Gold & Silver, STAFF NEWS & ANALYSIS
Barcelona Currency … What About Gold?
By Daily Bell Staff - October 26, 2015

Barcelona Threatens to Print Parallel Currency, Madrid Seethes … Over the next six months, Barcelona's left-wing city council plans to roll out a cash-less local currency that has the potential to become the largest of its kind in the world. The main goal of the project, according to a council spokesperson, is to boost economic opportunities for local businesses and traders. The idea is for local stores and residents to be able to exchange euros for the new currency at a one-to-one parity, and use it to purchase products and services at a discount or with other kinds of incentives. But it doesn't end there: the new parallel currency may also be used to pay certain subsidies, taxes and local services such as public transport, reports El País. Municipal workers could also receive part of their salary in the new money. – Wolf Street

Dominant Social Theme: Remember US Continentals? Here's an idea: Let's fund our revolution with paper money …

Free-Market Analysis: So Barcelona is challenging Madrid and currency is going to be the proving ground. It's a face off between the Catalan culture and the dominant Castilian culture in Madrid. It's tough not to root for the underdog here, especially because the Castilian culture is so evidently an arrogant and authoritarian one.

The Catalan culture may not be much better, but at least the Catalans are not continually oppressing the Basques and the other four or five cultures that have been smashed together to create the dysfunctional entity that is today called "Spain."

Spain generally is suffering from an identity crisis. At the depth of the Great Recession, some 50 percent of youth were unemployed. The country's institutions have suffered mightily from the economic fallout and even the highest authority figures have come under fire.

For instance, when former King Juan Carlos was discovered to be shooting elephants on a luxury safari to Africa during the depth of the economic crisis, the prestige of the royal family was rocked. Carlos later resigned the throne in order to avoid an "institutional crisis." Meanwhile, the king's youngest daughter Cristina and her husband Iñaki Urdangarin are accused of embezzlement of US$8.3 million from a charitable sports foundation.

The institutional crisis is coming anyway. The Catalans are not the only tribe that wants to depart. The Basques are one of the oldest tribes in the world and archeology cannot even account for where they came from. But they appeared thousands of years ago and may be responsible for the great cave paintings in France and Spain. The Basques are resolute about their demands for independence and they are just as serious as the Catalans.

Right now the momentum resides with Barcelona and even the idea is angering Madrid, which has called a new currency "impossible" and "undesirable." Yet it is neither. The currency is reportedly going to be modeled after the Bristol Pounds, which is one of the simpler currency variants in the world today.

The planned currency can be issued in cash or electronically and will be convertible to the euro. The idea is that local businesses will provide incentives to shoppers who wish to use the new currency. This keeps the "money" circulating locally and thus benefits the issuing community.

The Barcelona currency might also be used by the government to pay for salaries, public services and – perhaps – taxes. Because Barcelona's metropolitan area is some three million, the implementation of a successful local currency would immediately make it a force to be reckoned with, and the largest alternative currency in the world.

The model is not bad, either. The Bristol Pound, on which the Barcelona currency is said to be modeled, has proven quite popular, with about one million printed. However, the story as regards local (alternative currencies) is much larger than that.

Barcelona will not be the first European city to launch such a scheme. Local currencies are all the rage these days. There could be as many as 3,000 forms of local money in use around the globe, says Community Currencies in Action, a global partnership promoting such schemes that is part-funded by the European Union's Regional Development Fund. Which begs the question… Why's the EU promoting parallel local currencies around the world?

Perhaps there are somewhat less altruistic motives behind the EU's agenda — motives such as encouraging people to embrace cashless currencies. As I warned in The War on Cash in 10 Spine-Chilling Quotes, the war on cash has moved from one of words to actions. As such, is it pure coincidence that most of the local community currencies that have been launched so far are in purely digital format, as would Barcelona's?

Perhaps that explains why local currencies have captured the interest and support of organizations like the Long Finance Group, whose sponsors include the City of London Corporation, and which recently echoed the Bank of England's calls for the UK government to adopt a purely digital currency in order to save the national economy (no, seriously).

The local currency movement is apparently backed by Western institutions. We've pointed out that the United Nations is a big sponsor of LETS currencies that demand a central ledger – which is especially convenient when it comes to taxation because all expenditures are easily traceable.

An alternative currency will be useful to Barcelona in its fight for independence because this money would be controlled locally, not by Madrid or even by the European Central Bank. However, as Barcelona is now run by a socialist government, another possibility is that the scheme would be helpful in providing additional revenue for public spending.

