MD: I am a Goldmoney sucker. Rather than go to the pawn shops and gold shops to get my gold, I went to Goldmoney. That was back in the day when I was sure the “train was finally leaving the station”. Gold against the dollar was going up very quickly … as was silver.
To test the wisdom of what I had done, I tried to get physical gold from them. The process was slow and expensive. My turn-around costs exceeded 10% … and that’s not including the import duty I had to pay. So all but one ounce still rests with them. I really don’t ever expect to see it again. When we have a reset, there will be all kinds of reasons why I can’t get to that gold.
As it turns out, I was even stupider than I thought. Gold went down against the dollar … and is still down. Go figure. So let’s see what wisdom Turk, the gold salesman, is putting out now. Here at MD we “know” gold is not money.
And look at the title: Here at MD we know there is no such thing as finance when you have access to a “proper” MOE process. This is because inflation is guaranteed to be perpetually zero … the time value of money is zero and it is in perpetual free supply to responsible traders. When (1+i)^n is perpetually 1.000, there is nothing for finance to do. They’re all out of work.
We are told by Shakespeare: “Neither a borrower nor a lender be.” Is it good advice?
Like so many things in life, the answer is – it depends.
Individuals are different, and what is right for one person may not be suitable for another. What’s more, everyone’s circumstances are different, which may require different decisions that result in a myriad of outcomes.
Consider too what has happened to money in the four centuries that have passed since Shakespeare penned those immortal words. The Bard himself lived during a time of sound money, with commerce conducted using gold and silver coins.
MD: The obligatory “sound money” nonsense. We at MD can blow those arguments out of the water very simply by blasting their claimed attributes of money … one after the other.
But sound money ended in Britain and pretty much the rest of the world with the outbreak of war in 1914, though the last remnants survived until 1971.
MD: Gold as money never ever existed. If it ever got close, it was just as an expensive, inefficient, risky, trade restricting stand-in for money … that was always in the wrong place and in the wrong hands.
We now live in a world of fiat currency, where money-substitutes called dollars, pounds, euros and yen circulate rather than money itself. So what would Shakespeare be saying today?
MD: Boy does he need a good dose of reality. Fiat money “is” real money. The instances he enumerates are just from improper MOE processes. This is very familiar territory here at MD.
It’s an interesting question. Unfortunately The Bard is not around to answer it. But here’s how I see it.
MD: Actually, we should probably be looking for Francis Bacon. It’s not likely Shakespeare wrote a single line attributed to him. And I’m sure any of us who could have know him contemporaneously would find that obvious.
Let’s look at lending first. The interest rate one can earn on a savings account or other bank deposit is near zero. Even though the Bank of England and other central banks are talking about raising rates – and the Federal Reserve recently bumped up interest rates slightly – central bank policy across the globe is aimed at keeping interest rates low.
MD: Here at MD we recognize the term “lending” for what it is … a corruption of the traders invention and creation of money … by the money changers who co-opted the process. And the “proper” value of interest is zero … as is the proper value of inflation. Interest rates aren’t arbitrary. Interest is the immediate mitigation of defaults on money creating trading promises. These articles are always such painful reading. We here at MD see them for what they are: erudition founded on false premises. I’ll scan ahead now to see if there is anything in here even tangentially worth reading … and not purposeful self serving disinformation.
More importantly, interest rates on bank deposits are generally lower than the rising cost of living. What this means is that money put on deposit in a bank loses more purchasing power from inflation than it gains from the interest income earned on the deposit. It is in effect a tax on your wealth – your purchasing power. So Shakespeare’s advice could apply to making bank deposits, but borrowing is a trickier proposition.
Borrowing is always a two-edged sword. There are always risks when borrowing money, but there can be benefits too.
For example, it often makes sense to obtain a mortgage to purchase a house, given that having a shelter is a basic human need. But even here there is a risk. If mortgage payments are not paid on schedule, one risks losing their house, and perhaps even the equity they have built up in it.
MD: Only under an “improper” MOE process. In a “proper” MOE process, the only risk anyone takes is making a bad trade. All the risks you see enumerated here are money changer imposed risks … and they’re not risks … they’re purposeful predatory traps.
Borrowing for whatever purpose requires a lot of thought, but so does lending because it has risks too. These realities lead to an important question that tests Shakespeare’s admonition. Should one borrow or lend in today’s fiat currency world?
MD: What a stupid false choice! The real choice is: Should a trader trade over time and space today … or just in the here and now. The question only comes into play when you trade in the face of money changer predation and the manipulation by the governments they institute. They call it the “business cycle”. It is more properly their “farming operation.”
To help answer this question, I’ve created Lend & Borrow Trust Company Limited (“LBT”), and am pleased to say that Goldmoney is one of its investors. In fact, it is Goldmoney’s customers who I believe will understand the potential that LBT offers, as I explain in the following FAQs.
