End the War on Freedom

By RIA Novosti, MoscowThursday, November 19, 2009http://en.rian.ru/russia/20091119/156903575.htmlMOSCOW -- Russia's Central Bank said on Thursday it is ready to buy 30 metric tons (965,000 troy ounces) of gold at market prices from the country's precious metals depositary, Gokhran, by the end of the year. Central Bank First Deputy Chairman Alexei Ulyukayev said the means of payment for the gold will depend on the requirements of the Finance Ministry and will probably be denominated in rubles. Ulyukayev played down fears that the timing of the purchase could prove unfavorable given the current high price of gold, currently over $1,000 per troy ounce on global markets. "They are at the peak levels relative to the previous period, but predictions of price dynamics vary," he said. The Central Bank's announcement to buy up gold comes amid increasing international assets held by the bank, which grew by $7.8 billion in the week of November 6-13 to $441.7 billion. The cash paid for the gold will be used by the Finance Ministry to cover next year's state budget deficit, predicted at 6.8% of GDP. This year Russia is running a deficit of 7.7% of GDP.For further reading:"Russia to sell 30 tonnes of gold to central bank", Reuters, November 19, 2009"Russia's Central Bank ready to buy up gold from State Depository", RIA Novosti, November 16, 2009

By Sandrine Rastello and Kim KyoungwhaBloombergTuesday, November 17, 2009http://www.bloomberg.com/apps/news?pid=20601087&sid=a_9ioLuRtQyk&posMauritius bought 2 metric tons of gold from the International Monetary Fund, underscoring a drive by central banks to boost holdings as the precious metal trades near a record and the dollar slumps. The $71.7 million sale to the Bank of Mauritius was based on market prices on Nov. 11, the IMF said in an e-mailed statement yesterday. The Reserve Bank of India paid $6.7 billion for 200 tons from the IMF, according to a Nov. 2 statement. Gold has surged this year as the U.S. currency declines and investors seek to protect their wealth. Emerging-market nations, which have amassed stockpiles of foreign-currency reserves since the 1998 financial crisis, have shown increased interest in diversifying out of U.S. assets. “Investors at different levels feel more comfortable” with some gold in their portfolio, said Albert Cheng, Far East managing director at the World Gold Council. The purchase more than doubles the amount of gold held by the Mauritian central bank to 5.69 percent of its total foreign exchange reserves, from 2.34 percent at the end of October, the bank said in an e-mailed statement today. The acquisition partially reverses a decline from the 13 percent of reserves that gold accounted for on Dec. 31, 1979. ‘Ultimate Currency’ Gold for immediate delivery is headed for a ninth annual gain and touched an all-time high of $1,143.60 an ounce yesterday. The metal, which traded at $1,134.32 at 9:46 a.m. in London, is the “ultimate currency,” Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York, said yesterday. The Mauritian purchase is “another signal that emerging- market central banks are looking to increase their foreign- exchange allocation in gold,” Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., said from Sydney. The Dollar Index, a six-currency gauge of the dollar’s value, was little changed today near a 15-month low. The Federal Reserve has cut borrowing costs to an all-time low while the U.S. government boosted spending to combat recession in the world’s top economy, fueling speculation the currency will be debased. “There are a lot of uncertainties in the U.S. dollar and not much confidence in other currencies,” AMP Capital’s Oliver said. “Gold is a viable option.” The IMF sale forms part of a plan to sell a total of 403.3 tons to shore up the bank’s finances and increase lending to low-income nations. Chinese Reserves “The fund is standing ready for an initial period to sell gold directly to central banks and other official holders that may be interested in such sales,” yesterday’s statement said, repeating an earlier commitment. China, the biggest gold producer, has increased reserves 76 percent to 1,054 tons since 2003 and has the fifth-biggest holdings by country, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in April. The world’s most populous nation may buy some of the gold now being offered by the IMF, Market News International said in September, citing two unidentified government officials.For further reading:"End of trend is nigh for central bank sales of gold", Stephen Kirchner, November 17, 2009"BlackRock says central banks to be net buyers of gold", Reuters, November 16, 2009"Gold Rush? Gold Squeeze", Jeff Clark, November 16, 2009

By Krishna GuhaThe Financial TimesWednesday, November 11 2009http://www.ft.com/cms/s/0/b163f502-cf02-11de-8a4b-00144feabdc0.html function floatContent(){var paraNum = "3" paraNum = paraNum - 1;var tb = document.getElementById('floating-con');var nl = document.getElementById('floating-target');if(tb.getElementsByTagName("div").length> 0){if (nl.getElementsByTagName("p").length>= paraNum){nl.insertBefore(tb,nl.getElementsByTagName("p")[paraNum]);}else {if (nl.getElementsByTagName("p").length == 3){nl.insertBefore(tb,nl.getElementsByTagName("p")[2]);}else {nl.insertBefore(tb,nl.getElementsByTagName("p")[0]);}}}}The world should try to mitigate flaws in the dollar based global monetary system by reducing demand for dollar reserves and exploring alternative reserve assets, a group of economists from the International Monetary Fund said on Wednesday.The economists said the crisis had “brought to the fore” long-standing concerns about a system based on a single core currency issued by one country. They said the dollar-based system “suffered inherent weaknesses”. The US, at the centre of the system, was under pressure to run large current account deficits in order to supply the world with the dollar assets it wants, they said, while there was no effective discipline on either the US or countries such as China that have big external surpluses to adjust their policies.The report was published by the authors in their individual capacity and not endorsed by the IMF as an institution. But it comes amid renewed global focus on and dissatisfaction with the role of the dollar in the world economic system, following the experience of a crisis at the core rather than the periphery of the world system.The IMF economists said the crisis highlighted the “scale and volatility of global capital flows” that led countries to accumulate reserves to protect themselves against a sudden reversal in capital.But it also renewed questions about “anchoring the international monetary system on one country’s currency [the dollar] given the origins of this crisis in the US heart of the global financial system”. They said the current system was “something of a non-system” because some economies maintained floating exchange rates while others pegged their currencies to the dollar. The IMF economists proposed creating better alternatives that would allow countries worried about volatile capital flows to stop building up reserves.These would include helping to create private sector insurance-type markets to provide funds when they were needed, and an enhanced role for the IMF itself in providing reliable access to finance.The IMF has already taken steps in this direction through the creation of a flexible credit line for well-run emerging economies. But the authors note that the fund’s resources would have to be greatly increased to enable it to act as a credible lender of last resort for large economies.The economists said reducing demand for dollar reserves would be only part of the solution. They said the world would also have to examine alternatives to the dollar as the dominant reserve asset.This could include a move to a system in which the dollar shared its leading role with a few other currencies such as the euro and possibly China’s renminbi. They also argued in favour of taking seriously the possibility that one day the the SDR, the IMF synthetic currency, might replace the dollar as the main reserve asset.However, in order to do this they said issuers would have to create large-scale liquid markets denominated in SDRs. Moreover, they said moving to such as system would be much easier if countries with large dollar holdings could exchange these for SDRs in off- market transactions with the IMF.© The Financial Times Limited 2009For further reading:"Dollar Overwhelms Central Banks From Brazil to Korea", Bloomberg, November 13, 2009"World Bank: yuan to become alternative reserve currency", Reuters, November 11, 2009

By David GoldmanCNNMoney.comThursday, November 12, 2009http://money.cnn.com/2009/11/12/news/economy/us_gold/The government holds the world's largest gold reserve, but even with gold prices at a record high, the Treasury is unlikely to sell.NEW YORK -- Gold is soaring to record high prices, and guess who has the biggest stash?The U.S. government.The Treasury Department has 261.5 million ounces of gold in its reserves, representing about a third of the gold stockpiles held by governments around the world. With gold selling at about $1,100 an ounce, that means Uncle Sam is sitting on $288 billion worth of the shiny stuff. (The vault underneath the New York Federal Reserve once held over one quarter of the world's monetized gold. Today, it holds about 500,000 gold bars, 95% of which is owned by foreign nations. This photo, taken in 1968, shows a "sitter" counting gold.)Treasury's gold sits in vaults across the country. It holds about 25,000 bars in a vault five floors down, 80 feet below street level, in the New York Federal Reserve in Manhattan. The majority of the nation's gold reserves still reside in Ft. Knox in Kentucky.But rather than sell it, the government is hanging onto its bullion.So are other global central banks. In fact, as the dollar continues its downward spiral, many countries are even buying up gold.Last week, the International Monetary Fund offered up 400 metric tons of gold, and the Reserve Bank of India bought 220 metric tons of it. Sri Lanka bought 5.3 metric tons in the auction as well. In the second quarter, central banks were net buyers of gold for the first time since 1997."Gold is gold," said Nathan Lewis, author of Gold: The Once and Future Money. "There's no real change in gold's value. Only the value of paper currency declines."Gold has come in and out of fashion with investors over the years. In times of economic instability or inflation, gold demand and prices have trended higher. Despite wild price fluctuations over the years, gold has maintained its purchasing power for about the past 750 years."From the mid-14th century until now, you can draw a relative straight line in the purchasing power of gold, and every central banker in their heart knows that," said Judy Shelton, an economist and director of the National Endowment for Democracy. "Gold is universally recognized as a store of value. That's important because it denotes price stability."Gold had been the standard currency for international trade for centuries. In fact, the Federal Reserve vault in New York has compartments for different countries. When one country would trade with another, a "sitter" would simply move bars from one compartment to another, according to David Girardin, spokesman for the New York Fed.Gold's inherent value is buoying its resurgence in popularity. The comeback also raises important questions about the United States' own reserve position and the government's ability to maintain demand for U.S. Treasury bonds as the world catches the gold bug.Why we're sitting on itGovernments' dependence on gold has waned over the years, but they still hold 848 million ounces of it, down 29% from the 1965 peak of 1.2 billion ounces, and just 10% from the 942 million ounces they held 50 years ago, according to the World Gold Council.Curiously, Treasury still values its gold at $42.22 per ounce. Congress reached that figure in 1973, two years after the the post-World War II Bretton Woods gold standard, which had valued gold at $35 an ounce, was scrapped.With gold selling at prices 26 times that amount, why doesn't the Treasury, and by extension, the Fed, realize those gains on their balance sheets by displaying the market value of their holdings? Or, with the gold standard abandoned, why doesn't the government sell off its reserves to put that money into the economy or pay off debt?There are lots of reasons, ranging from the psychological to the practical."If we started selling gold from our official reserves, it would be recognized as a sign of weakness for the dollar," said Jeffrey Nichols, managing director of American Precious Metals Advisors and senior economic advisor to Rosland Capital. "America's relatively large gold holdings provide some psychological benefit to our currency."Many gold experts and economists agreed that even though the gold standard has been abandoned for nearly 40 years, the world is still cleaving to its gold because it is a tangible asset.Another reason for Treasury to hold tight is gold's fluctuating price. Just ask British Prime Minister Gordon Brown. When Brown was the nation's chief finance minister a decade ago, he decided that gold had become relatively useless to the government -- without the gold standard, it was just an inert metal, and it was expensive to store.Brown sold off 400 tons, or 60% of the United Kingdom's gold, between 1999 and 2002. Brown's problem: Gold was selling at a record low inflation-adjusted average of $275 an ounce at the time. It turned out, had he waited 10 years, the U.K. would have made four times what it hauled in from the sale."Geithner doesn't want to be the Treasury secretary that sells gold at $1,100 an ounce and next year it's at $2,000," said Shelton.Furthermore, a sale of all the country's gold wouldn't make much of an impact. With the nation's annual deficit at $1.7 trillion, a $787 billion stimulus package and a $700 billion bank bailout, $300 billion is kind of puny in comparison."The Fed has plenty of tools to pump money into the economy; it doesn't need to sell gold to do it," said Lyle Gramley, a former Fed governor. "The government has its gold by historic accident, but there's no reason why they'd sell it -- there's no motivation."But most of all, a sale of the government's gold would be especially poorly timed now, since foreign central banks are lining up to add gold to their reserves. As a result, experts say a mass-sale of gold would mostly end up in other nation's coffers.That could spell disaster for the U.S. government, which is trying to finance its economic rescue packages by selling record amounts of debt to foreign countries in the form of Treasury securities. As gold holdings take up a larger percentage of foreign reserves, Treasury holdings could be reduced.Shelton, who believes that paper currency should have ties to hard assets, said the resurgence of gold buying should be unsettling for the government. The trend indicates that some foreign countries would rather hold onto an inert metal than Treasurys that pay interest. Treasurys have long been viewed as a riskless asset, because they are tied to the dollar and are backed by the U.S. government."If the trend continues, that could reduce the demand for Treasury securities and bonds' book value would go down," said Shelton.

