Freegold

Freegold derives its name from a monetary environment where gold is set free, and has no function as money. Gold is demonetized, and has one function only: a store of value. The function of money changes only slightly: it is a medium of exchange and unit of account, but stripped of the store of value function. In this environment, currency and freegold will coexist to supplement each other, without interacting with each other.
History
Freegold was first seen at the ancient times of the Roman Forum and its Greek equivalent. People gathered at the market place for trading, and used scrip money to facilitate transactions. Their scrip money was not intended to be a store of value, and a surplus of scrip money was converted to something more resembling a store of value like gold or silver. Later, and probably due to increased quality and general availability of Coining, base metals and precious metals were used as money, which brought us the gold standard and ended the natural freegold area. A gold standard had severe restrictions on governments to apply monetary policy, especially in deflationary times as occurred in the 1930's. Ever since, the importance of the gold standard has been reduced, first by removing convertibility for US citizens in 1933, later by removing the international dollar to gold convertibility for Nations in 1971, which ended the Bretton Woods system. That left the US dollar as a thought of gold, in the books of the US Treasury still marked at $42 2/9 dollar a Troy ounce<ref name="Treasury_valuation" />, without any convertibility whatsoever. Without this official convertibility though, gold was still monetized, and a rapid increase in the price of gold would signal investors a decline of the value of the US dollar. This forced governments to actively manage the price of gold<ref name="GATA" />, documented by the Gold Anti-Trust Action Committee<ref name="GATA_freegold" />. With massive printing of currencies started after the Bankruptcy of Lehman Brothers in 2008, investors flock to commodities and precious metals, making gold price manipulation difficult to governments and which in effect counteracts monetary policy.
Implications of freegold
Under a freegold system, people are encouraged to save their surplus purchasing power in gold, for future spending. There are some severe implications coming out of this:
* Savings accounts at banks will be found less interesting (as this is an investment, not savings), leaving the banks with a declining pool of capital. Due to leverage function of fractional-reserve banking, it may greatly impact the financial industry.
* People who save their surplus purchasing power in currency and currency derivatives, may see their purchasing power greatly diminished when the monetary system is shifting to freegold, while keeping their savings in currency.
* Monetary policy will no longer impact the pool of savings (the savers).
* Interest rates will truly reflect the anticipated future purchasing power of currency.
* Countries will no longer try to devalue their currency for cheap exports. Quite the contrary: a strong currency will cause an inflow of gold, a weak currency will cause an outlow of gold.
* Freegold will solve the Triffin dilemma<ref name="Dilemma" />, as nations may opt for payment in what they perceive most valuable: currency or gold.
* Freegold may enable meritocracy; those who have (are) the labour force, natural resources or capital (gold) are in power; opposite to today where those who control the money are in power. Therefor;
* Freegold is allowing Third World countries to join the global economy.
* Freegold will put a brake on the debt based money expansion (due to its compound interest), as money is used for short term transactions only. This is more compatible in a world existing of finite resources and sustainable energy.
* Freegold will better support Islamic banking, and Islamic countries might even opt for a gold standard, though leaving them without monetary policy capabilities.
The significance of freegold can only be theorized until its arrival, though it will fundamentally change our perception of money for centuries to come.
Promotion and publications
Late 1997, freegold was first promoted on the internet by someone with the name of Another<ref name="Another" /> who was believed to be a European Banker. In his publications, he described the relation between the flow of oil and gold, and a cheap dollar. When Another stopped publishing, someone else continued writer anonymous under the name FOA (Friend of Another<ref name="FOA" />) who published The Gold Trail. Writings have stopped after 2002, but as of 2008, an anonymous blogger by the name FOFOA (Friend of a Friend of Another<ref name="FOFOA" />) started promoting freegold again. In 2010, a public effort was completed to collect all the Another and FOA writings, including their comments on other users posts and questions, into one bundle<ref name="Bundle" />.
Moving to freegold
A move to freegold would not be as abrupt you may think. Starting with issuance of the Euro, the European Central Bank is marking its gold reserves to market value. The more Fiat currencies fall in value against gold, the more obvious it becomes that gold will remain the only store of value - just by reading the balance sheet of the ECB<ref name="Statement" />. After the ECB started marking its gold reserves to market, the central banks of upcoming BRIC economies started doing the same. Freegold is expected to emerge, once the (existing or emerging-) reserve currency starts accounting its gold reserves to actual market price.
On 9 May 2002, ECB President Wim Duisenberg said in his Acceptance speech of the International Charlemagne Prize of Aachen for 2002<ref name="Duisenberg" />: The euro, probably more than any other currency, represents the mutual confidence at the heart of our community. It is the first currency that has not only severed its link to gold, but also its link to the nation-state. As it may have seem cryptic at the time, Wim Duisenberg describes the Euro as a transactional currency, coexisting with freegold.
Controversy and lacking sources
The concept freegold is sometimes found hard to understand, especially to Westerners, who mostly have grown up in a world without a practiced gold standard, and an on average mild inflation. Asian people however do have better understanding, due to a more cultural suspicion against government and (their management of) fiat currency.
It is interesting to note that the term or concept freegold is not broadly found on the internet or in publications. Even though the ECB and the central banks of the BRIC countries do support freegold. In order to allow transparent coexistence of freegold, European countries were encouraged to drop VAT on gold, when the predecessor of the Euro , the ECU was introduced. The lack of sources may be explained as a surreptitious act of the creators of the new competing currency-block to the dollar, who didn't want to outright threaten the hegemony of the dollar. Implications have been found severe, as described by John Perkins in his book Confessions of an Economic Hit Man<ref name="Perkins" />.
A similar concept but different name for freegold has been suggested by Jim Sinclair, who used the name Revitalized and Modernized Federal Reserve Gold Certificate Ratio<ref name="Sinclair" />

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