Cash to be used in fewer than half transactions by 2015:Given that cash these days isn't even cash, but a fiat currency, why not have it in digital form rather than coins and notes?
Cash will be used in fewer than half of all transactions by 2015, according to an official report which suggests plastic is rapidly overtaking notes and coins in consumers' pockets.
The danger of course here is the merging of a government database with your line of credit or access to your funds. Pretty soon the government will have complete control over every aspect of your life.
The only way out of this, of course, and really the one thing that will irreversibly destroy governments and elites worldwide, is a private cyber-currency, as outlined by Rees-Mogg and Davidson in The Sovereign Individual. It will almost certainly be backed by gold, and will be an encrypted script of some kind, representing deposits of gold in a storage facility somehwere.
Naturally, such an operation would need to be located outside the major nations which have shown themsleves to be totalitarian - the USA and Britain being the most obvious examples. The company would need to be located in some "offshore" nation and would need to be agile, re-locating elsewhere fast if necessary.
As to where the gold is stored, there is always going to be risk here. You would need to make sure the gold is deliverable - none of this "theoretical" exchangability for gold. So places like Geneva, South Africa may do to start. But you can never be completely assured theat the gold will not be confiscated by government. You would have to then spread the gold out amongst several jurisdictions, as diverse as possible to spread risk.
The private company would then charge maybe 0.001% per transaction, or some such. Compared to inflation rates of 10% or so, that's a different ball game. Plus, the currency itself never loses value, so does not skew incentives or create uncertainty.
Such an operation would require no controls, no disclosures required - it would be anonymous, transparent, completely open.
It would be an immensely dangerous operation. You would have to remain a mystery, because you would be a major target for bribery or assassination.
This is shown by the US government's ruthless crushing of eGold - read this, it's an eye-opener.
Jackson, 51, is the maverick founder of E-Gold, the first-of-its-kind digital currency that was once used by millions of people in more than a hundred countries. Today the currency is barely alive.
As Jackson envisioned it, E-Gold was a private, international currency that would circulate independent of government controls, and stand impervious to the market’s highs and lows. Brimming with evangelical enthusiasm, Jackson proclaimed it a cure for the modern monetary system’s ills and described it at one point as “an epochal change in human destiny” and “probably the greatest benefit to humanity that’s ever been thought of.”
Over the next few years, Jackson drained his retirement accounts, sold his medical practice and charged credit cards to raise more than $1 million to nurture the fledgling venture. Cynics might have considered him just another internet hustler looking to strike it rich, but those who knew him say he was a true believer. “He truly thinks that having a gold-backed currency is what’s needed in the world,” says James Clement, a libertarian attorney who met Jackson in 2003. “I don’t think anyone would have stuck with it … other than that he thinks it’s extremely important and somebody has to do this.”Amen to that.
Eventually it went bad - the Feds got wind of the information he could offer them, and despite his full co-operation they eventually indicted him on money laundering charges.
“It never crossed my mind that anyone could seriously want people like us in prison,” he says. “But I guess my bigger fear was that we would go bankrupt, and there would be a train wreck of people that had trusted value to us who couldn’t get their money.”
Timberlake, the economics professor, is convinced that Jackson’s radical dream, his goal of upsetting the economic status quo and overturning the government’s monopoly on money, is what really got E-Gold targeted.
“No matter how innocent a person is you can always find a law that government agents can use to convict him of something,” Timberlake says, “And this is a perfect example of it. Any time anybody tries to produce money, the federal government is going to be on their tail.”
Every time I hear this story, I feel a little bit sick. Hatred for the state, central banks, politicians, and sorrow for this guy who had exactly the right idea, but the naivety to believe the government was there to support and protect him. I mean, the poor guy still believes it was him that did wrong:
Jackson, who always considered himself one of the good guys, acknowledges today that he might have done a better job of policing his system from the start. “In hindsight there’s any number of things that would have been a smarter or better way of approaching things,” he says.
He maintains that he would have done what authorities now want him to do, if they’d just worked with him to devise a plan, instead of treating him like a criminal.I'm afraid not. Not any more.
Now, after all of E-Gold ups and down, Jackson hasn’t lost his optimism for the venture, or his knack for florid prose. As he wrote on his blog last year, he looks forward to transforming E-Gold from a marginal player to a respected institution — one, he says, that will serve to “advance the material welfare of mankind.”
So the question remains, when will the next eGold pop up, and will it survive?