By Mike HewittDollarDaze.orgWednesday, November 11, 2009http://dollardaze.org/blog/?post_id=00742In early 2008 it was reported that at least some of the gold bars in the vaults at the National Bank of Ethiopia were fake. The discovery was made when bars shipped from Ethiopia to South Africa were returned after they were identified as being gilded steel. Gilded steel is a very unconvincing form of fake gold because the density of the iron alloy is significantly less. A steel bar identical in volume to the standard 400 troy ounce gold bars commonly used in bank-to-bank trades would weigh only 162.5 troy ounces (about sixty percent lighter). Anyone familiar with handling gold bars would easily identify them as fake. Even lead, a common heavy metal, is a poor substitute as it is only 59% the density of gold. One of the things that historically made gold so attractive to be used as money was its unmistakable density. Nowadays we know of several metals that have similar densities to gold, such as the heavier platinum-group metals. However, using these metals to produce fake gold is unprofitable due to their high cost. There are two metals that are suitable, from both a density and economic perspective, for manufacturing fake gold - uranium and tungsten. These metals aren't without their give-aways either. Different chemical and electro-magnetic properties exist. Uranium is of course radioactive. Tungsten is extremely brittle - the exact opposite of gold. Additionally, tungsten has the highest known melting point of any non-alloyed metal at 3422 degrees Celsius, making it difficult to work with. However, it appears that at least one high-temperature furnace is producing gilded tungsten products. A Chinese company called Chinatungsten is advertising imitation gold merchandise on its website. The following quote is taken directly from their Tungsten Alloy for Gold Substitution page: "a coin with a tungsten center and gold all around it could not be detected as counterfeit by density measurement alone ... We are well accustomed to exploit more innovative applications of tungsten products. Gold-plated tungsten is one of our main products." This raises a few (somewhat rhetorical) questions. What kind of customer is this company looking to sell its imitation gold products to and for what purposes are they intended? Furthermore, what exactly are the "more innovative applications of tungsten products" that this company is hinting at?Mike Hewitt is the editor of DollarDaze.org, a website pertaining to commentary on the instability of the global fiat monetary system and investment strategies on mining companies.For further reading:"Is the Dollar 'Good as Tungsten'?", FOFOA, November 15, 2009"On Doing God's Work: Gold Finger - A New Take on Operation Grand Slam With a Tungsten Twist", Rob Kirby, November 12, 2009

By Richard W. RahnThe Washington TimesWednesday, November 11, 2009http://www.washingtontimes.com/news/2009/nov/11/currency-that-kills/Converting to electronic money could prevent diseaseCan you imagine how many people have physically handled your money? Do you know who has previously touched it? Did they have a flu virus or some other communicable disease that is transmitted by physical contact with an infected object? Physical paper currency is often dirty - not so much to the sight, but it is a good home for dangerous microbes. It is often kept warm by our body heat and even absorbs some body moisture - a perfect breeding ground for bad stuff. It has been well-known for decades that paper currency is a major source of disease transmission. During the life of the average dollar bill, it will be handled by hundreds, if not thousands, of people. It is hard to think of any physical object that is handled by more different people than paper currency. Millions become ill every year as a result of handling currency, and a not insignificant percentage of them die. The Centers for Disease Control and Prevention (CDC) estimates that 36,000 Americans die each year from flu-related causes. How many people received the flu from paper currency? The precise percentage is unknown, but if it is just 10 percent, that still translates into a couple of million needlessly ill people and thousands of deaths. The good news is that it is no longer necessary to use paper currency in the digital age. Payments of all types can be made by electronic means - with electronic banking; credit, debit and smart cards; and cell phones - all of which help the user avoid physical contact with dirty paper money. (Note: Most paper currencies are made largely from cotton cloth, which makes them very absorbent.) The bad news is that government policies are slowing down and, in many cases, preventing the movement to the use of digital currencies. Most electronic payment systems require the user to have a bank account. For decades, the percentage of the population having a bank account grew, but that growth stopped a couple of decades ago as the government started its war on money laundering - which, ironically, resulted in the unintended consequence of requiring more people to handle dirty paper money. Physical money is expensive to produce. It is subject to counterfeiting, easily stolen and costly to handle. As noted, it is a major transmitter of disease. A rational and responsible government would be doing everything possible to eliminate physical currency. But no - legislators and policymakers have put destruction of the citizen's financial privacy and tax collection above reducing the costs and dangers of physical currency. People will only move away from paper currency when they can easily use an "electronic wallet" and have the ability to make non-identifiable and non-traceable transactions. As noted above, an electronic wallet can be a credit, debit or smart card - a cell phone or a PC. The electronic money can be held in an electronic chip within the cell phone or other device or in a depository account that can be in a bank, telecom company or some other depository institution. Encryption software has become sufficiently robust to protect users of digital money and is far safer than holding or handling physical cash. In many parts of the world, monetary transfers by cell phone are becoming the norm - they are particularly useful for small payments. The Philippines has become a world leader in cell-phone payment systems and use. Cell-phone use is expanding at a very high rate through the developing world - already, in Africa, a third of the people have cell-phone subscriptions, most of which can be used for electronic payments. The fact is that the spread of digital technologies will soon make it possible for all paper currency to become obsolete, but unfortunately, that is unlikely to happen because of the global political class. The politicians and international bureaucrats are increasingly limiting the ability of people to use non-highly regulated bank institutions as the depositories and clearinghouses for electronic money. As the political class demands ever-more-stringent and costly "know your customer" and other anti-money-laundering regulations, fewer and fewer people can qualify for bank accounts. The young, who have no financial track record; the poor; and those in transient occupations are particularly discriminated against and thus are forced to use inefficient, costly and unhygienic paper currency. The political class is also increasingly requiring banks and other depository institutions to spy on their customers and reveal all transactions to government officials - which gives individuals about as much privacy as having all their expenditures posted on a public Web site. Almost everyone occasionally wants to keep some expenditures private; for example, not wanting a spouse or loved one to know how much one spent on a gift; making an anonymous or confidential contribution to a church, charity or other nonprofit group; or even using the Internet for legal gambling, porn, cigarette or alcohol expenditures, etc. Encryption technology has developed to the point where electronic expenditures can be kept private if governments would only allow it. The fact is, people will not give up the use of paper currency, for good or bad reasons, until they know they will have the same anonymity with electronic money as they do with paper currency. Meanwhile, each year, millions of people needlessly get sick and thousands die because the folks who run Washington and the other world capitals are too dimwitted to understand the unintended consequences of their financial regulations - or are just plain callous. Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.

