A BitGold Update

Dateline: 15 September 2015

It has been about five weeks since I posted my blog essay titled, Considering BitGold (It’s Not A Cryptocurrency). Since then, I have put more money into BitGold than the initial $100 I mentioned in that post. And I have watched the price of gold go up quite a bit, then go down quite a bit, as this next graph of the 5-week period shows…

My 5 weeks of BitGold value
(click to see enlarged view)

Then, yesterday, I received my BitGold debit card in the mail…

I’m looking forward to transferring some of my BitGold account into the debit card, and using it as needed for everyday purchases. However, I’ll wait until the price of gold climbs up to the point where the value of my account exceeds the amount of money that I’ve put into the account. Then, when the price of gold dips down again, I’ll buy more BitGold

That’s my plan and it will be interesting to see how it works out. It isn’t important to me that the price of gold goes up and up and up, as many precious metal buyers hope and expect it will in the months ahead. I have not bought into the BitGold concept to make a profit, but to utilize an alternative currency—a currency that integrates with the central banking monopoly currency we are all familiar with, but is, at the same time, outside the banking system.

BitGold is what Bernard Lietaer would call a “complementary currency.” I’ve been listening to some of Lietaer’s YouTube talks and I like how he likens the central banking, debt-money system to a monocrop. A farmer who grows the same crop over and over every single year is inviting trouble. Diversity brings health and vitality to natural systems, and Bernard Lietaer believes the same is true for monetary systems. It’s an interesting concept, and I’m inclined to think Lietaer is on to something important in his thinking. 

From my agrarian point of view, I see BitGold as a decentralized form of money. Decentralization is fundamental to the agrarian way of thinking. Agrarians see decentralized social systems as being safer for the people who live in them, and more resilient. 

So I remain invested in the grand idea of BitGold. However, in keeping with my own advice in my first essay, I’ve not invested more money in BitGold than I’m willing to lose if the idea fails. 

One of my concerns about the BitGold concept is the ability to purchase gold at only 1% above the official gold price. While I really like that aspect, I wonder how it is sustainable. My understanding is that the demand for gold is currently so high, and the supply of physical gold is so low, and the official price of gold is so disconnected from reality, that there is currently a high premium (added cost above the official gold price) to purchase gold. No business can survive if it buys high and sells low. I’m assuming that there is something I’m unaware of in this line of thought, and that BitGold knows what they are doing.

In any event, I’m pleased to be an early adopter and supporter of this new idea. I’m hoping that BitGold will survive and thrive as a complementary currency. 


chickengirl said...

BR549. Jr on Hee Haw LOL

vdeal said...

Yep, noticed that too - very clever - I like it! Then again, I'm a bit of a old TV shows fan - when it was pretty clean. BTW, Herrick, thanks for the update - certainly something to think about.

Pam Baker said...

Yeah, BR549 caught my attention too. Saw my first episode on Netflix this past winter. Husband grew up on it way out in West Texas.
Wishing you success with Bitgold.

Herrick Kimball said...

Yeah, I was a little nervous about putting my credit card number online. But I decided it would be okay, just this once. :-)

wildbillb said...

do you have to pay capital gains tax on the profit from your gold investment? is that something you plan to track?

interesting post, please keep us updated! i don't suggest keeping the credit card # online though ;-)

Herrick Kimball said...

My understanding is that if the BitGold account earns money, the profit should be declared on taxes, just as interest is reported on a traditional bank savings account.

With that in mind, BitGold provides a monthly account summary that includes the "tax basis" amount of each transaction. I'm not sure if an end-of-year statement will clarify gains (or losses) but I'm expecting that to be the case. And that will be most useful for tax purposes.

One of BitGold's "selling points" is transparency. They are not trying to hide anything, and they appear to be keen on having their idea integrate with the tax system.

That said, as something completely new, this thing may have some "bugs" that will need to be worked out when it comes to figuring taxes. Hopefully not. We'll see.

Herrick Kimball said...

A further note on Bernard Lietaer:

This guy has the resume and bona fides when it comes to the subject of banking and monetary currencies. He can be a little dry to listen to but this is economics we're talking about here. Anyway, in the YouTube interview titled "What About Money," the interviewer asked Lietaer the following:

QUESTION: "Will The US Dollar Fail?"

LIETAER: "It's only a question of when.. Unfortunately, it's going to be a very big mess, because they have absolutely no plan-B. There is no alternative that has been set up. There is actually no alternative that has been allowed to be set up. And, therefore, it's going to be a hard landing when it happens."

Food for thought.

Anonymous said...

OMG Herrick - take your credit card info off this log immediately!!! We are not worthy!!!

Herrick Kimball said...

Thank you for your concern (and humility).

Herrick Kimball said...

For those who don't get it, watch this...


Anonymous said...

I thought I'd share this article about a company with a similar business model to Bitgold that went bankrupt and lost a ton of money for their account holders. I have no reason to suspect Bitgold is doing any of the unsavory things that Bullion Direct did, but they do have a similar business. And I think your concerns about Bitgold's business molder are good ones, and the broader point of this article is if one of these precious metals companies goes belly-up there are none of the protections you get from having your savings in a bank because the metals market is so unregulated.

Here's the article: http://www.mystatesman.com/news/news/local/downtown-austin-vault-of-precious-metals-turns-up-/nnYS2/

Herrick Kimball said...


Good article. Thanks.

The important difference between Bullion Direct and BitGold is that Bullion Direct was operated by a guy who was relatively unknown. But BitGold has investors and backers who are well known and have a long reputation in the precious metals world for integrity. Also, BitGold is a publicly traded company on the Canadian stock exchange, which means it has a board of directors, and investors to answer to, as opposed to one guy in Texas running the whole show, and only he knows what's really going on.

I am amazed that some people had so much of their money in the Bullion Direct scam. There is a lesson there, for sure.

As for protections of money in the bank, I hope that continues to hold true. The banking system is coming apart. Past performance is no guarantee of future results. I listened to a Bill Holder iInterview just today in which he points out that the FDIC is a broke institution of the broke American government. He is predicting a financial "reset" in which the banks shut down and accounts are revalued by a certain percent. Holter is a straight shooter and has been correct in some of his past analysis. The interview can be heard here... Bill Holter: All That's Left is a Reset

Herrick Kimball said...

This morning on ZeroHedge there was an article about United Precious Metals Association in Utah. They are doing something similar to BitGold, with the encouragement of Utah law.

The article says: "The United Precious Metals Association has the full backing of Utah Attorney General Sean Reyes who also uses the service."


Apparently, anyone can participate in the idea, not just Utah citizens.

I went to the web site but it isn't clear to me who is running the business. Nevertheless, it's another example of a complimentary currency that is outside the monopoly banking system.

I've read that Peter Schiff intends to set up a BitGold-type of business. This idea is just the start of something that is good to see. Hopefully it will endure.