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The good news and the bad news about Peter Schiff’s new bank

Peter Schiff is an economics guru held in high esteem by several of my libertarian acquaintances, and he is is starting a gold-based bank.

The good news:

You can open accounts in dollars or gold bullion at the new Euro Pacific Bank Ltd, launched by Peter Schiff. this is an awesome idea

You can even get a “gold debit card” that you can use anywhere in the world. It’s backed by actual gold, which converts to whatever currency you’re needing at the time you visit an ATM.

The bad news:

There’s one catch if you are an American: you can’t open an account at this bank if you’re a U.S. citizen.

U.S. security laws have become so intrusive, burdensome, and expensive to comply with, that it made it difficult for Schiff to offer the services in the U.S. So, Schiff opened his bank offshore, in St. Vincents and the Grenadines. It operates outside the jurisdiction of U.S. security regulations, and does not accept accounts from American citizens or residents.

In the comments on my previous posting here, about what went wrong and when, much was made of the idea that in addition to knowing what went wrong it would help a lot if we can also say how to put it right.

Personally, I believe that “politics” is never going to sort this mess out, certainly not politics alone. What might is people just recreating the gold standard on a freelance basis, by such means as joining in with enterprises of the sort described above.

Yes, governments can shut such things down, as the above report makes abundantly clear. But if large numbers of people start placing side bets in enterprises of this sort, then it starts to become politically hazardous to just forbid such arrangements.

One of my favourite slogans just now is: “This isn’t gold going up; it’s the dollar (the pound, the euro, the yen, the whatever) going down.” That is because I consider this to be the basic idea behind a non-state imposed (which is the good kind of) gold standard. When large numbers of people measure state fiat currencies by how badly they do against gold, rather than gold by how “well” it is doing against this or that collapsing currency, then that is surely the beginning of the end for these currencies.

16 comments to The good news and the bad news about Peter Schiff’s new bank

  • Alsadius

    Yes, that’s why gold is going up against every other currency, every manufactured good, the labour market, and every other commodity at the same time. Gold is stable, it’s the economy that fluctuates.

  • This looks interesting. Much more convenient than BullionVault. As far as I can tell spending with the debit card is free, which makes sense as the bank will take card handling fees from the merchant. The main inconvenience is the minimum deposit of $1000 at a time.

    What are the risks to opening an account?

  • CaptDMO

    Of course, Americans can legally expatriate with their
    assets, for a small fee. Just like Jews from um…[i]other[/i] of “Socialist”, “workers party”, “political” persuasion, venues. I’m SURE (technically self-described comedienne) U.S. Presidential candidate Roseanne Barr (I sh!t you not) would approve.

    How come I ran into so many Brit expatriate “yachties” (tax refugees) living on boats amongst assorted islands formerly exploited under the flag of GB (amongst other lessor well armed “explorer” Nations)?

    Once these places (much like American native-indian reservations) have been used up, deemed “liability”, and discarded, subsequently attract their own successful “economies”(exploited by, subsequently deemed “illegal” for the hoi polli, the moated folk ), the US/GB gub’mints seem to have taken renewed interest in “legal” um….”unsolicited supervision”.

    Even the currently delusional (in the U.S. anyway) addage “cash is king” is being supplanted by the promise of “equivilent electronic credits” (user fees, and OTHER arbitrary overnight re-valuation, MAY apply).

  • CaptDMO

    It operates outside the jurisdiction of U.S. security regulations, and does not accept accounts from American citizens or residents.

    I wonder if there are any “special provisions” in the current UN “Law of the Sea” discussions that address THAT obvious oversight?

  • Snorri Godhi

    There is an irony here since St Vincent and the Grenadines ultimately depend on the Pax Americana for their security, and yet Americans are not allowed to take advantage of this security.

    WRT “what is to be done” (to quote Lenin) politics does have an essential role to play, if “politics” is understood to include the political actions of cutting public spending, deregulating, simplifying the tax code, and generally shrinking the State.
    I agree that initiatives such as the Euro Pacific Bank also play an essential role, but unfortunately such initiatives can lead to more regulations as a backlash. That’s where politics comes in.

  • Sceptical Antagonist

    The price of gold is doing well because there is no faith in the stock markets. Once (if) the confidence reappears, the markets will rise again and the price of gold and silver will drop.

    Who will cover the bank’s losses when the assets required to balance the books needs to be double what it was when the deposits were made?

  • Richard Thomas

    Whilst it is marginally better than fiat currency, unless the gold is actually in my possession, it’s still just paper.

  • Richard Thomas: while you have to trust someone that the gold exists at all, at least you do not have to trust them not to rapidly increase the amount of gold in the world.

    Of course, this it is physically possible that this might happen if a solid gold asteroid is found, or some such.

    That is why I think Bitcoin or something like it is superior to gold. It is mathematically provable that you have it and mathematically provable that it can not be inflated.

  • Special Antagonist: surely both sides of the balance sheet are denominated in gold so the effects cancel.

  • Russ

    If I relocate back to Hungary, I’d try it.

    Point blank, who do I trust more, Peter Schiff, or anybody at the big TBTF banks?

  • Laird

    Interesting chart, Alisa. I looks to me like the euro is overly strong vis-a-vis the dollar
    (when expressed in terms of gold). Might be an interesting arbitrage play . . . .

  • Alisa

    Indeed, Laird – although it may be too late: if you look at the 30-day chart, you will see that this trend seems to be reversing as we speak.

  • Let me address your concerns.

    @Rob Fisher, spending with the debit is not free – there is an activation fee, ATM withdrawal fee, and/or a POS fee. The minimum opening deposit for the gold account is $500 and the minimum gold purchase is $100. The $1,000 refers to the minimum incoming wire amount required for all wires after the initial wire.

    @Sceptical Antagonist, Euro Pacific Bank is transaction-based, meaning it does not engage in lending or proprietary trading of client funds. Second, the bank does not make any investments with their statutory capital.

    Send any questions/concerns my way: Vincent dot le at europacbank dot com

  • Donavon Pfeiffer

    And once again we see the true purpose of regulation: the prevention of an upstart from competing with an established cartel.

  • Paul Marks

    That can be the purpose of regulation – but wrong headed “protection” is also there in the mix.

    Especially if the state is going to pay depositors if the enterprise failed.

    This bank?

    I do not know.