By Carolyn CuiThe Wall Street JournalWednesday, November 11, 2009http://online.wsj.com/article/SB125786272097541135.htmlThe world's central banks are likely to be net buyers of gold in 2009 after two decades of selling, sparking a race among analysts to figure out which country will step in with the next big purchase. Since 1991, central banks have reduced their gold holdings by 10%. It is a trend that has long been cited as keeping an overhang on gold prices. Developed countries like Switzerland, the U.K. and the Netherlands all sold significant amounts of gold to diversify into other assets in pursuit of higher returns. India's $6.7 billion purchase of 200 metric tons of gold from the International Monetary Fund last month, absorbing half the amount the IMF put up for sale, was the largest purchase by a central bank in 30 years. Now the market is engaged in a guessing game about which central bank may buy the rest. Eugen Weinberg, an analyst with Commerzbank AG, is looking to China. Jeff Christian, managing director of CPM Group, a New York-based precious-metal research firm, says other Asian and Middle East countries may be likely candidates. Wei Benhua, a former Chinese official, was cited by Chinese-language magazine Caijing on Monday as saying China, Brazil or Russia may follow India in buying IMF gold. India's purchase has thrown central banks back into the spotlight as a potentially powerful force behind gold. Even relatively small changes in the balance of a central bank's reserves could have a drastic impact on gold prices because of the relatively small size of the market.This year could mark a "watershed year," Barclays Capital analyst Suki Cooper said in a note to clients. And, even though central banks mightn't be big buyers of the precious metal, the prospect of added demand may provide key support to the market, they say. China, Russia and Brazil have tiny holdings of gold relative to their overall foreign reserves, placing them among more likely buyers. China, for example, has just 2% of its reserves in gold, compared with the world average of 10.3%., according to the World Gold Council; and Russia is at 4% and Brazil 0.5%. The most logical buyers are countries that are running current-account surpluses and that don't have their own domestic gold production, Mr. Christian said. With a net inflow of dollars and euros every month, central bankers in these countries are worried about the growing exposure to these currencies and have the most desire to diversify into other assets. According to the IMF's International Financial Statistics, Malaysia, Singapore, Kuwait, Saudi Arabia and Venezuela are among other biggest surplus countries behind China and Russia. Typically, central banks hold a basket of foreign currencies, bonds and precious metals in reserve, using it to make international payments or adjust the value of their domestic currency. The U.S. dollar was considered the preferred reserve currency for decades. But the greenback's recent decline has spooked many countries sitting on big dollar assets. While China has become an obvious buyer, some analysts say the country is likely to buy production from Chinese mines rather than buy from the IMF. China, the world's largest gold producer, has $2.3 trillion in foreign reserve, with the majority in U.S. Treasury securities.Even a tiny shift in China's reserves toward gold could have big ramifications, says Andy Smith, a senior metals strategist at Bache Commodities, a subsidiary of Prudential Financial. That makes it likely China probably won't make any big moves, he said. For example, to increase its gold holdings to the world's average of 10%, China would need to buy $180 billion of gold, or about 5,400 metrics tons -- the equivalent of more than two years of the world's mine production. Gold prices would probably spike above $6,500 an ounce, Mr. Smith estimates, making the scenario highly unlikely. To be sure, the recent surge in prices may deter many banks from buying right now. Since the Indian deal was announced, gold has gained 5%. On Tuesday, gold for November delivery rose for the seventh consecutive day, settling at a record $1,101.90 per troy ounce. India said it paid about $1045 an ounce. India's purchase "highlighted in two ways the ongoing shift of central banks and governments from being net sellers of gold to net buyers, which we believe will likely continue to provide strong fundamental support for gold prices," analysts at Goldman Sachs said in a note to clients on Tuesday. As of September, central banks around the world kept a total of 26,297 metric tons of gold, equivalent to 11 years of global production, down from 29,214 tons in 1991, according to the World Gold Council. David Rosenberg, chief economist and strategist with Gluskin Sheff & Associates Inc., said he sees prices rising through $1,300 an ounce should China buy the remaining 203 metric tons of IMF gold.For further reading/viewing:"Ron Paul on Monetary Policy" (video), Campaign for Liberty, November 12, 2009"A rock-solid case for gold reserves", The Globe and Mail, November 11, 2009

By Ecommerce JournalTuesday, November 10, 2009http://www.ecommerce-journal.com/node/25170The now shut-down online payment system e-gold reported on its blog that it is working with the various US Federal and State government authorities, including the Florida Office of Financial Regulation, the state where e-gold’s Operator is located, so as to allow some account holders to access their funds that were blocked under the previous agreement with the U.S. Department of Justice.In the blog e-gold states that in the near future it may finalize a Value Access Plan that satisfies the requirements of the Florida Office of Financial Regulation following which the company plans to engage with other jurisdictions where e-gold Owners reside.e-gold says: “Value Access Plan will allow account Users on accounts with Owners residing in jurisdictions in which the Plan is not prohibited or otherwise restricted by law to direct the exchange of value in the e-gold accounts they control for US dollars.”The prerequisite to participation in e-gold’s Value Access Plan is full compliance with e-gold’s Customer Identification Program (CIP), Customer Due Diligence (CDD), and Enhanced Due Diligence (EDD) requirements for the accounts you control.

Business History Review (Autumn 2009) from Harvard Business School published an excellent book review of Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage, 1775–1821 (2008) by George Selgin.Jeffrey Rogers Hummel of San Jose State University also completed a book review for George Mason University's History News Network on August 6, 2009.

By Dan WeilNewsMax.comThursday, November 5, 2009http://moneynews.newsmax.com/streettalk/china_india_gold_buys/2009/11/05/282070.html Gold purchases by emerging market nations have combined with inflation fears to send the precious metal to record highs. The latest emerging market acquisition news was India’s agreement to buy 200 million metric tons of gold from the International Monetary Fund (IMF) for $6.7 billion. That amounts to half of what the IMF has put up for sale. Already in April, China revealed that it almost doubled its gold reserves — to 1,054 metric tons from 600 tons in 2003. And traders tell the Financial Times that more purchases are coming from emerging market central banks as they seek safe haven investments after the financial crisis. Source: Deutsche Bank, "Global Commodities Daily", Michael Lewis, 4 November 2009The central banks are expected to buy gold from the IMF to diversify their reserves away from the dollar. Analysts see China, Russia and Middle East sovereign wealth funds as likely purchasers. China’s gold reserves now account for only about 1.6 percent of its total foreign reserves, despite recent purchases, far below the global average of 10.5 percent. India’s acquisition means that governments as a whole may be net buyers of gold this year for the first time since 1998. That would mostly come from IMF sales. "Central banks in India and China will be happy to accumulate gold at these levels. I will not be surprised to see even some Southeast Asian banks buying gold," Aaron Smith, Asia head of the $1.65 billion Superfund, told Reuters.For further reading:"Gold comfort", The Hindu Business Line, November 6, 2009"Sri Lanka central bank buying gold to diversify reserves", Reuters, November 5, 2009

By Dan DenningThe Daily Reckoning AustraliaWednesday, November 4th, 2009http://www.dailyreckoning.com.au/india-beats-china-to-walk-away-with-200-tonnes-of-imf-gold/2009/11/04/Well how about that! India pipped China at the post to walk away with 200 tonnes of IMF gold. Granted, India had to pay US$6.8 billion for the yellow metal. But with China steadily accumulating gold as a reserve asset (at the household AND central bank level), everyone thought China has this one in the bag. Not so! Something more than meets the eye is going on here. The IMF sale was part of a plan to unload 403.3 tonnes of gold. It's halfway there, and will use the proceeds to fund itself and loans to the developing world (or perhaps Britain and America when they go broke). But what else is going on? In the past, larges sales of gold - mostly by European central banks - swamped the gold price and kept it in check. The European CBs either felt like they had too much gold doing too little work on the balance sheet. Or, they were manipulating the price of gold down by increasing the supply to the market whenever the gold price began rendering its verdict on global fiscal and monetary policy. India's central bank is now the proud owner of 557 tonnes of gold. That gives it the tenth largest gold holdings among central banks. But it probably isn't finished. Gold makes up just six percent of India's foreign exchange reserves. There's plenty of room for that to grow. But don't forget China. China has $2.3 trillion in foreign exchange reserves. But 70% of those - or $1.6 trillion - are in U.S. dollars. It owns over just a 1,000 tonnes of gold. That makes up less than 2% of China's reserves and makes China the seventh largest holder of above ground gold. In fact the gold exchange traded fund (NYSE:GLD) owns more gold than China. France, Italy, the IMF, Germany, and the United States round out top five (from fifth to first). What this tells you is that China could double (and then double again) its gold reserves and gold would still make up less than 10% of its total forex reserves. Compare that to 66% in Italy, 69% in Germany, 70% in France, and 77% in the U.S., according to official numbers. So what's the big deal? There will always be a threat that European Central Banks release gold supply on to the market. In fact, European central banks just renewed a five-year agreement (including the IMF) to sell down a maximum of 400 tonnes of gold per year from their holdings. They've agreed to this to disgorge their gold in an orderly fashion. But it would not surprise us to see the Europeans fail to sell the gold they're allowed to sell under the agreement. Our old desk mate in London, Adrian Ash (now with Bullion Vault) is at the London Bullion Market Association's annual meeting in Edinburgh. Word from UBS analyst John Reade, also at the meeting, is that European Central Bank official Paul Mercier reckons that official holders of gold will, "no longer be net sellers of gold." As we predicted earlier this year, the European central banks would rather hoard their gold than sell it in a rising market. There may be a price at which they do sell it, in order to pay down sovereign debts. But psychologically, the fact that central banks want to own gold and not sell it is pretty important. Also, it shows you how the balance of economic power in the world has shifted East. True, the European banks can still dump gold on to the market to drown the price. But between the ETFs, central bank buyers in India and China, and the average man on the street in Beijing, Mumbai, and elsewhere, there are more buyers of gold now than sellers. And if we were right yesterday that the GFC is slowly morphing into a sovereign debt crisis, then the case for gold is that much stronger. This explains why gold futures were up by nearly 3% overnight and old yeller hit a new high at US$1,084.90. The only worry? So many hedge fund managers and pundits are singing the same tune: long gold and short U.S. Treasuries. As we mentioned yesterday, the bond bubble could go on much longer than anyone expects. And when so many people agree on something, none of them are usually right. As a contrarian, you'd be worried about becoming a victim right about now. But yes, in the long term, the end of the Super Cycle in fiat money results in the remonetisation of gold. That is what you're seeing now. And it's probably what you'll see for a few more years. It also ought to benefit other precious metals, and of course, precious metals shares.For further reading:"Get It India", Greg Peel, November 4, 2009"The significance of the IMF-RBI gold sales", Tim Iacono, November 04, 2009"Golden sale heralds economic force", Andy Hoffman, The Globe and Mail, November 4, 2009"Why is India Buying IMF Gold?", Reuters, November 3, 2009"IMF Sells Gold to India, First Sale in Nine Years", Bloomberg, November 3, 2009

