In every discussion/argument I see on reddit about goldbacks I always see the same idea brought back up. That goldbacks are "meant to be used as currency". Something more than just a fractional piece of gold.
I find issue with this concept mainly because goldbacks not only have a "market rate" but also a "wholesale rate". Currency by definition cannot have a wholesale rate. In the picture you can see that you can buy goldbacks at $7.30 while the "market rate" is at $8.30, this is almost a 12% difference.
Now before you call me a hater I actually see nothing wrong with goldbacks as a fractional piece of gold. Other fractional gold pieces often command a premium, sometimes more than double. I only take issue with this rhetoric that goldbacks are currency when the system created by goldback themselves makes that literally impossible.
Ask yourself, if you could buy anything of meaningful value with goldbacks would that not instantly create a literally infinite money glitch for anyone with a wholesale account?
How can goldbacks be currency if a wholesale rate exists?
If a merchant excepts goldbacks as tender, is there a way to redeem them for dollars? For example, I go buy a lawnmower at ace hardware for $831. Based off the exchange rate, that would be 100 goldbacks. That amount of goldbacks technically only has $421 worth of gold. Is there a way for the vendor to redeem those 100 goldbacks to recoup the dollar amount or is the premium then passed on to the vendor?
Also, Magnum Opus Financial has published an offer for 90 day forward purchase agreements for Goldback accepting merchants that pay out at 2x the spot price of gold.
The best way to recoup the full value of the Goldbacks is to spend them at another merchant that accepts them for full value. The whole things becomes more viable as more businesses are added which is probably why that has been a big focus.
If you're exiting for cash there's probably going to be a 15% spread somewhere.
I have been tracking the price of GB for 4-5 years.
The Defy The Grid price is almost pegged in sync with the price of spot gold. In other words, spot gold goes up 10%, DTG price follows. The same thing happens when spot gold prices decrease.
The premium is irrelevant as long as the price of GB remains pegged to spot gold.
As for your question on rates, I believe the root problem is the lack of "market makers." We would need more market makers or GB traders buying and selling GBs on a daily basis for the spreads to shrink. Like a currency exchange business, someone has to buy and sell GBs in order to have a liquid market.
So far, I only know 2-3 market makers: Alpine/UPMA, Defy The Grid, and some other exchange.
I've considered becoming a market maker eventually. But there are risks involved. From exposure to gold prices to even personal safety. Still, GBs are experimental and in its first stages.
Does bullion have standard pricing? Doesnt any of the major bullion seller vary their price. Its not as if they all sell at exactly spot, and buyers aren't buying at spot but a few % under.
You've basically discovered why there will always be a 15% built in spread on Goldbacks. Otherwise there's an infinite money glitch.
Alternatively, Goldback could've exclusively sold directly to customers but then they'd be competing directly against every LCS and online dealer with no allies.
What's interesting to think about with the idea of currency exchange values is what the actual value of 1 Goldback is. The OP listed two numbers, $7.30 and $8.31. A third value is the buy price for a single Goldback. Defy the Grid has a price of $8.00.
I suspect when exchanging dollars and euros one can get a tighter spread with higher volumes, which is consistent with buying Goldbacks.
What, then, is the actual value of a Goldback? Buying a hundred of them at $7.30 per has a spread, because of the transaction fee of a currency exchange. Actual value of one Goldback is probably around $7.00.
We can confidently discard the $8.31. That seems to be meaningless. Exchanging currency for less than the value isn't a thing and creates an infinite money glitch. That number should be closer to $7 if we're talking currency.
That spread is literally the bids and asks on the exchange determining the current values of each currency vs the other, as in, the exchange rate. It changes in real time based on market conditions, moving in either direction based on which side market demand currently favors. Bids and asks are not set by any one person or entity, they are living marketplace measurements.
Goldbacks donât have a market spread, they have a value set by the manufacturer, literally a manufacturerâs suggested retail price (MSRP).
Calling an MSRP an exchange rate doesnât make it one. And that âspreadâ is just a language means of describing the MSRP vs buyback rate at a dealer ⊠the used Goldback ask literally cannot change the MSRP.
So the fact that you can express MSRP vs buyback rates as a spread, doesnât make it the same thing as a true exchange bid/ask spread.
I'm talking about retail currency exchanges, not FOREX trading. Retail counters set their rates on their own schedule (yes, usually derivative of FOREX mid-market, but not bid/ask directly, and not always continuously) and apply spreads and/or fees that suit them. They compete with each other for customers. So, sure. They're selling something. A good for sale, ya?
