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India''s investment demand for gold reported up 80 percent
Would You Like to Pay
by Check, Cash -- or Gold?
James Turk's Quixotic Quest:
An Online Payment System
Based Entirely on Bullion
By Craig Karmin
The Wall Street Journal
Saturday, October 8, 2005
James Turk thinks he has a solution to worries about a weaker
dollar: Stop using cash to pay for things -- instead, pay with gold.
A handful of companies are pitching services that let people make
payments to one another denominated in gold, much as they might wire
cash through a bank account. Amid soaring bullion prices and
simmering concerns about the health of the U.S. economy, they are
finding a small but promising market.
One of the main providers, GoldMoney.com, based in the British
Channel Islands and founded by Mr. Turk, currently has 23,000 users,
he says, more than double the number a year ago. His company
followed on the heels of e-gold.com, a West Indies-based company
started by a Florida oncologist that has offered electronic gold
payments since 1996. A handful of other competitors, with names such
as e-bullion.com, also have sprung up.
"Gold's historic role has always been as the world's currency," says
Mr. Turk, a 58-year-old former banker and self-described "gold bug."
That is a term more often applied to fringe characters who own gold
to protect against market crashes or even Armageddon.
"Some gold bugs are very fervent," Mr. Turk says.
Still, he shares their belief that governments ultimately give in to
temptation by printing too much money and debasing their currencies.
He argues that current U.S. economic fundamentals -- rising
government spending paired with an increasing trade deficit -- will
inevitably cause the dollar to weaken dramatically.
There are mainstream economists who share some of his concerns, even
if they disagree with his proposed solution. And gold could prove to
be a wise investment, because it tends to gain value at times of
uncertainty. But it is hardly a one-way bet. For the past 25 years,
holding gold actually has been a good way to reduce wealth. While
bullion prices recently hit $472.30 an ounce, their best level since
1988, that is down from $834 an ounce in 1980.
GoldMoney's users tend to be small-business owners who make regular
purchases overseas and worry about currency fluctuations. Jeff
Wright, a director for software-development company TimeWarp in
Colorado Springs, Colo., has been using GoldMoney for more than
three years to buy software from vendors in Europe and Australia.
One benefit, he says, is that everyone avoids currency-conversion
charges, which can be as much as thousands of dollars on large
transactions.
Of course, now he has to worry about volatility in gold prices. "I
usually check it twice a week to see how things are going," he says.
Services like these aren't for everybody. For one thing, Mr. Wright
points out that the first thing he had to do was persuade his
suppliers to accept payments in gold and then set up online accounts
with GoldMoney. And the gold industry has proven to be rife with
scams and swindlers. During the early 1980s, for instance, customers
of the International Gold Bullion Exchange in Fort Lauderdale, Fla.,
once the largest gold-bullion dealer in the U.S., were shocked to
learn that the gold bars stored in the company's vault were made of
wood. Thousands of customers lost tens of millions of dollars.
Mr. Turk says he often fields questions about authenticity, and
points out that he lists the vault company where the gold is stored
on the company's Web site, as well as other documents attesting to
the gold's validity. His customers' holdings are valued at $62
million, Mr. Turk says. Account holders' money is held in gold that
is stored as 400-ounce bars in a vault just outside London.
In effect, each time a payment is made, one account holder is
passing to another a claim on the stack of gold in the London vault.
He says a transaction costs only about $1.50, compared with $20 or
more for a bank wire.
Mr. Turk's own thoughts about the nature of money go back to his
childhood in Ohio, where his Austrian father emigrated after World
War I. After the war, Austria suffered extreme hyperinflation that
made its currency next to worthless.
Then, early in his banking career, while with Chase Manhattan in
Asia, he was present in Bangkok in 1974 for the collapse of Herstatt
Bank due to unauthorized foreign-exchange dealings. It marked the
biggest bank failure in the history of what was then West Germany,
and caused turbulence in financial markets around the globe.
"My family's experience and Herstatt's collapse made me realize that
national currencies are much more inherently unstable than tangible
assets," he says. That led him to start thinking about how to
circulate gold as a currency, a practice that started falling out of
favor back in the 17th century, when the Bank of England issued the
first widely circulated paper money as a stand-in for gold and
silver.