By Jeff ClarkDaily WealthMonday, November 2, 2009http://www.nuwireinvestor.com/blogs/investorcentric/2009/11/china-is-becoming-world-leader-in-gold.htmlLast year, China produced over 9 million ounces of gold, one million ounces more than South Africa and more than any other country. This, combined with the Chinese government’s recent public statements encouraging its citizens to buy gold, could quickly cause China to become the world leader in the gold market.As you read this, the Chinese government is doing an extraordinary thing... something nearly unheard of in the modern world.It is encouraging citizens to put at least 5% of their savings into precious metals.The Chinese government is telling people gold and silver are good investments that will safeguard their wealth. After last year's meltdown in the stock market, people believe it. After all, Chinese citizens don't receive government retirement money... and they don't have company pension plans like people in many other countries do.This is why folks in China are lining up outside of banks, post offices, and the new official mint stores to buy gold and silver (they especially like silver because it's cheaper per ounce).The Chinese attitude toward gold and silver is a striking contrast to the American attitude right now. I don't recall a TV or radio ad from my congressman or President Obama encouraging me to buy gold or silver. Does your bank sell silver bars? Are gold mints popping up in your neighborhood? Are any of your friends, family, or coworkers scrambling to buy precious metals?In spite of a few ads on television and satellite radio, buying gold and silver in the U.S. is still largely seen as a fringe-group activity. That's not the case in China. And in the big picture, there are three distinct trends occurring in China today that many in the Occidental world are not paying attention to.First, look where China stands as a gold-producing nation.In 2008, China produced 9,070,000 ounces of gold, exceeding all other countries. Further, its production continues to rise, while many of the top-producing countries are in decline.Second, China had the lowest per-capita gold consumption of any country over the past half-century. This year, it is widely expected that Chinese demand for gold will surpass that of India. In other words, they'll also become the world's No. 1 retail buyer.Third, the Chinese government has been using its foreign exchange reserves to buy gold – a lot of it – and doing so on the sly. This past April, Chinese officials made a surprise announcement that they had been secretly buying gold since 2003, increasing their gold reserves by 76% to 33,886,000 ounces. The Chinese government now owns 30 times the gold it held in 1990. And China is believed to be a leading candidate to buy some or all of the 12.9 million ounces the International Monetary Fund says it will sell.But all this production and all this buying isn't enough...Even though China is the world's seventh-largest holder of gold, gold comprises but a tiny fraction of its reserves, as shown in the table below.What would happen to the gold price if China increased its gold reserves to just 5%? What about 10%? To overtake the U.S. as king of the gold hill, it would have to buy all the gold held by the governments of France, Italy, and Germany combined. Can China really do any of that?At $1,000 gold, to push China's gold holdings to 5% of reserves would take $55.3 billion; to 10% would cost $144.4 billion; to be the world's top gold dog would run $227.6 billion.Chinese reserves are approaching $2.3 trillion, of which almost 70%, or $1.6 trillion, are denominated in U.S. dollars. The cost to become the world's biggest holder of gold would be a pittance compared to the amount of money China has available. In other words, money is not a problem.Combining the country's massive holdings of dollars and the very real likelihood those dollars are going to lose much of their value, the motivation to buy tangible assets is urgent.Further, keep this in mind: China's reserves continue to grow. Therefore, the country must continue buying gold (or consuming its own production) just to maintain the small gold-to-reserves ratio it has, let alone increase it.In addition to the government buying precious metals, Chinese citizens will continue gobbling them up, too. Demographics alone tell us why.Government statistics show the average urban household in China has about US$1,300 in disposable income. Multiply that by the number of urban households in China and you come up with roughly $36 billion in available capital.According to precious metals consultancy CPM Group, about 9.5 million ounces of gold will be turned into coins this year (including "rounds" and medallions). At $1,000 gold, that's $9.5 billion, or only about one-third of the capital available in China.The number is more striking for silver: Total coin production this year is expected to hit 35 million ounces, equaling $615 million or just 1.7% of the available capital in China. Of course, a lot of Chinese people want cars and refrigerators, etc., but it won't take much of a shift of this capital into gold and silver to have a major impact on the global retail precious metals market. It may already be under way.And long-term projections show the demographic trend won't slow down: The middle class in China is expected to increase by 70% by 2020. So over these next 10 years, more Chinese and more money will be coming into the precious-metals markets, all at a time when inflation is almost certain to be high, adding to gold and silver's appeal. Couple this with China's long-standing cultural affinity for gold and you have the makings for a potentially life-changing gold rush.If I were a crime detective, I'd say China has the motive, means, and opportunity to push gold and gold stocks much higher.

By Howard S. KatzGoldSeek.comMonday, November 2, 2009http://news.goldseek.com/GoldSeek/1257177600.phpThings are looking good for the gold bugs these days. September and early October saw the (long awaited) break above $1,000. This past week saw the technical pull back to the breakout point, and Thursday was the turnaround day. Friday saw some very bullish candlestick signals in many of the gold stocks.But one thing has been bothering many gold bugs. In 1933, the U.S. Government confiscated the people’s gold. The Government even went into safety deposit boxes (in private banks) and took the gold out of them. This was done once. Perhaps it could be done again.Actually, I find this fear to be alarmist. There were special circumstances which led to the confiscation of gold in 1933, a special legal situation unique to American history and which made the confiscation necessary if the New Dealers were to achieve their objective of taking us off the gold standard.First, let us go back to a key event in American history. For those of you outside of the USA, this is still useful information because America was (and still is) the most wealthy country in the world, and its gold/silver standard played an important role in that accomplishment. As Senator Daniel Webster wrote early in America’s history:“Most unquestionably there is no legal tender and there can be no legal tender in this country, under the authority of this government or any other, but gold and silver….” [as quoted by Chief Justice Salmon P. Chase, “Supreme Court Reports,” Legal Tender Cases, 12 Wall 586, Opinion of the Minority.]The U. S. went on the gold/silver standard with the adoption of The Constitution in 1788. This was compromised on a few occasions but basically led to a stable currency for the period 1788-1933. This was the fastest growing economy in the history of the world.The first compromise occurred during the War of 1812. The Federal Government did not abandon hard money, but the private banks outside of New England suspended payment of gold and silver and were allowed to get away with it. Essentially only New England remained on the gold standard for the duration of the war. In relation to this, it is only the New England militia who refused to invade Canada in 1812, and it was this fact which led to the American defeat.The second compromise of hard money occurred during the Civil War. Lincoln was afraid that financing the war with a tax increase would make the war unpopular in the North. So he printed money to pay war expenses. This doubled the U.S. money supply between 1861 and 1865. The railroads were enabled to pay their debts (which had been contracted in gold) in paper money (greenbacks). For example, a $1,000 railroad bond, which had cost its owner 50 oz. of gold in 1860, could be paid off in 1865 for $1,000 in greenbacks, which were worth 25 oz. of gold. They borrowed 50 oz. and paid back 25 oz. It was stealing pure and simple, and the American railroads loved it. They tried to persuade the country to remain off the gold standard after the end of the war.This was defeated when President Grant vetoed the pro-railroad legislation and Congress voted resumption (of gold) effective 1879. This shifted the battle to the legal arena. Many holders of railroad bonds brought suit arguing that the greenbacks were unconstitutional and that the railroads had to keep their obligation to pay in gold.The Court which had to decide this matter should have been a Republican Court. Lincoln had had the opportunity to appoint 4 of the 8 new justices (one of them Salmon P. Chase, his former Secretary of the Treasury, who had issued the greenbacks). All he (or the Republicans who wanted to uphold his memory) needed was one vote from the old judges.They didn’t get it.Not only didn’t they get it but Chase regretted his action in issuing the greenbacks. He decided that it had been done in a war hysteria and that this precedent could not be allowed to stand. He broke with the Republicans and in Hepburn vs. Griswald (1870) joined the Democrats to uphold the gold standard by a vote of 5-3. (Congress had switched from using two metals, gold and silver, to just gold in 1873.) This set the precedent that the country had to be on the gold standard.The Republicans, however, were the dominant political party, and they were determined to uphold Lincoln’s memory. Forget what you learned in Civics class. The Supreme Court does not follow The Constitution. Neither does it follow precedent. Here it followed the big money of the railroad interests and their desire to cheat their creditors. One of the 5 judges of the pro-gold majority of Hepburn retired from old age, and Congress increased the size of the Court from 8 to 9. This gave President Grant 2 appointees, and he appointed two men known to be anti-gold. The new Court disregarded precedent and overturned Hepburn in The Legal Tender Cases (decided in 1871) by a vote of 5-4. The New York World, commenting on this decision, stated:“The decision provokes the indignant contempt of thinking men. It is generally regarded not as the solemn adjudication of an upright and impartial tribunal; but as a base compliance with executive instructions by creatures of the President placed upon the bench to carry out his instructions.” [As quoted by Sidney Ratner, “Was the Supreme Court Packed by President Grant?” Political Science Quarterly, Sept. 1935, pp. 343-58.]Having lost his main battle, Chase (the good guy) retreated to seeing what he could salvage. He had understood that the railroads merely wanted to cheat their creditors. Beyond this, they were not interested in ideological points. Chase was, and he did everything he could to shore up the legal foundation for the gold standard knowing that the new majority would not bother to overturn it.Chase’s most important decision in this regard was Bronson vs. Rodes, 7 Wall 229, decided in 1870. And this is the decision which played a crucial role in the gold confiscation of 1933. In Bronson v. Rodes (1870), the plaintiff had a written gold clause in his contract requiring payment in gold. Since very few people had such contracts in 1870, the railroads did not care if they lost that one. The Chase Court ruled:“It recognizes the fact, accepted by all men throughout the world, that value is inherent in the precious metals; that gold and silver are in themselves values, and being such, and being in other respects best adapted to the purpose, are the only proper measures of values; that these values are determined by weight and purity…A contract to pay a certain number of dollars in gold or silver coins is, therefore, in legal import, nothing else than an agreement to deliver a certain weight of standard gold…the tender must be according to the terms of the contract.” [U.S. Supreme Court, Opinion of the Majority, Bronson v. Rodes, 7 Wall 229 at 249, 250, 252.] This was an extremely important opinion. It meant that future creditors could protect themselves from another depreciation of the currency by insisting on a gold clause in their contracts. If they had a gold clause, they were effectively on the gold standard, no matter what happened to the rest of the country. Lawyers went over these two Supreme Court decisions (Bronson v. Rodes and Legal Tender Cases) after 1871, and recommended gold clauses to their clients. Gradually gold clauses became very widespread in American business.So when the New Deal took over in 1933, they faced the fact that, even if they abolished the gold standard, it would not work because now, unlike 1870, most everyone had a gold clause. It is for this reason that the New Deal anti-gold measures included a ban on the ownership of gold coins, a ban on gold clause contracts and the invasion of bank safety deposit boxes.Quite frankly, it is unlikely that a modern government would do the same thing for the simple reason that they do not need to. We are already off the gold standard. Remember that paper money is theft. There is always a group (the paper aristocracy) who wants to steal wealth from the people by arranging things so that they are the beneficiaries of the printing of money. Now the paper money system is well established and firmly in place. There is no need for measures which will alarm the general public. At the present time, it is only the gold bugs who realize the evil of paper money and who are acting to protect themselves. But we gold bugs are only a small minority. (Notice that the one time that both prices and pro-gold sentiment were increasing sharply, 1979, the establishment turned off the money spigot and suffered through a period of tight money and credit (1979-81) in order to prevent the gold bugs from becoming more popular.)So you do not need to worry about the Government stealing your gold. They don’t need to. They already steal the wealth of the naïve (anti-gold) majority. This majority believes their lie that the Government is robbing from the rich to give to them. They keep getting poorer and poorer, and they can’t figure out why. And they keep re-electing the politicians who victimize them.However, this does bring up an interesting speculation. Both gold ownership and gold clauses have been legalized in the U.S. (in the 1970s). This raises the question as to whether gold clause contracts could be made, as in the 19th century, on the precedent of Bronson v. Rodes. One problem that such a project would face is that the old American double eagle coins (approximately one ounce) now have a numismatic value and thus are not suitable for using as currency. To solve this problem, Congressman Ron Paul championed the (new) American eagle gold coins (exactly one ounce) in 1986. It was passed in the Senate by unanimous vote and in the House with a very small dissenting minority. A further advantage of the new Eagle coin is that language accompanying the bill states specifically that the coin is intended to be used as money, is legal tender and is not merely an item for collectors.For example, suppose you buy some real estate and intend to hold it for 10 years. You have the choice to pay either 200,000 dollars for the property or 200 ounces of gold (in American Eagle coins). At the end of the 10 years, the value of the U.S. dollar has fallen in half. All real estate, quoted in dollars, has doubled. But the price of your property in gold is still 200 ounces.Along comes the Internal Revenue Service and says, “Sir, you have made a handsome profit on your real estate. You bought it for 200,000 dollars and sold it for 400,000 dollars. Here is your tax bill. You, however, reply, “I did not buy the property for dollars. I bought it for ounces. I paid 200 ounces, and I sold it for 200 ounces. I made no profit at all. My house did not go up; your dollar went down. But since I did not use your dollars, what does that have to do with me?Or take the following case: A man buys a life insurance policy on himself for his wife to provide security for her should he die. Since this purchase was made back in the old days when the dollar was still connected to gold and had some value, the insurance was in the amount of $100,000. Today, however, if his wife puts $100,000 in the bank, it will earn $125 per year (1/8% interest). And that is not the kind of protection he had in mind. What he needed to do was to buy insurance denominated in gold ounces. As the paper currency depreciated, the gold currency held its value.A possible difficulty with the use of the Eagle coin in this way is that Congressman Frank Annunzio, Chairman of the House Banking Committee, illegally slipped a dollar denomination onto the coin (although both House and Senate versions of the bill specified only an ounce denomination). This muddies the waters and raises a question as to how some future judge would rule.What is wrong with the economic establishment today is that it raises its capital by having the central bank create money out of nothing. In effect, our governments are robbing us and giving to them. It makes money, not by creating wealth, but by going into debt. The more debt the more they make. This was the cause of the enormous profits made by Wall Street in the early years of this century. The problem with this system is that conditions change. Their high-risk strategies which make lots of money in the early part of the cycle cause them to go belly up in the late part of the cycle. The last time this happened the Government admitted that its function was to rob from the common people and give wealth to these powerful interests. It argued that they were “too big to fail.” Well, they got so big because the Government stole wealth from us and gave it to them. They never produced any wealth. And the whole purpose of Bernanke’s ultra-easy credit policy of 2008 was to steal more from us and give it to them.The system cannot continue as it is going. The stealing must either progress to the point that it destroys our society or it must stop. In 4th century A.D. Rome, they chose the former path. People stopped using money; the society reverted to barter, and the economy of western Europe collapsed. The barbarians swept across the Empire, and millions of people died of war, plague and famine.For further reading:"Gold and Freedom", Jacob G. Hornberger, November 2, 2009"Gold and Economic Freedom", Brad Parkes, November 1, 2009"Could Gold Confiscation Happen Again?", Julian D.W. Phillips, September 1, 2009"Are We Being Conned About Gold Confiscation?", Doug Hornig, August 7, 2009"The Myth of Gold Confiscation", The Silver Analyst, May 29, 2009"The Federal War on Gold", Jacob G. Hornberger, January 20, 2007