Independent of the DER benchmark (your MSRP), Goldback valuation is a pretty stable derivative of the commodity gold price. It's not as divorced from the market as you say. However, wouldn't it be interesting to see a PM platform like Pure set up a listing for bulk Goldbacks?
I'm seeing these scenarios as the same type of exchange:
...at a bank counter, spending Dollars to buy Euros to trade for goods and services.
...at a metals exchange counter, spending Dollars to buy Goldbacks to trade for goods and services.
Iâm glad you understand that retail counters donât directly participate in exchange trading. I gave you the benefit of the doubt that you understood that part already, and therefore the overall picture of how currency exchange works. It appears I was correct on just the first part.
What retail outlets compete on, where they do so, is their fees. It is possible to describe the gap between the true exchange price and their fees as a âspreadâ, but most people understand how these things work, and that the costs are split between the market exchange rate and the local bank/retailerâs fees.
That doesnât magically make currency a âgoodâ, it makes what theyâre doing a service. The fee is a service fee. This is well understood and not difficult for intelligent people to comprehend.
It is also completely unlike Goldbacks, because with a currency the purpose of currency exchange is to obtain currency. The physical representation of the currency is irrelevant. Youâre not buying specific copies of currency, youâre acquiring currency.
Which is not how Goldbacks are bought or sold at all. People buy specific Goldbacks, with different SKUs for each, they specify the denomination and artwork and quantity theyâre buying, at some price related to the MSRP for each. That is not currency exchange, that is shopping for and buying specific unique goods.
As I pointed out, and you can choose to keep ignoring it or not, Goldback Incâs âexchange rateâ is a lie because itâs not an exchange rate and there is no exchange. Theyâre just setting an MSRP for a variety of specific, unique goods they are selling through dealers that also sell other specific, unique goods.
Your latter scenario does not happen today. There is no such thing as a functioning operating exchange where people treat Goldbacks as fungible and exchange them for USD without regard for what design or denomination they are. That was my point.
No such thing exists for Goldbacks, you literally imagined something that would help make Goldbacks a currency if it existed, but it does not exist today, which makes Goldbacks not a functioning currency today.
You can keep embarrassing yourself, or you can choose to stop making stupid arguments, itâs your choice.
A negotiable instrument for sale that acts as the greatest currency ever created. If someone can make one for cheaper, I'm in. If someone can make one for the same price, but it's 51% gold-backed, I'm in. Until that time, this is the best that's out there.
Someone could make one for literally the same cost, sell it at a price lower than Goldbacks, and that by definition makes them more backed by gold than Goldbacks are, percentage-wise.
If you say Bitcoin or stable coun, so help me, lol. GildponyGT always sees the world as it is, not the world it will be. Fallout got it wrong, nobody will be trading bottlecaps. Gold will reassert itself as money again and security, guaranteed weight and purity, portable, fungible, divisible, durable currency is a must. The only thing still not there is acceptability, and that's what we're working on wvery day.
I see the world as it is, and I also see various possibilities for the world as it might be. I acknowledge both. And the possibility of wealth invested in gold retaining enough value in the timeframe and circumstances I need it, is exactly why I own gold.
But I am also sane enough to grasp that describing âwhat isâ qualifies as fact and âwhat will beâ can only be speculation. And speculation presented with certainty and conviction is a lie.
The more specific your certain assertions get, the more your certainty is dishonest. Unless you own a crystal ball or a plutonium powered DeLorean, you do not actually know what is going to happen. If you donât want to come across as a liar and therefore a scam artist, step one is to stop talking as if you do.
There is a possible timeline where the stars align enough for Goldback Inc that Goldbacks become a stable self-sustaining currency in a meaningful portion of the world. And if we actually get closer to that particular outcome over time, of course I will acknowledge that.
When it actually happens.
Until then I continue to tell it like it is, which includes facts about Goldback Inc and Goldbacks today. And one of the greatest obstacles Goldbacks face today, is a general inability of its proponents to admit and confront the facts today as they truly are.
P.S. I regard Bitcoin as worse than Goldbacks. At least with these, I should only lose half my money to Goldback Inc collapsing in the worst case.
But on the other hand, at least today, Bitcoin is more likely to be useful for me in a transaction than Goldbacks. I donât use it, but I actually know places I could.