After a stint in the United Arab Emirates, where he managed the
precious-metals portfolio for the Abu Dhabi Investment Authority,
Mr. Turk settled in London, where since 1987 he has published the
Freemarket Gold & Money Report.
His newsletter quickly became essential reading for gold bugs, a
group he has an affinity for despite its quirks. In one instance, in
the late 1990s a gold-bug organization called the Gold Anti-Trust
Action Committee demanded a congressional investigation into its
claim that, in effect, Federal Reserve Chairman Alan Greenspan was
conspiring to fix gold prices with the Bank of England and the
government of Kuwait.
"The framers of the Constitution were gold bugs," Mr. Turk
says. "That's why they insisted on a sound money policy of gold and
silver when writing the Constitution."
In 1998, as e-commerce was taking off, Mr. Turk launched GoldMoney,
seeing the Internet as a tool enabling gold to again be used as
currency. Last year the company reported revenue of $37 million, Mr.
Turk says, and he expects twice that much this year. The company has
attracted outside investment from DRD Gold, a South African mining
company, and IAMGold Corp. in Toronto, which together hold a 21%
stake in GoldMoney.
Mr. Turk's case for bullion is rooted in history. He argues that all
governments -- from ancient Rome to King Louis XV's France to 1990s
Argentina -- eventually succumb to excessive spending. Rather than
raise taxes, officials resort to printing more money, sparking
inflation and financial collapse.
Because paper currencies are no longer backed by gold or another
tangible asset, Mr. Turk likes to point out, they represent nothing
more than a government's promise to honor them. But when currencies
fall, he says, gold remains a valuable commodity.
"Unlike the dollar," he says, "gold is not dependent on the U.S.
government's promise to honor it."
----------------------------------------------------
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----------------------------------------------------
RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS
Free sites:
http://www.cbs.marketwatch.com
http://www.usagold.com/amk/usagoldmarketupdate.html
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kereport.com
(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)
http://www.resourceinvestor.com
http://www.goldpennystocks.com/
Subscription sites:
http://www.lemetropolecafe.com/
http://www.interventionalanalysis.com
http://www.investmentindicators.com/
Eagle Ranch discussion site:
http://os2eagle.net/checksum.htm
Ted Butler silver commentary archive:
http://www.investmentrarities.com/
----------------------------------------------------
COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS
Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
888-413-4653
http://www.blanchardonline.com
Centennial Precious Metals
3033 East First Ave., Suite 807
Denver, Colorado 80206
1-800-869-5115
http://www.USAGOLD.com
Michael Kosares, Proprietor
cpm@usagold.com
Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
http://www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net
El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
http://www.eldoradogold.net
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203
harvey@eldoradogold.net
Gold & Silver Investments Ltd.
Mespil House
37 Adelaide Rd
Dublin 2
Ireland
+353 1 2315260/6
Fax: +353 1 2315202
http://www.goldinvestments.org
info@gold.ie
Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
http://www.gloomdoom.com
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com
Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com
Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
http://www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com
Lone Star Silver Exchange
1702 S. Highway 121
Suite 607-111
Lewisville, Texas 75067
214-632-8869
http://www.discountsilverclub.com
Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel
Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com
Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com
http://www.buysilvernow.com
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com
The Moneychanger
Box 178
Westpoint, Tennessee 38486
http://www.the-moneychanger.com
Franklin Sanders
1-888-218-9226, 931-766-6066
----------------------------------------------------
HOW TO HELP GATA
If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.
By check:
Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA
By credit card (MasterCard, Visa, and
Discover) over the Internet:
http://www.gata.org/creditcard.html
By GoldMoney:
http://www.GoldMoney.com
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L
Donors of $1,000 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled GATA.
Donors of $200 or more will receive copies
of "The ABCs of Gold Investing" by Michael
Kosares, proprietor of Centennial Precious
Metals in Denver, Colorado, and "The Coming
Collapse of the Dollar" by James Turk and
John Rubino.
GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.