By Ron PaulSpecial to CNNFriday, October 30, 2009http://www.cnn.com/2009/OPINION/10/30/ron.paul.fed/Washington, D.C. -- A growing number of Americans are becoming aware of the Federal Reserve System, what it is, how it has precipitated our financial crisis, and how it continues to pursue policies that delay economic recovery and weaken the dollar.The Fed's actions, combined with the federal government's bailout bills and stimulus packages, have struck a nerve in the American people.Recent polls have shown that more than 75 percent of Americans support efforts to audit the Fed, something which my bill, HR 1207, the Federal Reserve Transparency Act, aims to do. HR 1207 has the support of 304 members of Congress, and the Senate version of the bill, S. 604, is supported by 31 U.S. senators.Fed Chairman Ben Bernanke has embarked on an ambitious program of monetary expansion, more than doubling the monetary base to almost $1.9 trillion and doubling the size of its balance sheet to over $2 trillion, placing the American economy in a precarious position.If all this excess money begins to be loaned out, the Fed risks creating a hyperinflationary crisis similar to 1920s Germany. If the Fed contracts this money, it risks harming the banks it desperately wants to see bailed out.It is imperative that the American people know what the Fed is up to, how much money it loans to banks and what types of agreements it enters into with foreign banks and governments. Just about all of this information is exempt from audit or oversight. The Fed's actions directly affect the value of the dollar, which is coming under increasing pressure from our foreign creditors. If we do not wish to see a complete collapse of the dollar, the Fed needs to be subject to a strict audit of its actions, if not an outright abolition of its charter.While I would like nothing more than to see the Federal Reserve abolished, it is not absolutely necessary to do so with direct legislation.The Fed's influence comes about because of its monopolization of the creation of money. If we could abolish the government monopoly on the creation of money, the Federal Reserve would be forced to clean up its act or go out of business. Economists know that monopolies lead to reduced output and higher prices, a suboptimal allocation of resources. This applies as well to the market for circulating currency as it does to markets for any other good.In the previous Congress I introduced legislation that would eliminate the three major barriers to competition in currency and break the Fed's stranglehold on money.The first barrier: Legal tender laws, which Congress does not have the Constitutional authority to enact. Historically, legal tender laws have been used by governments to force their citizens to accept debased and devalued currency.Gresham's Law describes this phenomenon, which can be summed up in one phrase: Bad money drives out good money. In the absence of legal tender laws, Gresham's Law no longer holds. If people are free to reject debased currency, and instead demand sound money, sound money will gradually return to use in society.The second barrier: laws that prohibit the operation of private mints. Certain sections of U.S. code classified as anti-counterfeiting statutes were in fact intended to shut down private mints that had been operating in California. There is no reason to ban private companies from minting gold and silver coins to compete with the dollar.All currencies are based on trust, trust that the issuing authority will not debase the currency. If it becomes known that the issuer of a particular currency is minting underweight coins, people will stop accepting that currency and that company will go out of business. If someone else attempts to counterfeit that currency and pass those coins, there are sufficient counterfeiting laws on the books to prosecute those counterfeiters.Merchants and individuals are free to choose which currencies they accept, and in the absence of legal tender laws I believe that alternative currencies will gain more traction.Stores today can accept whatever currency they like. In Washington, DC a few years ago, some stores began accepting euros from international tourists. Harrod's in London accepts pounds, euros, and dollars. There is no legal requirement in the United States for a store to accept dollars for non-debt transactions.If you walk into a 7-11 to buy a soda, the clerk doesn't have to accept your dollars, he could demand euros, silver, or copper. But because legal tender laws backing the dollar have caused the dollar to drive other currencies out of circulation, it is easier for stores to accept dollars.However, most stores also accept credit cards, personal checks, and debit cards, none of which are legal tender. Some stores are moving to credit card-only transactions to minimize costs, which they are allowed to do.Under a system of competing currencies, it would be to the advantage of stores to accept as many currencies as they could, in order to attract a wide range of customers. Stores that only accepted one currency would see their customer base shrink. The use of credit cards could simplify things just as it does today when Americans travel to Europe. They pay in euros with their credit card, and their card company bills in dollars. The market will find a solution to any problems that might arise.The final barrier to competing currencies: Laws that assess capital gains and sales taxes on gold and silver coins. Under federal law, coins are considered collectibles, and are liable for capital gains taxes. These taxes actually tax monetary debasement. The purchasing power of gold may remain relatively constant, but as the nominal dollar value increases because of a weak dollar, the federal government considers this an increase in wealth and assesses taxes.Thus, the more the dollar is debased, the more capital gains taxes must be paid on holdings of gold and other precious metals. For individuals who may wish to use gold and silver in everyday transactions, this can quickly become a complicated and costly burden.The long-term strength of the dollar will only be weakened by maintaining the Fed's monopoly on our monetary system. Our foreign creditors are already moving to dethrone the dollar as the world's currency.The prospect of American citizens also turning away from the dollar toward alternate currencies should provide an impetus to the U.S. government to regain control of the dollar and halt its downward spiral. Restoring soundness to the dollar will remove the government's ability and incentive to inflate the currency, and provide stability to the financial system. With a sound currency, everyone is better off, not just those who control the monetary system.The opinions expressed in this commentary are solely those of Rep. Ron Paul.For further reading:"The Diminishing Dollar", Charles Scaliger, October 29, 2009