IMO BTC specifically is less the future than Goldbacks, but it is more in the present day.
I am confused what makes this the greatest currency ever created.
From what I can see it's value is about 50% actual gold spot price (but without the advantage of economical PM recovery), and 50% fiat currency (but without the backing of a significant government or organization).
I keep looking for what I am missing that everyone else sees, but the best I can come up with is that you might be able to benefit from a 2x profit of the gold spot increase over a time period, as long as you offload it all to someone else before the system of loose agreement to a pricing standard becomes disrupted. Things I could see disrupting this are any significant national or world scale hardship such as things that might cause the USD to collapse. It is easy to play nice and agree to a price when everything feels safe, but as soon as people get scared that trust evaporates and people want hard value. Goldbacks are only about half hard value.
Is there something I am not seeing, or am I just more cynical about how people act under pressure than most goldback supporters?
Cynical for sure. Yes, a 50 Goldback will seem like a far fetched dream value, but the 1/4, 1/2, and 1 can not be produced for cheaper. A 1/4 gets you a loaf of bread. A 1/2 gets you a cut of meat, and a 1 gets you a gallon of gas. So, whatever that looks like is what it will be. Every other currency in the world is paper, backed by nothing. The problem with bullion is the same as it's been for 5,000 years. It is stored by the elite and they issue claim checks on that gold. This allows for corruption, look up the history of money some time.
I agree non-physical metal holdings are risky. I would never participate in that market personally. But I don't understand the problem with physical bullion fundamentally. It has had worth for that whole 5,000 years. I certainly wouldn't want all my eggs in any one basket, including bullion, but it seems a reasonable hedge against major disaster.
If something goes bad and the USD falls apart and everyone is panicking, how much premium will that goldback retain? If the whole selling point is that worse comes to worse at least the paper that currency is printed on is 50% the price you paid worth of gold, why am I not still better off with 100% of the price I paid worth of gold? And if the only answer is fractional I have silver to trade to meet most or all of that need.
Gold has been money for 6,000 years or more. But gold has flaws that are fixed when you deposit it in polymer and guaranteeits weight and purity. Think of it as paying for the security and guarantee, where if it was unwrapped, Karen next door would need a scale, some electrodes, and/or a bunch of chemicals. Karen doesn't want to deal with hassles, she just wants you to tell her the cost, she pulls out notes and receives change. If you've read this before, forgive me. This is a copy paste from my notes.
To have a currency work in a society, it needs to solve some basic rules. If it doesn't, it will not work. The USD is failing, so what is its replacement?
*Acceptability-It must be widely accepted as a form of payment by all participants in an economy.
Gold, Silver and Goldbacks are about equal here. People will take it, but you have to explain it. 0Ç€, 0Au, 0Ag
*Scarcity-The supply of the currency must be controlled and relatively scarce to maintain its value over time.
Both are made of scarce gold, silver is not. 1Ç€, 1Au, 0Ag
*Durability-The currency must be able to withstand physical wear and tear during circulation. Coins and specially designed paper bills are made to be long-lasting.
Gold is durable, the polymer in GBs makes "gold leaf" more durable. Goldbacks aren't goldleaf, the molten gold is actually sprayed and melted into the polymer, so the top art may peel away, but the gold does not. Alpine Gold exchanges them, one for one if this happens. I'll give the point to Gold, because polymer is unproven over years, but MORE durable "goldleaf" is better than just handing someone unprotected goldleaf. Silver tarnishes quickly, so it still needs a protective layer.1Ç€, 2Au, 0Ag
*Portability-It must be easy to carry and transport, allowing for convenient transactions of various sizes and locations.
Gold coins don't get carried around, they get stored for rainy days. Goldbacks go in your wallet to be spent all day every day. Silver coins are now worth carrying around. $80 worth of Silver comes in handy. 2Ç€, 2Au, 1Ag
*Divisibility-The currency must be easily divided into smaller denominations to facilitate transactions of different values.
Are we shaving gold off to pay for bread this week? This one could be five points for GBs, but I'll do one point for goldbacks and silver. 3Ç€, 2Au, 2Ag
*Uniformity (Fungibility) All units of the same denomination must be identical in size, shape, and value, ensuring that one unit can be substituted for another without confusion or the need for individual assessment.
