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Gold Bank

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Jared Stewart Posted: Sun, May 8 2011 8:27 AM

So a concept that I have been toying with is a gold bank. This wouldn't be an investment scheme, but rather a way to use gold as money without having to get everyone to agree to use gold.

The way it works is people (and companies) buy gold which is held by the bank, then when they spend the money the gold is sold by the bank and sent to the creditor. In this way the dollar (or any other currency) is still the value exchanged in the transaction (thereby skirting the law), but gold is made into a more liquid asset where it can be used in daily transactions.

I recognize that there are a couple of barriers to entry. First, there isn't a way to see prices that are normally in dollars in denominations of gold (I was personally thinking of grams, or maybe milligrams - the current price of gold is around 50$/g). Second, there needs to be a good method to make payments in gold, this would be trivial with a checking system - but a debit card system would likely require a large corporate backing. Third, I haven't quite identified what the pricing mechanism should be; would it be best to collect money as a premium on the price of gold, or through a transaction fee, or a one time fee for so many transactions? Finally, there is the challenge of verifying that this does comply with the current laws and that the danger of prosecution is minimal, even when two parties make a transaction explicitly in gold.

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z1235 replied on Sun, May 8 2011 8:51 AM

Everyone would have to pay capital gains taxes on any $ "profits" their gold holdings may have accrued in between the switches to $ for transactions. If the current tax level doesn't mess up your plan, you-know-who will raise it so that it does. 

 

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There we go, I knew something wasn't quite adding up, it just seemed too easy.

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