should hit 30,000 or so, as all those foreign held dollars seek some sort of return on investment.
First, let’s just look at the historical prices. In January 1980, the price of gold hit $895 per ounce during intra-day trading in the April 1980 futures contract. In today’s dollars, that would be over $2700 per ounce. So, as long as gold is below $2700, it is not even matching the historical high.
Second, let’s look at the dollar. What is holding it up? Some confidence in the American government? Some set of policies that may be believed? Some history of fiscal or monetary restraint? No. None of these. All the trade policies are protectionist and inflationary. All the foreign policies are aggressive and inflationary. All the fiscal policies are deficit-laden and profligate, so, inflationary.
The only thing that is going to bring nominal prices for gold down is the huge investment in gold mining that has been going on since 2002. Yes, that is going to realize some serious discoveries, and those discoveries already found are going into production next year and through 2011. But, the dollar is going to collapse before that new production is in hand, so the prices won’t be dollar denominated. Plus, of course, there is a little known rebellion cycle in American history which peaks right about now. The actual peak should be in the five years around 2010. So, the period from now to June 2012 or so. And rebellion is very, very inflationary.
I know you have had an interest in the Liberty Dollar and the Phoenix Dollar, both are private barter style silver bullion products. I’m also a big fan of 100% silver backed currency.
Yes. My first silver coin was a 90% silver dime my great Aunt Dori gave me in 1967. The coin was minted in the year I was born, before Lyndon Johnson said that silver was “too expensive to use as money.” It was, of course, the debasement of the silver coinage that told the French to begin converting their dollars to gold. That was what started the London Gold Pool of 1965-1971.
Do you consider yourself a force for change?
Me? I’m just this guy, y’know? I’m aware of change, and I do what I can to stay even with some of it. But a force for change would be nanotechnology. You want to see how fast that is changing things, talk to Darrell Brookstein.
Or a factor in how the world of tomorrow is being shaped today?
Well, sure. We all are factors in that shaping. Look, the economy is just choice taking behavior. All it is, all it has ever been, is buyers and sellers taking choices. I happen to be an innovator in this industry, in the digital gold industry. Or a very early adopter. I’m someone people talk to about this stuff because I’ve gone to a lot of trouble to meet the people involved in the industry - Doug Jackson, Bernard von NotHaus, Jim Turk, Anthem Blanchard, Sidd Davis, Paul Vahur, and others.
But, your question suggests some quality I have that might be regarded as unique. I would demur. What I have is a certain facility for knowledge and a considerable ability to communicate, which are easily replicated. It is possible that I lend insights and witticisms to speed things along, or make them more enjoyable, but I’m just this one guy.
What are you currently doing to help move that change along?
Very little. I think the only meaningful thing to do in that regard is to combine encryption technology with digital bearer instruments and some sort of gold and silver redemption system to offer completely private exchange of value. But, I don’t have the math to contribute to crypto. I don’t have much background with digital bearer instruments. And the auditing of the gold and silver is a puzzle that I think George Hara might have worked out, but I’m still puzzled by.
I read from the Vertoro ‘About Page’ that your goal or mission is, “…to help individuals and businesses educate and protect themselves from the collapse of the dollar.”
If we do nothing else, that should prove to be very valuable to a great many people, yes.
Where do you see the US dollar falling to over the next two or three years?
I believe that within the next three years, the USA dollar could cease to circulate. Just as the mandat replaced the assignat in Revolutionary France, I expect the North American Union to include a monetary union, and something hyperinflationary like the amero to be the new currency.
There is no historical parallel outside of the collapse of the denarius when Rome fell or the failure of the solidus when Constantinople was sacked by the Turks or the failure of the dinar when Baghdad and Damascus were sacked by the Mongols. Perhaps something like what happened when the mulberry bark paper of the Khans of Imperial China went hyperinflationary in 1300 or so. Basically, everyone with any dollars is going to be desperate to unload them on anyone selling anything of value. In other words, I don’t see a bottom.
Part 4, we close out my fascinating interview with Vertoro’s Jim Davidson.
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