MD: Right out of the money changers playbook. I wonder what he would create if he had a clue what money really is. Frankly, having the where-with-all to create Goldmoney, he does have the where-with-all to institute a proper MOE process. But the problem is, there is no money to be made doing that. Unlike a Mutual Insurance Fund where money is made on investment income and otherwise premiums equal claims, with a “proper” MOE process, defaults equal interest collections … but there is no investment income … there is nothing to invest.
And this LBT is a little too close to LGBT for my comfort, thank you very much!
What is LBT?
LBT is an online peer-to-peer platform where lenders and borrowers interact to lend and borrow British pounds, Canadian dollars, euros, US dollars and Swiss francs. LBT is unique because it is the first P2P platform where all loans are secured by the borrower’s investment-grade gold and silver.
MD: I wonder if I could use this to get rid of my Goldmoney with no transaction cost.
What does LBT offer to lenders?
LBT provides an alternative to bank deposits. It enables lenders to earn interest income outside the banking system with five major national currencies. Through LBT’s online auctions, lenders:
- may earn interest income at a rate above the inflation rate, and
- are secured by the borrower’s gold/silver, which is sold to repay the lender if the borrower defaults.
MD: See how they must sustain the money changers “improper” MOE process to make a living. Do we really think people like Turk are our salvation? Do we really think the Harlem Globe Trotters and the Washington Generals are competing? … that they don’t report to the same management?
What does LBT offer to borrowers?
LBT enables borrowers to monetise their precious metals. Through LBT’s online auctions, borrowers:
- may borrow at interest rates lower than available from banks,
- use their investment-grade gold and silver bars as collateral to borrow, and
- borrow in any of five currencies: GBP, USD, CAD, EUR and CHF.
MD: But can I do it without this fiction of borrowing. Can I just sell my “records of gold” for dollars and use it to pay off the money changers … who are overtly fleecing me right now at 8.25%?
How much can I lend?
There is no maximum, and the minimum is £5,000 or currency equivalent.
How much can I borrow?
You can borrow up to 65% of the value of your gold and silver that you pledge as collateral at loan commencement. LBT actively monitors this loan-to-value and makes a margin call if it rises to 75%, requiring the borrower to pledge more collateral and/or partially repay the loan to reduce it back to 65%. If the margin call is not met, LBT sells enough metal to meet the 65% benchmark.
Is LBT regulated?
Yes, LBT is based in the England and regulated by the Financial Conduct Authority to operate an electronic system in relation to lending. LBT does this through online auctions in which its customers participate.
MD: This is starting to look real humorous … like other religions. You’ve gotta love words like “authority” and “financial conduct”.
How are auctions started?
Online auctions are started by either the borrower or lender. Through these auctions lenders and borrowers compete with each other to seek an interest rate at which they are prepared to lend or borrow.
Can I borrow using my gold and silver in Goldmoney?
Yes, you choose how much and which metal or both you would like to pledge as collateral. At this time, only gold and silver stored in England and Hong Kong can be used.
How do I get started?
Click here to visit the LBT website and open an account.
Is there risk to lending or borrowing?
Yes, there is risk with everything in finance. Therefore, each individual needs to weigh the benefits LBT offers relative to the risks of lending and borrowing. If you are uncomfortable in making financial decisions, we recommend that you seek advice from a professional advisor. View LBT’s Risk Disclosure.
Did Shakespeare have any other financial advice?
There are many, and here’s my selection. “Money is a good soldier,” meaning it should be working for you because “Gold that’s put to use more gold begets”, provided of course it is done wisely.
MD: The trouble is “gold is not money” Turk! Would you refer to a “promise” as a soldier? Of course not! So why would you be comfortable referring to “money” as a soldier. Promises don’t “work for you”. You “work to deliver on them”. Big difference to the responsible trader. Not so much to the deadbeat.
This financial promotion has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by Lend & Borrow Trust Company Limited, which is authorised and regulated by the Financial Conduct Authority (“FCA”).
The views and opinions expressed in this article are those of the author(s) and do not reflect those of Goldmoney, unless expressly stated. The article is for general information purposes only and does not constitute either Goldmoney or the author(s) providing you with legal, financial, tax, investment, or accounting advice. You should not act or rely on any information contained in the article without first seeking independent professional advice. Care has been taken to ensure that the information in the article is reliable; however, Goldmoney does not represent that it is accurate, complete, up-to-date and/or to be taken as an indication of future results and it should not be relied upon as such. Goldmoney will not be held responsible for any claim, loss, damage, or inconvenience caused as a result of any information or opinion contained in this article and any action taken as a result of the opinions and information contained in this article is at your own risk.
MD: Anyone ever seen an instance of someone claiming “gold is money” and not finding them to be a gold salesman … or someone who has been deluded by a gold salesman?