Readers of this list will remember that a while ago I commented on this list about a shortcoming of the e-gold governance system:- There was no way a user could verify that the amount of gold declared in the 'examiner' was indeed the true value of gold in storage, and thus there was also no way of verifying the integrity of the figures given in the stats for total value of accounts, and there is no independent third party audit on the database, verifying the issued amount of e-gold. Obviously, this shortcoming could allow e-gold to issue more e-gold currency than the declared reserves, leading to a "fractional reserve" type situation. This observation on my part (apparently) led to the audit performed by the escrow agent and Ernst & Young in February. The audit partially corrects the problem because an observer can now see third party verification of the amount of gold held, but... Of course, there is still a huge gaping hole in the Governance model, because there is no independent 3rd party verification of the database. It is still quite possible that e-gold have in fact issued substantially more e-gold than they have gold in reserve, and they are simply not declaring the figures on the examiner correctly. The point brought up by JP illustrates the sloppy manner in which the reporting is implemented, and causes me to wonder whether the entire governance is treated in an equally sloppy manner. My understanding is that the e-gold special reserve trust is there to exclusively store gold for the e-gold account holders. If there is more gold in the vault than there is e-gold currency, then who owns the excess gold? How did the excess gold get into the vault? If there is ANY discrepancy between the EXACT weight of e-gold in storage and the EXACT issued weight of e-gold as reported by the database, then there is a loss of integrity in the currency. e-gold is created by bailment of gold into the care of the trust, in return for the equivalent "weight" of e-gold. How is it possible that the weight of gold in the vault can be different from the amount of e-gold unless.... there is no control of the "minting" process by an independent observer and e-gold is sloppy about minting the correct amount? A couple of people have recently mentioned that "as long as there is more gold in the vault than e-gold issued" everything is great. This is a wrong attitude! Where financial integrity is concerned, there need to be checks and balances, sloppiness leads to all manner of problems. Accountants don't audit the books and declare "well we're only out by a couple of hundred bucks so that's good enough!". Everything MUST balance to the cent. Until e-gold take a serious look at their procedures and governance process, there is opportunity for the integrity of the e-gold currency to be questioned. Sidd. --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED] Did you know that the new e-gold Secure Random Keypad can help you to protect your passphrase from both keystroke & mouse- click "sniffing" trojan viruses? You can find out more about computer security at: http://www.cert.org/tech_tips/home_networks.html