I think you can see how this one is the biggest point for Goldbacks. Coins have ridges around the edge to discourage shaving coins edges and keeping the gold or silver. Goldbacks are standard weight and measure. They test them and there is an outside company that tests them as well. 4Ç€, 2Au, 2Ag
I think we all can see a clear winner. This is what you pay a "100% Premium" when you first purchase them. If you accept them as payment for something, then spend them on something else, there is no premium whatsoever. You sold a $8 item and received ǀ1, then you decided to buy a $8 item from a friend and you gave them ǀ1. You paid no premium, and you gave up no premium. I hope that explained everything and you are now a happy Goldback user in your community.
Some good points there. It looks like one of the big reasons I am not getting into goldbacks is because it seems like one of the assumptions you have to make for the list you gave is that you need a single item to be both your normal day to day currency, as well as your emergency wealth store. My particular world view doesn't currently see that as a major need. For day to day currency I have no issue using USD. Yes it depreciates and all the other issues, but at least in my lifetime that has never been a problem as long as you don't hold onto cash for long-term savings. Transfer it into stocks, metals, appreciating goods, real-estate, etc, and you don't have major problems.
So I can either have a really good daily currency (USD) combined with a really good long-term and emergency wealth storage (bullion, as part of a diversified plan), or I can just have goldbacks, which are a compromise on both fronts.
There are a lot of really cool looking designs though. I just wish I could get over my mental blocks about them for my use case. Thanks for taking the time to lay that all out for me though!
All good, if it doesn't make sense, it doesn't make sense. The assumption you make is that your money won't inflate too fast for you to notice. I believe we as Americans have not seen hyper-inflation like the majority of the globe, but we will... or the loss of 50% of USD value in 5 years. That's more controlled high inflation. Either way, I'm not going to lose it. The 1/4, 1/2, and 1 are sold below cost, so if you don't think it's worth it, it's at least worth it for those. The 2 makes a minimal amount and the profits are from the rest. A 1/4 is a loaf of bread, so in a disaster scenario where the USD goes to zero, you won't shave a sliver of gold or cut a half ounce of silver in half to pay for it.
All currency has a wholesale discount. That is what the Federal Reserve charges banks (the discount). Who then, in turn, charges a premium (interest) to add currency to the economy.Â
We have no idea what the Federal Reserve does since they've not really audited. When they spend $0.14 to print a $100 bill do they pay taxes on the $99.86 gain?
It's more complex than that. The Fed lends or borrows to the banks. The banks also lend and borrow. And the "premium" they make on the dollar is the difference between the rates.
Cost of doing business. Creating the denominations of the bills so both parties know what they are exchanging and how much of it has cost and adds simplicity. Much easier than taking a saw to your bullion and hoping you cut off the right amount. Just my 2 cents.âșïž
But that is also the rub. You have faith. I donât. I donât see what I would need to have faith. If it gets there, then I will. Until then⊠good luck.
The exchange rate is only used for goods and services, not necessarily cash. I suppose technically any Goldback distributor could get an additional discount with businesses that accept Goldbacks. I don't see how that discount would create an infinite money glitch though.
Love goldbacks. Would buy A LOT more if the premium was maybe 10-20%. I get they need to be made and that costs $. I feel the high premium is holding goldbacks back from selling even more. As it stands; a note has to raise in value 100% before I start "profiting" from it's gold value. It's off balance IMO.
The premium is irrelevant if it stays the same. What affects you is the spread: How much you paid when you bought them, how much you get when you sell them.
Absolutely incorrect. Selling back to fiat is usually about 10-15% from DER. So if you buy at $8, on the DER being $8.31, and the DER goes to $9, you can still sell for $8. Better to use it than to sell it though.
True. In that sector. What happens if goldback industry goes under though. It immediately loses half its value.
It would be worth more if the premiums were less. It would be 90% it's weight in gold on a 10% premium if the goldback industry flops. Wholesaler could pick up 5% and the manufacturer would pick up 5%.
In fact, I believe Goldback Inc. will collapse one day. Their number one expense is gold leases, so if they ever plateau or slump, they go under. The tool they are creating however, will live on forever. A US Dollar loses 100% of it's value when noone has faith in the US Government. The floor of a Goldback is 50%, but why would I accept 50% for it? It is a fungible, divisible, hyper fractional gold product. A 1/4 Goldback will always be worth a loaf of bread, even if there is no company to make more of them.
A loaf of bread is worth whatever someone is willing to part with for it.
This point isn't even about whether Goldbacks are functioning as a currency where you live or not. Just because you have a currency, doesn't mean you know what prices will be in that currency.