The article points out that the "big challenge will be getting local people and local businesses to trust the new form of money, as well as finding a local financial institution willing to back it up with euros … Without credibility and trust, fiat money loses value very quickly."

This brings us to a larger issue: Why are so many of these local currencies fiat oriented? If Barcelona wanted to ensure the probable immediate success of its new currency, it could simply announce that some of it would be backed by gold. Even an implicit gold-backed currency would surely become an attractive local alternative. Of course, it is possible that people would hoard the stronger currency rather than spend it. But perhaps that could be overcome by local merchant incentives that would stimulate the circulation.

Certainly, gold is a winner when it comes to the creation and acceptance of money. In a well-received editorial last week, The Daily Bell's chief editor Anthony Wile pointed out that junior miners could make themselves competitive again if instead of selling their gold on the open market they attempt to retain some or most of it, either refined or simply identified in the ground.

Anthony Wile wrote:

The reason we own physical gold and silver to begin with, or ought to, is because they bring real, tangible value to our portfolios, which tend to be otherwise dominated by paper-based asset holdings. Oddly enough, the ultimate "value" of a modern mining firm – and even its share price – lies in fiat currency, and more often than not, US dollars. This doesn't make any sense. The tangible value provided by retaining physical gold and silver could aptly be thought of as portfolio insurance – protection against a paper money scheme that is accepted only so long as the mass public retains confidence in it. And today that confidence is seriously eroding.

An interview with Seabridge's Rudi Fronk confirmed Anthony Wile's perspective, as well as giving insights into Seabridge's current success.

Rudi Fronk: Your basic premise is correct. Gold miners are always seeking to turn a superior currency, gold, into an inferior one, the dollar. At Seabridge, we like to think of ourselves as modern alchemists, turning cash into gold. Over the last 16 years, we have used cash to fund acquisitions and exploration of gold projects in Canada.

The interview revealed that Seabridge holds 90 million ounces of gold in all categories, or nearly two ounces of gold per share. While gold has not been performing exceptionally well over the past few years, at some point a breakout will come and Seabridge will be in a good position to benefit from the price momentum.

Barcelona, too, could benefit from a gold link. That none of the alternative currencies, so far as we are aware, have either an explicit or implicit relationship to money metals is at the very least curious. Certainly, there are powerful forces at work in the world that desire nothing less than a resurgence of a gold standard – at the local level – no matter how sensible it might be. It's unfortunate that the local currency movement has avoided a precious metals linkage that would make many of these currencies instantly more valuable and desirable.

After Thoughts

Maybe someday …

Posted in Gold & Silver, STAFF NEWS & ANALYSIS
  • dave jr

    Going to print your way to prosperity, eh Barcelona? Good luck. Perhaps this will aid the ECBs QE program. Create a conduit to import more monetary corruption…what could possibly go wrong?

  • Money is simply an IOU exchangeable receipt to facilitate commercial operations. Paper serves just as well as the historically worshiped gold and silver, if not even better. The value of IOU exchangeable receipt should origin equally in every adults bank account to have a fair play world.

    • Bill Ross

      “fair play world”

      equality of results? Why work and be productive?

    • You want Barcelona to deposit “free money” in the bank accounts of inhabitants? That’s a separate issue. The point the article makes is that gold backing would likely increase the penetration of the currency and generate acceptance more quickly. And in an ideal world money would be marketplace function, not a government one.

      • dave jr

        Separate issue. Same collectivist propaganda selling their utopian snake oil.

      • Bruce C.

        It would be interesting to see how any gold-backed currency would do. Gold may actually be “fairly valued” right now and so it would be used/traded and not hoarded IF the market believes its fairly valued. It would be an another test at the “grass roots” level. Without the gold-backing I think an alternative is still a little too abstract for most and it would have the same potential problem as every other fiat currency – counterfeiting.

    • Marcopolo

      Paper is a great way to create currency. Money on the other hand, by definition is a store of value as well as many of the attributes of currency like a medium of exchange. Gold and silver have functioned as money historically as they are a store of value. What goods and services bought for 1 oz of gold in 1913 or 1813 you can buy today for 1 oz of gold. Currency, like the USD, which in 1913 bought 1 dollar of goods and services, today only buys about a nickle (5 cents) in goods and services. Paper isn’t a store of value. It’s a currency (of which there have been many throughout history-all failing to last more than ~100 years).
      Gold and silver are money. Silver of late has become more of an industrial PM, but still retains its value. Gold has not appreciated in value from $20 oz in 1913 to $1140 oz now. It’s the paper currency you’re using to measure it, the USD, that has decreased in value.
      As Ron Paul once said, he could get a gallon of gas for 20 cents….if the two dimes were pre-1964, which were 90% silver.
      Even if one takes issue with the above, Gold is the best way to “short” the USD/uSG and Federal Reserve. Best defense against the socio/psychopaths in DC:-)

      • Gil G

        Value is always subjective and can never be stored. It’s impossible to place a value on a gold coin versus 1,000 years ago versus 1,000 years before that. Gold has the capacity to be valuable over time assuming there won’t be much more technological advancement.