By Jason HommelSilver Stock ReportThursday, October 29, 2009 http://silverstockreport.com/2009/free-market-hindered.htmlWith "free market" advocates like these, we'll never return to honest money!Sometimes well meaning "experts" do more harm than good. Antal Fekete explains "free coinage of gold" -- to New Zealandershttp://www.gata.org/node/7950 Antal Fekete wants government to open their mints to the people, for free coinage of precious metals, to allow people to turn scrap gold, or newly mined gold, into gold coins for free. Thus, he wants government to provide free (subsidized) services of four different businesses: assaying, refining, minting, and retail coin shops. As he says, "the proper role of government is to provide coins for the realm". He also wants no seigniorage nor any tax nor cost associated with such conversions. Seigniorage is the extra value of precious metal in "official" coin form. http://en.wikipedia.org/wiki/Seigniorage Antal is living in a fantasy land. Government "help" can never be free. Subsidies and bail outs always come at a cost, it's only a matter of who pays. What's especially troubling about Antal's advocacy is that government subsidies are inconsistent with free market theory! Since we handle three of those four services ourselves (all but refining) I think I'm qualified to speak on this topic. Government bail outs are uneconomic, don't work, and always come at a much higher cost than when provided by businesses in a competitive free market. Government minted Silver Eagles already cost more than privately minted 1 oz. rounds, showing that government is not providing the service better or cheaper than private industry already does. Furthermore, the US government's current minting program sells retail "collectible" silver and gold to the public at the mint's web site, but only at extremely high prices. The mint sells cheaper bullion to about 15 major wholesalers, who then re-sell to other dealers, like ourselves, who then sell to the public. This private-industry re-sale market is more efficient, and less costly, than direct purchases from the US Mint. Assaying gold, refining, minting, and selling retail gold coins are all businesses that involve advertising a place of business, hiring skilled employees, paying for equipment, installing security systems, and training skilled people. Also, such businesses need to know how to offset the risks of price movements in the metal such as avoiding taking a short position in a bull market, and providing these services more efficiently than the competition. Assaying requires a skilled and trained assayer making a quick and accurate estimated value of the underlying bullion. That estimate must also include all such costs of the business, such as advertising, rent, salaries, time taken away from other customers, etc. One time, I needed to cover a silver order, and I was talking to some customers. Due to my 10 minute delay, I lost $150, because the silver price went up. It is simply impossible for any government or any entity to sustainably pay everyone 100% of the bullion value for their bullion. Doing so would only create another government program that is open to being scammed and defrauded, at the ultimate cost to the taxpayers. There are simply not enough real world resources, such as fire crucibles, to give every customer an individual 100% accurate fire assay, and it would be completely uneconomic to melt a single $25 pair of earrings in a special melting pot, which could cost well over $25 in energy just to melt, if melted individually, to obtain 100% accuracy. 100% accuracy would come at a loss of efficiency, and only businesses are able to understand this, and allocate resources to most appropriately meet these real world trade offs in the most efficient way. In some cases, it might cost 100% or more to give a 100% accurate assessment, which could result in offering nothing to the customer, or costing the government everything. We pay from between 60% to 85% of our estimated bullion value when we buy scrap gold, which is higher than all other locations that we have heard of in the Sacramento Area. The difference is explained by the amount of time it may take to do an assay, and also by the accuracy of our assays, and also by the amount brought in by the customer. If a customer can bring in over 5 ounces of gold, we are simply able to pay more. If the quality of the gold is difficult to determine such as is the case with placer nuggets, or smaller 10k-18k jewelry items, we must offer less. Scrap gold comes in many forms, with many contaminants, and refining is a real, added cost. Refining is a separate business which must aggregate, or pool together, enough scrap or placer gold to melt them economically. Our current refiner only works with established businesses like our coin shops, who will bring in repeat business of about 30-50 oz. of scrap gold per month. Refiners operate on the slimmest of margins. A man called us this week to sell us a new $1 million dollar machine to refine gold, so we could do our own refining, instead of using our current refiner. I said, "Great, we can pay for that machine, given our current refiner's costs, in about 100 years!" At $1 million in start up, compared to our current great prices from our refiner, it's just not economic for us to try to do it ourselves! Minting coins is a business that today requires a minimum of 10 different machines and processes. We have a pre-melt bucket, a continuous caster, a rolling mill, a slitter mill, a punching machine, a rimming machine, an annealing oven, a burnishing vat, die making machines, and stamping mills. We are looking to buy a wrapping/tubing machine. All of those machines cost money, the installation costs money, the rent costs money, employees cost money. And we are still not yet set up to mint a single thing! How can it be provided for free? Bottom line is this: Antal's position assumes that these services should be provided by government for free, or essentially, at prices substantially less than the prices charged by existing, sustainable, competitive businesses in the free market today. Antal is thus claiming that the prices charged by businesses today are too high for his theoretically optimum scenario. It he accusing these businesses today of price gouging? If current assaying, refining, minting, and retailing prices are really too high, then Antal should go into the market, and provide those services cheaper than industry is already providing. Go ahead Antal, start up your own scrap gold buying business if you think prices charged are too high. Nobody is stopping you. There is little government regulation, thank God, so the market is already free, and highly competitive in this area.Many investors who could provide these services instead choose to buy mining stocks, as real business involves real work! But Antal should not claim to be a free market advocate, while asking for government intervention and subsidy. That kind of rank hypocrisy can win no support from the public, who is sick of seeing government handouts, and can easily see they hypocrisy of a "free market" gold advocate who seeks government handouts. The gold market does not need government welfare. We need government to get out of the gold business, and stay out. What's especially ironic about Antal's position is that the government is already providing gold at "below market" costs, as they are dumping gold onto the market through the leasing of government central bank gold to bullion banks, who dump it into the market at opportune times, which is helping to manipulate prices lower than they should be. In essence, Antal is already getting what he wants, that is to say, cheap gold provided on an uneconomic basis, but those of us who can see this correctly, are correctly identifying this as market manipulation, and we recognize that it is unsustainable, and is ending, which is leading to the higher gold prices we are seeing. Another advocate of using precious metals as honest money is billionaire Hugo Salinas Price, in Mexico. Here's some of his work: A BRIEF EXPLANATION OF THE PROJECT TO MONETIZE THE ONE OUNCE SILVER "LIBERTAD" COINhttp://www.gold-eagle.com/editorials_05/salinas102806.html Hugo wants the Mexican Central bank to provide a price quote that would be a virtual nominal currency value for a 1 ounce silver round, a value that will never go down, just as nominal values on notes and engraved values on coins never go down. It sounds elegant at first glance. Hugo maintains that this "price floor" for a silver coin is essential for helping it circulate as currency, since money holders should not be taking on the role of speculators. But expecting to be able to ask the Mexican central bank for a favor that works against its own interests is self-defeating. Would I ask any of my customers to shoot themselves in the foot? Of course not! Nobody expects the dollar, or any other currency, to "never move down" compared to other currencies of the world! There might be an exception. True, China is trying to let the value of their currency "only move up" against the dollar, but this is after they already devalued their own currency by 40% against the dollar a few years ago. Such attempts are normally and appropriately called price fixing, and are widely recognized as totally contrary to free market principles. Nobody should expect society to return to free market money by violating free market principles! Why should silver investors, or silver holders, get a government guarantee that the nominal value of the silver coins they hold will never go down? No other investor gets such a guarantee. No other currency holder gets such a guarantee. Why should silver investors be so special? Hugo is just another billionaire looking for a government hand out or bail out. When silver is already the lowest valued thing on earth you can buy, value for value, why would a "price support" system even be necessary? The problem here is that asking for government intervention hinders what Hugo could already be doing if he simply decided to do it himself. Hugo could already mint his own 1 oz. rounds privately. He could reduce the spread if he wants, all on his own. He owns a chain of Mexican electronics stores, and he could sell 1 oz. privately minted rounds emblazoned with his own store's logo, and he could sell the coins at 10% over spot, and even accept them at up to 10% over spot, or 9% over spot, or whatever he may choose, in return for his store merchandise. But he will never even think to develop his own plan, as long as he wastes his time and money on seeking a handout from the Mexican government. Or, as he said to me a few years ago in his own words, "It's too late in the game now to try and change tactics. I've already gotten so many on board with the current plan, I don't want to confuse anyone." And so, his refusal to change, and his insistence on seeking government handouts, prevents the actual implementation of real world silver as money that could be issued by his own stores directly, within a few weeks! No government is preventing Hugo Salinas Price from issuing silver as money. No government is preventing Antal Fekete from buying scrap gold as from the public. Both of these men are hindered only by their own hypocritical cries for government intervention. Two warnings: The firearms manufacturing industry, after WWII, fearing the dumping of surplus military weapons onto the market, pushed for gun restrictions, or "government protection" for their businesses, as if they didn't make enough money during the war years! Today, those gun restrictions have mutated into nearly destroying the firearms industry who has been beset with lawsuits for selling "assault" weapons. Another story: Over 100 years ago, silver advocates pushed for a government handout. They wanted the silver price to be guaranteed to be set at a 15 to one ratio with gold. Western states wanted to be able to pay their debts with silver. This would be price fixing, completely contrary to free market theory, and would have cost the government their entire gold hoard. The compromise? Silver advocates (Democrats) lost to Republicans, who demonetized silver, and made the paying of all debts greater than $5 due in gold only. The 'gold standard' advocates ended up being the champions of the banking industry, who eventually demonetized gold as well. Moral? Government subsidies backfire! They always do. Yes, I advocate silver and gold to be used as money, as Hugo and Antal do. But I'm not asking for the government to do anything. I'm doing it. I'm using silver and gold on a daily basis. We buy scrap and sell to a refiner. We have coins minted. We sell bullion to the public. I'm helping people to use gold and silver as a form of savings, since I sell it to them. I'm helping others liquidate it, both of which help to monetize it. Nearly every day I explain to people why we can pay 99% of the spot price for a gold Eagle, but only 60% to 85% of the spot price for jewelry. One is fungible, the other is not. One is money, the other is not. One is similar enough to be like any other similar piece of gold as to be easily exchangeable and interchangeable. The scrap stuff is not. Scrap must be assayed, then refined, then minted, and then it can be sold in a coin shop (yes, at one more small mark up), as a stable form of money. Warning, numismatic silver and gold items are not fungible, despite the claims of many numismatic dealers who attempt to make them fungible with quote books, and grading slabs, etc. It can cost up to $60 just to grade a silver Eagle. What a rip-off market! if you spend $300,000 on numismatic investments you "ARE" the numismatic market! It's a horrible trap. Those who ignore the danger of non-fungible gold have to pay the price. Asking government to pay, really just gives the government a license to steal from others to be able to pay for it. Gold and silver stand in the way of such government theft, if properly used and understood. Besides, when silver was money in the USA, the markup on silver coinage was up to 400%. The government bought silver for 29 cents per oz., and turned it into $1.40 of coinage! ($1 of 90% silver coinage contains .72 of an oz. of silver. $1.40 x .72/oz. = 1 oz.). So if the government gets into this game of "FREE" coinage, you will likely trade 1 oz. of scrap silver to the government, and get maybe a 1/5th of an oz. of silver back in an "official" silver piece! That's not free at all!Jason Hommel is the publisher of Silver Stock Report and he lives in Grass Valley, CA in the heart of gold country.For further reading:"Forgotten Anniversary: One Hundred Years of Legal Tender", Antal Fekete, October 28, 2009"Opening the Mint to Gold and Silver - Then and Now", Hugo Salinas Price, September 7, 2009

RIA-Novosti, MoscowWednesday, October 28, 2009 http://en.rian.ru/business/20091028/156617011.html ANKARA, Turkey -- Turkey is switching to national currencies in trade with Iran and China, ending dependence on the U.S. dollar and the euro for about 20 percent of its commodity turnover, local media reported on Wednesday. Turkey has already switched to settlements in national currencies with Russia amid weakening confidence in the greenback as the world's major reserve currency. The move was initiated by Turkish President Abdullah Gul during his visit to Moscow in February. Turkey's decision to make settlements with Iran and China in national currencies was announced during a visit to Iran by Turkish Prime Minister Recep Tayyip Erdogan. The Turkish premier told a Turkish-Iranian business forum on Tuesday that the countries had prepared a legal framework for transition to settlements in national currencies. "We have adopted a necessary legislative act and are prepared for the transition," the Turkish newspaper Milliyet quoted Erdogan as saying. According to the paper, Turkey's trade with Russia, Iran, and China exceeds $65 billion a year. Russia is Turkey's largest trade partner, with $37.8 billion commodity turnover registered last year. Russian Prime Minister Vladimir Putin said on October 14 that Russia was ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings. "We are ready to examine the possibility of selling energy resources for rubles, but our Chinese partners need rubles for that. We are also ready to sell for yuans," Putin said. Britain's Independent newspaper reported in early October that Russian officials had held "secret meetings" with Arab states, China and France on ending the use of the U.S. dollar in international oil trade. The countries are reportedly seeking to switch from the dollar to a basket of currencies including the euro, Japanese yen, Chinese yuan, gold, and a new unified currency of leading Arab oil producing countries. The Independent said the meetings have been confirmed by Chinese and Arab banking sources, although Russian officials said they had no knowledge of the talks.