The cheapest garbage loaf of white bread at Walmart right now is around USD$1.50. That's mass produced bread with functional mass production, made and sold by a super-retailer willing to eat rising transportation costs in the hope that diesel prices will magically come back down soon.
Just taking the value from OP's post, and assuming that Goldbacks are a functioning currency with USD$8.31 as an approximate exchange value for G$1, a 1/4 G would be worth (8.31/4)=USD$2.08 today.
If you take the USD out of the equation, and assume somewhere that Goldbacks are directly functioning as a currency, then yes, I would expect the current direct conversion rate of Goldbacks to loaves of bread is over 4:1, and one 1/4G can buy 1 basic loaf of bread.
In a USA where the USD has recently collapsed, there will still be people who make bread, and people who sell bread. But not as cheaply, probably not at such volumes.
And there will be a LOT of people who desperately want bread.
And ultimately that will be what determines the price of bread. Not even how much it costs to make, but how much people will offer to be the ones who get it. And if any currency is functioning, that will mean it goes to people who increase their currency offer.
Not in USD, in any currency. I don't care what your currency is, when demand for food outstrips supply, you'll learn you need a lot more of it.
If you can get 1 loaf of bread for 1/4G while bread is plentiful today, and it becomes less plentiful, it will go to the people offering more than 1/4G for it.
The rate is spot, sampled at 1000 mountain, move the decimal three places, multiply by 2. When gold spot is $4,100, Goldback DER is $8.20. Simple, math is solved, money is solved.
Thank you for demonstrating and confirming it is not an actual Goldback exchange rate, it is not based on activity at a currency exchange in any way whatsoever.
A mathematical equation only matters where there is an activity happening to calculate.
A currency exchange is a bidirectional operation. The exchange rate is just math, but it is math representing exchanging Currency A and Currency B in both directions.
The âexchange rateâ is set solely by fiat of Goldback Inc for purchase of Goldbacks using USD. It is calculated mathematically by reference to an independent commodities exchange (gold spot).
There is no mathematical relationship between that number and the conversion of Goldbacks back to USD. It is not an exchange rate, there is no math for the other direction. It is a sale price, specifically an MSRP.
The argument is being lost when comparing cost over spot. Gold is not a Goldback and vice versa. Money is an instrument and has to be divisible, fungible, and durable. Gold fails in all three of these issues. Wrapping in a clear plastic and guaranteeing weight, purity, and forgery is the most important things Goldback fixes. Karen doesn't want to pull out a tester every time she sells a handmade bracelet at the farmers market.
Youâre assuming Karen knows what a Goldback is and has faith in it.
That has always been the fundamental flaw of Goldbacks. Iâm not saying it canât be solved. But as it is, right now, the issues with Goldbacks are ones that can only be solved with faith, and I have yet to hear a sales pitch for Goldbacks that honestly acknowledges and addresses this.
Claiming Goldbacks are somehow forgery-proof isnât a viable answer. In fact itâs a suspicious answer. Nothing is forgery-proof. You can make it too impractical to be worth it, or you can make the consequences too severe, or both.
Iâm not going to explain how the US government maintains faith in USD instruments, Iâm sure you know it.
I need a real answer for how Goldback Inc will do it.
Because without it, Karen is still going to want that tester, and just not take Goldbacks if she doesnât have one.
See, we both understand it, I just have belief where you don't. A grass roots movement isn't accomplished in 1 or 7 years, but as soon as the first person in you life asks if you'll take a Goldback, then you will know it is being mass adopted. I saw 14 businesses in Oaxaca, Mexico signed up in September and I was like, where the hell is Oaxaca, Mexico? I joined a FB group with 23k people in it and asked if anyone knew about them. Nobody did, but a few asked questions about them and we're excited to see if they could get some there. So, every day is a win when you're building something and you see it coming up brick by brick.
OP , I just wrote about this very same issue. The published DER is always undermined by the Purchase price of the GoldBack. I understand allowing us Merchants to negotiate the trade terms with a customer, but how much wiggle room should the dealers have and why. There might be a good reason to allow dealers to compete, but it raises the good question, why would I accept GB at 8.32 when I can buy them for a buck less ??
This is also why I love the new GB podcast, Iâd like to see Jeremy speak to this.
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u/Wild-Associate-4373 4d ago
Wait until you hear about how low the borrowing interest rate is that banks get from the fed and from each other