        • Marcopolo

          As it is a medium of exchange, its value is always at all time measurable based on what one can exchange a fixed weight at defined purity for some level or amount of goods and services. While it is “subjective,” the marketplace provides a uniform level of price for a product or service at any point in time. That’s what markets are for.
          2,000 years ago, men didn’t wear suits. A hundred years ago they did. If I can purchase a finely crafted toga in Rome, or a fine tailored suit on Bond St. a thousand years different in time, for the same gold amount, as both were considered a “premium goods of their era,” it has value that is stored.
          Any paper currency around that long that can be redeemed in goods in and services of like kind over that long a period? Didn’t think so.
          Technological advancement has nothing to do with it. We can produce new technologies never seen before or one able to make a men’s suit inexpensively. All that means is that I can buy one toga 2,000 years ago, or 25 machine made suits today or tomorrow instead of one hand/tailor made.
          Technology in any era is only a side show. It affects market prices of goods or services based on what the technology change has impacted.
          Technology only affects the goods or services in the economy; with the stored value I can exchange the metal for more of different goods and services possibly made less costly, but the quantity of the metal will reflect the quantity and quality and of good or service I purchase….and they’ll still related (in clothing) back to the finest Roman toga of X BC or X AD.
          That’s why it has been used as a medium of exchange for over 6,000 years. It’s why our original laws at the founding was silver based then moved to bi-metallic. Lesson learned was there was zero value to “issuing a Continental.”

          • Gil G

            Technology has everything to do with it. Technology gives us access to cheaper, higher-quality goods. Technology has meant 90% of gold has been mined since the 20th century hence gold isn’t quite as valuable as it used to be. If technology allows for cost-effective interplanetary mining then the era of precious metals will come to an end and gold will come cheap rolls of foil.

    • dave jr

      Then let commercial operations facilitate their own exchangeable receipts. What does ‘every adults bank account’ have to do with commercial accounts except for government sanctioned theft? How bout you bust your ass, take risk and let government give me a piece of your efforts. I have a taste for some pizza right now, won’t you share? What? You don’t like me? That’s it! I’m calling the police.

  • Bill Ross

    folks;

    looking for a link to the video that concludes that, as a result of historical conflict between civilized and barbarians, matters have devolved to barbarians in control.

  • What nonsense are you spitting out? You consider fair play as not working and not being productive. What planet are you from?

    • Who are you talking to? And what did your previous post mean: “The value of IOU exchangeable receipt should origin equally in every adults bank account to have a fair play world.”

      • Me thinks a victim of Google Translate perhaps?

      • The answer to “Who are you talking to” should easily be determined by simply reading the comments section.

        • Honest question, there EL… Not sure why hostility is needed. You didn’t post it in reply to anyone, and you’re the one who mentioned “fair play.”

          • dave jr

            It’s easier to not reply to anyone directly. You know, that work ethic thing. Where’s Roger Malcolm Mitchell? At least he put up a challenge.

          • So Daily Bell is blind to this:

            Elhughman • an hour ago

            Money is simply an IOU exchangeable receipt to facilitate
            commercial operations. Paper serves just as well as the historically worshiped
            gold and silver, if not even better. The value of IOU exchangeable receipt
            should origin equally in every adults bank account to have a fair play world.

            Bill Ross Elhughman • 35 minutes ago

            “fair
            play world”

            equality
            of results? Why work and be productive?

            The
            Daily Bell

            Who are
            you talking to? And what did your previous post mean: “The value of IOU
            exchangeable receipt should origin equally in every adults bank account to have
            a fair play world.”

            1:20 p.m., Monday Oct.
            26 | Other comments by The
            Daily Bell .

            Elhughman The Daily Bell • a few seconds ago

            The
            answer to “Who are you talking to” should easily be determined by
            simply reading the comments section.

          • dave jr

            Why not present some new and thought provoking ideas/facts. Old Marxist/collectivism and past tense whining and sniveling isn’t getting it anymore. You need some help?