By Nguyen Anh Thu in Vietnam, Darcy Crowe in Venezuela, and Will Connors in NigeriaThe Wall Street JournalWednesday, October 28, 2009http://online.wsj.com/article/SB125667861511511383.html Globally, the Greenback Remains King BEHIND THE SCENES: The U.S. dollar, despite its beating this year, is the currency of choice in black-market exchange shops like this one in Hanoi, Vietnam. The U.S. dollar, once universally accepted as the world's strongest currency, has been trounced in recent months by everything from the euro to the Brazilian real to the South Korean won. But in the back-alley markets where business is done in many of the world's developing economies, the dollar still reigns. In jewelry stores in Vietnam, taxicabs in Venezuela and outdoor markets in Nigeria, black-market money-changers say the dollar is still the currency of choice, even though its value has fallen in some cases. "The U.S. dollar is losing value, but not here in Vietnam," said Vu Manh Quynh, an auto trader who regularly exchanges dong for dollars in the winding streets of Hanoi's Old Quarter. "Vietnamese people still keep U.S. dollars and gold." While the U.S. dollar fetches 17,858 dong on the official rates, the black market rate is closer to 18,600. Hai Duong, a currency trader, said he had 20 or more customers buying U.S. dollars on a recent Wednesday, compared with two customers buying euros. While their true size is unknown, black markets in currencies are key to greasing the wheels of commerce in countries that have tight currency controls. They provide residents and companies with protection against inflation or a possible devaluation of the local currency, and give companies a source of dollars with which to buy and sell goods abroad. In most countries, the markets are illegal, while in others they are tacitly condoned. "Typically, dollars are king in the black markets of the world," says Kenneth Rogoff, professor of economics at Harvard University and former chief economist at the International Monetary Fund. Prof. Rogoff estimates that as much as 75% of U.S. notes in circulation, or more than $600 billion, are held outside the U.S. Most of that is likely in what he calls the underground economy, where transactions are made beyond the oversight of government -- much of which is juiced by the black market. "This money is not in cash registers, it's not in bank vaults," Prof. Rogoff says. In the world's official foreign-exchange markets, where turnover totals about $3 trillion each day, according to the Bank for International Settlements, the dollar's luster has diminished. The dollar, for example, has fallen about 6% against the euro this year. The dollar has dropped about 15% against a basket of currencies since early March. The ballooning U.S. deficit and a move by investors away from the haven of the dollar as world economies recover have sparked worries that the currency may be headed for a years-long swoon. It also has opened the door for renewed questioning of the dollar's future as the world's reserve currency. For Venezuelans, where the black market plays a crucial role in the financial system, the dollar has retained its status. Residents seeking protection against inflation or a devaluation of the bolivar turn to currency traders. Large companies that need dollars for operations abroad also visit the unregulated market."Having dollars is like a barricade," says Arnaldo Morales, a cabby who moonlights as a currency trader, buying dollars from travelers as they enter the country, then selling them to Venezuelans.Mr. Morales says he has been trading dollars since 2003, when President Hugo Chávez imposed a currency peg. Residents can purchase only $2,500 for travel abroad each year at the official rate of 2.15 bolivars. The economy has become so heavily dependent on the so-called parallel exchange rate for greenbacks that the government was recently forced to intervene after the dollar traded as high as seven bolivars in August. The government is flooding the domestic market with dollars by selling bonds to locals who then trade them abroad for U.S. currency. "The dollar will always be strong," says Andrea Martinez, a trader who dismissed as temporary the recent decline in the black-market rate. Ms. Martinez operates inside a tiny, nondescript mall where shotgun-carrying private-security guards wearing bulletproof vests watch over rows of pawn shops that serve as a front for dollar traders. On a good day, she says, she still sells as much as $5,000. In Nigeria, sub-Sahara Africa's second-largest economy, currency traders still deal predominantly in American currency. The black-market traders even have their own trade group, the Association of Bureaux de Change Operators of Nigeria. "The dollar still has dominance in Nigeria," said Alhaji Farouk Suleman, the president of the group. "The exchange rate might not be good, but you know what you're dealing with and that you can use the dollar anywhere you go. I don't see any real shift towards the pound or euro." The Nigerian naira, after plummeting late last year and earlier this year, has stabilized against the dollar, thanks to renewed confidence after harsh banking reforms undertaken by a new central bank governor. The dollar was fetching 183 naira in the spring, but now buys about 153 naira. But the dollar's descent against the world's biggest currencies hasn't gone unnoticed. On the streets of Mumbai, illegal currency traders that swap wads of cash from bags behind their shops in the bustling back alleys of Colaba, a neighborhood popular with tourists, say business has been slow recently. The dollar's decline has sellers waiting for a rebound and buyers waiting for a better deal. "Business is way down," says one trader, spitting a stream of red betel-nut juice in the alley behind his shop and wiping his moustache. "People still want to wait." The dollar buys 47 rupees at licensed currency-trading companies and 46.70 rupees on the black market. And at the Super Rich currency exchange near one of Bangkok's busiest downtown thoroughfares, Thaweesak Kanchanakorn says he and his girlfriend are planning to vacation in the U.S., and that he thought it might be a good idea to invest in dollars now, because they're "cheap." In the long run, "I don't think the U.S. dollar will still be a major currency for reserves anymore," he said. China's yuan "will take its place." For now, those seeking to exchange bolivars or dong are choosing the U.S. dollar, if only because it remains the most recognizable of the world's currencies. In Iraq, where legal currency exchanges have become common, the U.S. presence since 2003 has kept up demand for the dollar at the expense of the euro. Ali Mohammed of the Al Nasir currency-exchange company said that although the world market value of the euro has risen, it is difficult to exchange in Baghdad. And the dollar likely will be Iraq's unofficial second currency for some time to come. The dollar fetched about 1,190 dinars in September, according to central bank figures, little changed from 1,220 dinars at the beginning of 2008. "It's the only thing used, besides the Iraqi dinar, for commercial business and trade," he said. "As long as it stays pretty stable, we don't mind this." Carlos Denis, who trades in the Venezuelan mall alongside Ms. Martinez, insists that the dollar is still the only currency that matters. "Take out a dollar bill in the remotest place in world and people will recognize it," he said. Eric Bellman in India, Gina Chon in Iraq, and Wilawan Watcharasakwet in Thailand contributed to this article.

By Karen PercyABC NewsMonday, October 26, 2009http://www.abc.net.au/news/stories/2009/10/26/2723736.htmIt may never happen but the idea of having one Asian currency is being floated as part of a greater Asia Pacific community. As leaders got together in Thailand to discuss regional issues, the idea of combining the Association of South-East Asian Nations (ASEAN) and APEC was again talked about. The idea is to bring more countries together to cooperate on issues of regional security and trade, but it is still a long way off. ASEAN and its partners are promising to work closely together on economic integration, climate change and disaster management. And they discussed the long-term future of the group and the East-Asia summit forum as Australian Prime Minister Kevin Rudd outlined his ideas for creating a bigger and bolder grouping. His idea is to meld the APEC and ASEAN groups to create a far-reaching alliance that would have security issues at its heart. "It reflects the fact that in this dynamic region, which is so much the centre of global economic activity in the 21st century, but with still genuine and continuing security challenges in the 21st century that we must always work to improve our regional coordination and cooperation systems and institutions into the future," he said. Japan has floated a similar proposal, going even further - pitching for a common currency amongst East Asian nations. Thailand's Prime Minister, Abhisit Vejjajiva, ASEAN 's current president, has reinforced his colleagues' desire to build on the ASEAN framework. "We continue to practice open regionalism and we know that with the evolving circumstances and environment of our times, our cooperation and arrangements too must evolve and we have had good responses from our dialogue partners," he said. "I am confident that in doing so we will preserve ASEAN centrality and make vital contributions, not just to our own region but to the Asia-Pacific region and to the whole world." ASEAN charters 'hollow' Despite adopting a charter in the past year aimed at ending the perception of ASEAN as a country club and committing the 10 members to a more rules-based system, ASEAN is still seen as being weak and ineffective. A case in point is the region's first human rights body, which was formally established during this weekend but it is going to be an instrument of the 10 governments, many of which are accused of abuses. The leaders talk up their aims to be there for the people, yet input from outsiders, whether it is ordinary citizens or non-governmental organisations, into how ASEAN should grow has been poorly received, as seen in Friday's people's meeting where a number of NGOs were turned away from their own discussions. Political commentator Thitinan Pongsudhirak says there are worries now about what happens next year when Vietnam assumes ASEAN's presidency. "Vietnam is not going to be very receptive to civil society activism, human rights organisations and so on and this is going to cast a cloud over ASEAN because ASEAN has come out with this ASEAN charter," he said. "Human rights provisions, the fundamental freedoms in the ASEAN charter will come under pressure during Vietnam's chairmanship. "If Vietnam does not allow some opening, some abidance of this human rights and fundamental freedoms in the ASEAN charter, the ASEAN charter will be hollow. It will look like a joke. It will be bankrupt." One thing will not be at issue in Vietnam and that is security. While Thailand has had to contend with threats of protests and a disruption to one summit, there is no chance that Vietnam's meetings will be disrupted by protesters or anything else for that matter.For further reading:"Asian Community: It’s time to act on currency plan", New Straits Times, October 27, 2009"Plans of Asia-Pacific Integration through Single Currency", Jose Roy, October 27, 2009"The Dethroning of the U.S. Dollar Will Happen Sooner Than You Think", Keith Fitz-Gerald, October 27, 2009

