The first thing E-gold says on their site is that egold is 100% *backed* by gold.
Actually, on the home page, the very first line of text is the <title> tag which says "e-gold...gold itself circulated electronically."
Below that, the first non-menu text is "Better Money since 1996."
Then the slogan repeats, followed by "the ultimate worldwide free market currency."
There is a meta tag "description" of the e-gold page which includes this "100% backed by gold" comment, but it doesn't appear in my browser unless I view..source.
"Backed" is not a term with which I agree. I don't think it is especially meaningful. One could argue that there is gold "backing" to the Federal Reserve Notes, since there is gold in US Treasury vaults in places like West Point and, possibly, Fort Knox. However, the amount of gold backing the currency amounts to about one ounce for every thirty two thousand dollars ($32,000). So at an exchange rate of one ounce (troy) of gold for $32K, the Federal Reserve Note is "100% backed."
However, since there is no process whatever for Federal Reserve Notes to be redeemed for gold, it just doesn't matter. There is no reason to expect anyone to ever get gold out of the US Treasury vaults by attempting to redeem currency. In fact, people have tried it since 1971, and it just doesn't happen.
Obviously there has to be gold in the vaults to cover that claim
Well, "has to be" isn't always true. One would think that there had to be gold backing OSGold to cover the claim that it was 150% backed by gold. There was not, of course. The claim was bogus, the OSGold currency was bogus, a lot of people got burned, and it was a very bad thing for people who bought it.
That's one reason why I'm enthusiastic about audits. Third party audits of GoldMoney.com and Pecunix.com are a good thing, in my view. The audits of the LibertyDollar are great. I'm not impressed with the extent to which e-gold.com has been audited recently.
(i guess this is one of the reasons they have more gold than egold: they have to cover at all times the egold that is bought).
This idea is an interesting guess, but that's all it is, really. I once guessed that e-gold was buying gold bars and therefore it would always have about 400 ounces in a given bar (within the London Bullion Marketing Association's allowed range of weights). Thus, the amount of extra gold in the vaults should have been less than 400 ounces in excess of the amount of gold in circulation. However, that was about two years ago, and when I checked, there was much more than 400 ounces in excess.
JP May can give you an overview of a bunch of the ideas about this "famous excess gold" that have been shot down. Nobody really has a clue why there is excess gold. E-gold has never explained it. We don't know, and probably never will know.
And one can also redeem/exchange the egold for gold
You are using a mistaken concept of the term "redeem." Redemption is not exchange, and exchange is not redemption. A currency which offers redemption is redeemable for something else - such as gold or silver. Ounce for ounce, e-gold is redeemable for gold. Ounce for ounce, the LibertyDollar is redeemable for silver.
If there is no provision for redemption in the account user agreement or on the currency itself, then there is no way to redeem it.
Exchange is an entirely different matter, and arises in a free market. Free market participants will volunteer to exchange at some rate some amount of any one thing for any other. The advantage of free market money which is redeemable is that there will always be a discipline with respect to the exchange rates.
Returning to the Federal Reserve Note, or USA dollar, up to 1971 it was redeemable at $35 for one ounce troy of gold. After 1971, it was not redeemable for anything. And, today, the gold in the US Treasury vaults would only redeem the currency in circulation at a rate of around $32,000 for one ounce troy of gold. That means that there has been dramatic and terrible inflation. It means that dollars have become essentially worthless.
So, while you can still exchange them for gold, there is no discipline of redemption to make sure that there is a good exchange rate. At any point, the price of gold could go up to or higher than $32,000 per ounce.
(but also for other things, like platinum, palladium, silver, EUR, USD). So, just because it can be redeemed / exchanged doesn't mean that *it is* that.
Again, I don't think you understand the distinction between redemption and exchange. Redemption should mean that the balance (in ounces) in your e-gold account is a digital representation of the same number of ounces of gold in a warehouse somewhere. They should be symbolic equivalents, if there is true redemption.
And, since I've redeemed e-gold for gold, I believe there is symbolic equivalence.
I don't think there was ever any evidence that OSGold was redeemable. And a whole lotta people got burned by it.
I don't think there is presently any evidence that, say, INTGold is redeemable. And so I don't have anything to do with it - I neither buy it nor sell it. I think the use of "Gold" in its name is a source of difficulty, since it implies redemption without any formal mechanism for redemption. That seems wrong, to me. I wonder if we're going to see the same sort of problem with INTGold in a few months that we saw with OSGold some time ago.
Besides, any currency can say it's gold because at any time one can exchange that currency for gold,
No. That's not meaningful. You can exchange a pound of coffee for half a gram of gold. That does not mean that coffee is gold. Coffee is not a symbolic representation of gold. If a coffee currency were redeemable for gold, it would be a symbolic representation of gold. (Maybe that would have made "beenz" more successful.)
even though the value of the currency is not anchored to the gold's value (as egold is).
I think that anchor is critically important. That anchor is the discipline which the currency brings to the exchange rates.
Federal Reserve Notes are an undisciplined currency. Evocash is undisciplined - being a dollar equivalent. INTGold may claim to be gold, and may claim to have gold backing it, but it is not redeemable for gold and so there is no clear tie - no discipline - no anchor.
Of course, it is possible to say that egold is and also isn't gold.
I think that's sort of daft, George.
This may come in handy in a court room,
Well, I'm not a lawyer, and I don't go out with girls who are. It seems to me that the courts are far more perverse than you give them credit for. It seems to me that there are a bunch of people who have been convicted even though they've obeyed, scrupulously, every law. So, obedience to the law is no defense.
in countries with laws that forbid people to buy / sell precious metals through any other channels than those recognized by the state.
Such countries, whatever else they may claim, have a fascist economic policy. I don't believe any such policy can be sustained for very long or over a very wide area.
And yes, the country I live in, Romania, is one of them...
Sounds regrettable.
until some laws will regulate electronic currencies...
I think you are mistaken about how real regulation takes place. Governments don't regulate the market. The free market is self-regulating. Government interference with the free market is perversion, not regulation.
Thanks for clearing that up!
One is glad to be of service.
I don't understand it's purpose!
When used properly, an exclamation point serves to highlight an idea as startling or astonishing.
Regards,
Jim http://www.ezez.com/
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