          • Please stop with the mysterious remarks. We are not blind to what you are proposing which is variant of Fabian-Marxist economics. In this paradigm, the “people” run the government and print money for their benefit and no one has to work, or work much. We strongly disagree with the idea that “free money can create a prosperous economy.” We’ve written dozens of articles about this topic and you can find them with any decent search engine. If you wish to continue to comment in this thread, please move on to another topic.

      • Gil G

        I think he’s taking a stab at gold isn’t valuable per se but because of what it can buy and as such gold is just another currency. In other words, paper or metal, it’s all good.

  • Jim Johnson

    If I wished to do business with the next county over, then a barter script would work fine. But to go further away, especially across the world,we will need something based on PM. I will continue to check in on ideas along this line, such as Bitgold, as the logic is simple enough for me to follow while I devote my time to doing what I am good at. When I bought my Bitcoins 4 years ago, I wrote down what I was instructed to write down, not at all surprised now that it gets me nowhere. One can guarantee anything forever if they know they will not be found and held liable.

  • If Catalan ‘cash’ is fixed to a EURO exchange rate where is its advantage to the public, short of just embracing an independent stance. Clearly, the risk is, the local government will suck-up the EURO’s exchanged and spend them, spend them on providing social infrastructural to justify themselves as successful at governance. And when, sooner or later inevitably, taxed receipts start to fall short of the public’s then expected government spending ability and the fix on the EURO proves costly to maintain – the house of cards fails. Between times the EURO central bank hovers in the background ready to drop-in and save the day – at a price. The price? the terms of EU membership for Catalonia being the EU’s terms. And yes – the experiment with a cashless society will be encouraged and expanded, with the EURO bank at the helm, in total control of the Catalan government’s budget and in control of a system of taxation that is impossible to dupe with ‘grey market’ transactions.

    And if the Catalan government wanted to introduce a gold backed currency I do not see why they would do that. I can see that, if they should want to do that, it would work, but I fancy all the proposed government is seeking is a popularism windfall of ‘printed’ a fiat currency to spend which would not happen with a gold backed currency. Sure a ‘gold’ based money would be durable and should help an economy to thrive but the disadvantage would be the wrath of the global central banking money system – which in the case of Libya’s planned gold backed Dinar for the African Union ended badly for that government of the time.

    • planckbrandt

      Most of the new local currency systems are voluntary memberships who agree to trade amongst themselves in mutual credit. They are like the Wir in Switzerland. They are basically LETS. Otherwise, they are just locally sequestered Euros. These do not really free themselves from the bank created credit supply. Most of the community currency models going around Europe are LETS basically. They cut out bank credit from their economy.

  • planckbrandt

    The local currency movement is about backing with local talent and human resources in every region, and to promote circulation not hoarding. So, it isn’t clear how gold backing could fit in here. What makes local currencies valuable is their usefulness locally for spending to grow local economies. Bitcoin is designed for hoarding and so it doesn’t circulate enough. It also spikes up and down in value.

    • As has been pointed out regularly for decades in market-based economic literature, money metals are self-correcting. When there is too much in the economy, mines close down and haording begins as people don’t want to part with their gold and silver when prices are low. Contracting volume sends the price higher and mines open and dishoarding begins. And thus the market itself regulates supply and demand. If is too bad the local currency movement does not understand more about how money works in a private sector environment.

      • Bruce C.

        But it’s the other way around: People will hoard when the money metals increase in price, not drop. The higher price increases mining/production/supply which tends to lower the price again. That assumes, however, that prices for goods and services remain the same. If g-s prices fall when money metals increase in value then hoarding won’t occur. This is true whether or not the currency is actual metal (coin) or metals-backed paper, which is theoretically a proxy for real metal.

        For example, people started hoarding pre-64 US dimes when the price (melt value) of the dimes’ silver content exceeded the face value of the coin. The fact that consumer price inflation also rose only exacerbated the situation. Had consumer prices fallen sufficiently, people may not have hoarded them, but under the circumstances hoarding was inevitable.

        • planckbrandt

          Yes, and anyway gold mining is polluting and also a reason for violence. Right now in Myanmar the conflicts over land enclosures for mining projects are evident. The same is happening in SAmerica and Haiti also targeted for mining. It is a source of violence like Boer War. The local community currency movements understands these connections and so that is why they are creating new currencies based on credit that people create between themselves, the ultimate form of freedom. It is anyway Anglo-American, Rio Tinto, etc. who ultimately control gold mining, AKA the big global owners. We need to be rid of them.

          • Gold and silver are self-regulating money metals that exist in a private sphere and may be purchased or sold anonymously. Try that with a LETS system. You can’t.

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