By Julia IoffeFortune Brainstorm TechTuesday, October 27, 2009http://brainstormtech.blogs.fortune.cnn.com/2009/10/27/crashing-russias-all-cash-culture/Electronic money purveyors make it easy for Russian consumers to make micropayments. Now they’re seeking legitimacy. Because building an entire banking sector from scratch in 20 years makes for some wild swings, Russians put their trust in cash. In Russia, the first thing you do when you get your monthly salary is withdraw it all, and pay for everything with tangible, fungible cash. You buy your groceries with cash, pay for your winter boots with cash; heck, you even pay for real estate in cash. But how do you use cash for amorphous things like Internet service or to prepay your cell phone? In the last ten years, a rapidly growing shadow banking system has sprouted up in Russia to service these small payments by turning cash into electronic currency, or e-money. And now that this sector has reached the $1 billion mark – and this in a crisis – and has expanded to include 10 million customers, e-money business owners are getting antsy about government regulation. Their problem? There isn’t any. However paradoxical, this is an understandable fear in a country where government pressure on businesses is becoming more and more suffocating, and where legal gray areas can be used to bring a business to its knees. (Often, this also depresses the market valuation of these companies.) And now that the Kremlin and the Russian Central Bank have noticed these legal blind spots, the need to mold regulation right is even more urgent for the various e-money players. This month, they have banded together to form the Electronic Money Association (AED) in order to lobby the Russian parliament (the Duma) for clear – and favorable – legal definitions of their business. The association’s goal is regulation based on the flexible and nuanced European model, which outlines six types of e-commerce entities. To date, Russia has zero. In fact, e-commerce is barely described in the Russian legal system, partially because of the natural lag time before law catches up to fast-moving technology, partially because there is no consensus here on how to regulate this industry. For instance, because e-commerce uses the language of banking – checks, currency – some in Russia have suggested that it be brought under the preexisting banking framework. But these companies are no banks. Here’s how it works: Say you want to pay your web provider for a month’s worth of service. You take your cash and feed it into one of 200,000 ATM-like terminals scattered all over the country. (Qiwi, which owns the largest network of these, is a member of AED.) Then, depending on which company you use, you either direct your money for an on-the-spot payment to your provider (WM Transfer Ltd.’s WebMoney service is popular in Russia), or fill up a virtual “wallet” from which the funds can be distributed later to merchants of your choosing. (Search engine Yandex operates a digital wallet called Yandex.Money payment system. For more on Yandex, see "Google's Russian Threat.") WebMoney and Yandex.Money account for more than 90% of the e-money market and account for hundreds of thousands of daily transactions, some for sums as low as $7, to, say, play a round of World of Warcraft. These are small transactions, usually topping out at $250 for bigger-ticket items like air or train tickets, but the need for them is evident: WebMoney, which controls 54% of the Russian e-money market and deals with several currencies (including a gold-based one), has doubled in size every year since its creation. Overall market growth rates have slowed a bit but given that Russian internet penetration is still low and growing faster than anywhere in Europe, it only means there’s room to expand. And as more Russians get online, they’re bound to turn to the web to handle some of their basic transactions. First, there are the convenience and trust factors. Banks in Russia have been known to vanish overnight with the savings of millions, yet opening an account in one is extremely difficult. (“My 18 year-old son tried to open an account and the bank demanded to see a real-estate deed – for a debit card!” says Peter Darahvelidze, an executive with WebMoney.) Furthermore, in a country sprawling across six time zones and bound together with an infirm infrastructure, even getting to a bank might be difficult. E-money services, points out Mikhail Mamuta of the National Partnership of Microfinance Market Participants, “are also a form of economic development and fighting poverty.” E-money has also become extremely popular with Russian and international merchants (Telecom company Skype gets most of its Russian payments through Yandex.Money) because it cuts down on fraud and false “charge-backs” (when a customer declares a credit-card purchase to have been made without his knowledge), which are rampant in Russia. E-money companies have put in place various measures to deal with this. Yandex.Money, for example, does not allow a charge back if there was no technical problem with the transaction. (Some players in this business – like some terminal operators and mobile micropayment companies — are less than legitimate and have raised suspicions of money laundering. It is yet another reason that the bigger players are looking for careful regulation.) But as the sector continues to grow, some natural foes have started to trouble the waters. Many banks, for example, are reluctant to see any inroads made into their market share yet who are too unwieldy and uninterested to build any e-commerce interfaces of their own. The Association of Russian Banks, for instance, viciously fought recent reforms targeting payment terminals. And certain conservative members of parliament have begun speaking openly about the illegality of e-money, demanding that these companies apply for banking licenses – which means would require them to have at least 5 million euros in assets. Rather than wait for the anvil to fall, however, the Electronic Money Association has taken a proactive approach, pushing for legislation that will spell out, exactly, what kinds of legal entities companies like WebMoney are. To that end, they have formed a working group in the Duma to hammer out legislation and to resolve some key dilemmas. Who, for example, will be allowed to participate in this sector: just banks? Just internet companies? Both? And who will regulate the industry: an industry association or the Russian Central Bank? What kind of documentation will a virtual system need to provide this regulator? Will the new regulation significantly raise operating costs? The law is rumored to be passed before the new year, but, “so far, there is no ready text,” says Maria Panferova, a member of the Duma working group. “The goal at this stage is to work out the conceptual framework of the legislation.” Victor Dostov, an e-money pioneer and head of the Association, hopes that this legislation will pass more smoothly this time and that banks recognize that this is not a natural niche for them. “These companies collect all the crumbs, make a roll out of them, and then put it in the bank,” Dostov says. “The bank still gets the money.” He points out that Deutsche Bank and Citibank tried to get in on this business in the United States and then quickly figured out that it wasn’t worth the hassle. “No one is interested in killing the hen that lays – well, maybe not the golden egg, but the little silver eggs,” he says, adding. “At the end of the day, we just want to sleep soundly at night.”Julia Ioffe is a freelance writer living in Moscow.

By Alex NewmanThe New AmericanTuesday, October 20, 2009 http://www.thenewamerican.com/index.php/world-mainmenu-26/south-america-mainmenu-37/2123-leftist-regimes-agree-to-new-currencyAdding to pressure mounting against the U.S. dollar, left-wing Latin American leaders gathered in Cochabamba, Bolivia, over the weekend for the seventh Bolivarian Alliance for the Peoples of Our Americas (ALBA) summit and agreed to create a new regional currency in a bid to stop using American Federal Reserve Notes, according to foreign news reports. Initially the new fiat money will be used to settle foreign and commercial payments among member nations, with the goal of eventually creating a unified monetary system. “That this may be the start of creating a new currency that will serve between the countries, a currency at the Latin American level, and for this to succeed, it is necessary to bring about other conditions which we evidently do not yet have today,” said Bolivian Economy and Finance Minister Luis Acre, noting that it took the European Union 40 years to create a true monetary union.The new “sucre” — short for Unified System of Regional Compensation in Spanish, but also named after South American independence leader Jose Antonio de Sucre who fought against colonial Spain with the more well-known Simon Bolivar — aims to challenge the hegemony of U.S. Federal Reserve Notes. It will go into effect in early 2010, though some Caribbean island members will reportedly remain in the Eastern Caribbean Currency Union rather than adopt the new sucre. “It is an important step for the sovereignty of our people and in liberating ourselves from the dictatorship of the dollar, from the neo-liberal dictatorship and the dictatorship of the transnational [corporations],” said the self-declared socialist President of Venezuela, Hugo Chavez. He called the new currency a “revolution of paradigms.” This most recent attack on the U.S. dollar’s global-reserve status comes on the heels of a report about a secret plot against the dollar involving Gulf Arab states, Russia, China, France, and Japan. According to the U.K.'s Independent, the Gulf countries are planning to create their own regional currency and stop pricing oil in dollars. The United Nations recently called for an end to the dollar’s position as well.At the summit ALBA also agreed to implement further sanctions on Honduras because that country's government ousted its leftist President when he sought to unconstitutionally extend his term in office. It also called for the unconditional return of deposed President Manuel Zelaya while urging world nations to reject the results of a planned presidential election there. "No electoral process held under the coup-installed government, or the authorities that emerge from it, can be recognized by the international community," read a joint statement.According to the final summit statement, leaders also condemned Colombia’s military base agreement with the United States, though they failed to adopt Chavez’s proposition to form a military alliance for defending against the “Yankee empire.” The organization also said it would consider the creation of state-owned multinational corporations to compete globally in mining, trade, energy, agriculture and other sectors. The assembled leftist regimes called for a UN declaration of rights for “Mother Earth” against the capitalist system and the creation of an “International Tribunal for Climate Justice” to force America and Europe to hand over more money for having emitted carbon dioxide. They also agreed to bypass the World Bank’s International Center for Settlement of Investment Disputes by creating their own international arbitration court. The next ALBA meeting is scheduled for December and will be held in Cuba.The organization, first proposed in 2001 and renamed this year from Bolivarian Alternative for the Peoples of Our America, consists of Venezuela, Cuba, Bolivia, Ecuador, Nicaragua, Honduras, Antigua and Barbuda, Dominica, and Saint Vincent. It seeks to promote regional and economic integration while providing an “alternative” to U.S.-led “free-trade” agreements.Russian news reports noted that Russian National Security Council chief Nikolai Patrushev was present at the meeting. President Dmitry Medvedev also promised closer Russian cooperation with the organization. Delegations from several other countries including Haiti, the Dominican Republic, Guatemala, and more attended the summit as well. “Let’s not kid ourselves. This is a subtle step to bring about a global fiat currency by the people who are planning to create a One World Government,” opined LewRockwell.com blogger David Kramer. “The ‘retaliation’ for the Sucre will be a push for the ‘Amero.’ (That’s the US/Canada/Mexico single fiat currency that has been in the planning stages for decades.) By gradually having fewer and fewer fiat currencies in the world, eventually our One World Government planners will claim that we might as well have a global fiat currency to really ‘facilitate’ global trade.”The news about the new currency went virtually unnoticed by the American media, with only a half a sentence at the end of an Associated Press article even mentioning the agreement. Foreign press, however, gave widespread coverage to the sucre and its implications.The ALBA agreement is yet another attack on the U.S. dollar, which combined with others represents a serious threat to American standing in the world. While the radical leftist regimes may account for only a small percentage of the global economy, international pressure on American Federal Reserve Notes and reckless monetary policy by the U.S. central bank may culminate in the perfect storm against the American economy, causing massive inflation and devaluation that will wreak havoc on the dollar’s purchasing power.Of course, such a scenario will eventually require a “solution.” But the proposals currently being contemplated by “world leaders,” including the Amero or even a global fiat currency, would be a complete disaster for America and for human freedom. The constitutional and proper solution is to abolish the non-federal reserveless central bank and institute sound money. This will require a dedicated effort by a significant portion of Americans, but it must be accomplished or the consequences will be dire.For further reading:"End of the Dollar 'Dictatorship'? Hugo Chávez and Latin Leaders Hope to Bury the Greenback", Nikolas Kozloff, October 23, 2009"Antigua-Barbuda government denies signing on to the SUCRE", Caribbean Net News, October 21, 2009