ATM Salvation

by George F. Smith
Jul. 03, 2010

Would you buy a gold bar from a vending machine? If the ATM were located in a secure area, and the bars carried an acceptable premium over the current spot price and could be purchased in units as small as one gram or as large as an ounce, would you consider swapping your unbacked paper money for an authenticated 24-karat gold bar? There are entrepreneurs who are betting you would. Thomas Geissler, managing director of the German company GOLD to go, installed a gold vending machine in the lounge of the three-billion-dollar Emirates Palace Hotel in Abu Dhabi earlier this month. His company is able to produce fifty gold ATMs a month that he plans to install in places where "the machine will be liked by the audience," which so far doesn’t include the U.S. Another firm debuted a similar gold vending machine in Las Vegas a few weeks ago.

But gold is not yet money again. Why would people buy gold from a vending machine when all they could do is hoard it or give it away? To Austrians, the answer is the same for buying gold anywhere: to prepare for the ultimate rainy day – the Flood, for those who like biblical references. Bernanke may not want to shower the world with dollars, but history suggests politicians will gladly do the job and blame the disaster on speculators (and now Asians, given their current economic position). If enough people have gold bars and coins in their possession, the government will have trouble imposing a new paper money standard to replace the one it destroyed. Hyperinflation would be bad enough, but to allow government to lay the foundation for another monetary disaster would be an act of supreme treason to mankind.

Gold ATMs would be a convenient way of getting civilization’s choice for money to the general public. Let Krugman and other statists howl about how senseless it would be to return to the "barbarous relic" and how Keynes would be rolling over in his grave. People are still wise enough to know a con game when they see it. The bailout mania of recent times has shredded the slick wrapper on government’s fraudulent monetary scheme. People see the massive corruption but not necessarily where it’s taking us. They don’t see the endgame of monetary inflation. Thus, the run on gold and silver has not happened yet. Can a run be modulated with technology? The ATMs’ novelty and very presence will alert people to the seriousness of the crumbling monetary order and induce them to act now.

If gold-buying is limited to a relatively few who understand the monetary turmoil to come, the majority of the public will be vulnerable to the usual barrage of controls, edicts, and accusations that accompany high inflation and hyperinflations. But if most people have gold (and silver) in their possession, they will have a potential exchange alternative to the wallpaper the government cranks out. They will learn that the precious metals preserve their wealth, while the government’s imposed money drains it. As the dollar falls ever closer to zero in purchasing power, their gold and silver holdings will turn from being keepsakes to items they could exchange for real goods. ATMs that now accept fiat paper for gold could be joined by machines that exchange gold for silver or copper, for use in smaller transactions.

Mises said for gold to become cash people must have it touch their senses. In his words (pdf),

Gold must be in the cash holdings of everybody. Everybody must see gold coins changing hands, must be used to having gold coins in his pockets, to receiving gold coins when he cashes his pay check, and to spending gold coins when he buys in a store. [pp. 450–451]

Very few on planet earth today have had this experience. As a start, gold-dispensing ATMs could get those coins into pockets and purses.

As more gold went into more hands through gold ATMs people would begin to appreciate the value of saving. In 1966 Alan Greenspan wrote: "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value." Since 1976 matters have improved somewhat. Government makes us accept its inflated paper, but it doesn’t forbid us to use an alternative. Not directly. It penalizes gold with sales and capital gains taxes. Still, using an ATM to get rid of dollars for gold and silver would be a convenient way for Main Street to build insulation from government "monetary policy."

Gold and silver ATMs would teach valuable lessons to our youth. They already know the metals are rare and highly-prized. And as any parent could testify, kids of all ages love vending machines. As they fed depreciating paper money into the machines and pulled 24K gold bars from the chute in exchange, it might occur to them they were, in effect, snubbing the tyrants. They would be taking a step, however small, towards putting their future in their own hands rather than leaving it to the whims of Washington bureaucrats.

Government officials could always find ways to stop or cripple the emerging gold ATM movement, but doing so would be self-defeating. As parasites, they have a vested interest in the prosperity of others. We can always hope they have enough self-interest to step aside and let the market prevail.

July 3, 2010

George F. Smith [send him mail] is the author of Eyes of Fire: Thomas Paine and the American Revolution and The Flight of the Barbarous Relic, a novel about a renegade Fed chairman. Visit his website.

Copyright © 2010 George F. Smith