In Gold We Trust (continued)

Ray argues, though, that the advantages for merchants go further. A transaction fee of 1 percent, capped at 50 cents per spend, comes in well under the 2 to 5 percent fees charged by credit card companies. And as for that bane of online businesses, the credit card chargeback, e-gold is a silver bullet. Unlike almost any other form of online payment, e-gold clears instantly and finally, with no chance for the spender to cancel after the fact. Or as Ray puts it, "When you get paid, you stay paid."

Still, Ray knows better than to pretend that these are the only reasons most e-gold users have bought into the system. Or even, perhaps, the main ones. For most consumers, the ability to reverse online credit card charges is decidedly a feature rather than a bug. And if you're going to pay a nickel for every dollar you turn into e-gold - as the going rate of exchange requires - you're probably not doing it because you want to help some online merchant save the same nickel in transaction fees. More likely, you're doing it at least in part for the one thing e-gold offers that no other digital payment system before it ever has. You're doing it for the gold.

Which is to say, you're doing it for any of the complex cultural, psychological, and above all political reasons that make gold, in Ray's words, "the most emotional spot on the periodic table - never mind plutonium."

As a onetime Libertarian candidate for the Florida House of Representatives, Ray is well aware, for instance, that a large percentage of e-gold's early adopters come from the ranks of the laissez-faire radicals for whom gold has long been an icon of economic freedom from government. Others are goldbug investors, desperately bullish on the metal despite years of declining prices. Still others come to e-gold via e-dinar, looking to honor Islamic financial commandments and subvert the Western economic system.

Finding bits of 141 bars of gold circulating on the Net is a little like a coelacanth, a financial fossil come to life. Don't be fooled. E-gold is hotter than plutonium.

But all the same, Ray insists gold's philosophical baggage doesn't stand in the way of its being a technically superior currency. It frustrates and baffles him, for example, that the only advocacy groups currently taking e-gold donations on their Web sites are outfits like his cherished Jews for the Preservation of Firearms Ownership or the cyber libertarian Electronic Frontier Foundation. "I would love," he says, "to go up to some offensive antifreedom group like Handgun Control Inc. and say, 'Look, you morons: You're taking plastic. They're taking a percentage out. Take e-gold and sell it for a profit. It's better money! Even if you're not a libertarian, it's better money.'"

Ray sighs, as if summoning the patience to wait for civilization to catch up with him. "Gold," he says, "has always been better money."

There are those who would beg to differ - among them, the most influential economist of the 20th century, John Maynard Keynes, who 78 years ago declared the gold standard a "barbarous relic," unfit for the complex monetary demands of modern economies. In Keynes' now widely held view, the problem with pegging currencies to fixed amounts of gold was that it limited government's ability to adjust the money supply, which among other things made economic crashes much more brutal than they had to be. The onset of the Depression drove the point home, and central banks spent the next 40 years gradually weaning themselves off gold. Finally, in 1971, President Richard Nixon pulled the plug on the world's last metallic national currency: the gold-backed dollar. Ever since, the major currencies have all floated anchorless, backed only by "the full faith and credit" of their issuing governments.

Encountering 141 solid bars' worth of gold-backed currency circulating on the Internet, therefore, is a little like hauling a wriggling, gasping coelacanth up from the bottom of the sea: It's a financial fossil come to life, calmly going about its existence despite decades of expert consensus that it couldn't be anything but dead.

Don't be fooled, though. The convergence of gold and the Net - of the oldest of low tech and the newest of the high - isn't nearly the freak encounter it appears. When Douglas Jackson first conceived of e-gold in 1995, he had barely heard of the Internet. Likewise, when longtime gold-market analyst James Turk founded GoldMoney last February - Jackson's most serious competition - he was making good on a concept he'd started thinking about in 1979, back when he still doubted that the technological infrastructure to support it would exist in his lifetime. But both men knew as soon as they encountered the Net that their currency belonged there - and not least because classic gold money and the core mechanisms of the Internet are in fact strikingly analogous technologies.

The international gold standard was one of the technical wonders of the highly globalized late-Victorian era - a sophisticated, elegant mechanism for transmitting value from one end of the civilized world to the other. National monies existed, of course, but in effect were just local network protocols running on top of the internetwork layer that connected them all. Or as the Nobel Prize-winning economist Robert Mundell has put it, "Currencies were just names for particular weights of gold." The dollar, for instance, was fixed by statute at 23.22 grains (about one-twentieth of an ounce), the pound sterling at 113.0016 grains, and so on. Local payments were made in local units, but all cross-border deals ultimately were settled through international bank-to-bank shipments of the universal currency - bullion.

Today, in a world just now returning to Gilded Age levels of economic interdependence after a century of hot and cold global warfare, the closest thing we have to a universal money is the US dollar. But as with most proprietary standards, many argue, the dollar introduces costly inefficiencies into the system - from the distorting influence of US monetary policies on non-US markets to the simple fact that final clearance of dollar payments still takes place only during East Coast banking hours.

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