From: "Frank O. Trotter, III" <ftrotter@marktwain.com>
Date: Fri, 12 Jan 1996 16:25:23 +0800
To: Cypherpunks List <cypherpunks@toad.com>
Subject: E-cash and Interest
Message-ID: <199601111911.AA16628@mail.crl.com>
MIME-Version: 1.0
Content-Type: text/plain


Once the Ecash Mint and the account (in our case the WorldCurrency
Access account - others will be different) are merged, the balance
you hold in the Mint may be able to earn interest.  Like an
individual, the amount of interest offered  will involve a cost benefit 
relationship based on cost of funds, regulation,  and operational 
costs, but there should be no obvious reason not to pay something 
in most curencies.

One note, under US banking regulation, "transaction accounts" fall
under different rules than money market accounts, savings accounts,
and NOW accounts.  Depending on the exact functionality desired, 
and future regulation changes, there will be more or less incentive
and/or legal ability to pay interest.

Given the current functionality of Ecash there will be little 
incentive to hold balances on your hard drive once interest is
available.  It is just too easy to move the money down when
you need it.  Today there is no specific cost incentive between 
the Mint and your hard drive.

It does not take a long leap to see that when the account and the
Mint are merged, that since the Mint _is_ the account, PC/Internet 
banking, debit and all other regular banking functionality can
become immediately integrated!


Frank Trotter
ftrotter@marktwain.com
Opinions expressed are my own....



> On Wed, 10 Jan 1996, Tim Philp wrote:
> 
> > With the E-cash systems that I have seen, you generate your own E-cash 
> > and have it signed by a 'bank' At that moment, it becomes like cash in 
> > your wallet and you loose interest that this money could be earning.
> 
> >From the standpoint of monetary economics, this is correct.  The (ecash)
> bank has the right to use your deposits to give out loans.  When you
> withdraw your money (and turn it into either cash or ecash) they (the
> bank) no longer have the right to turn your deposits into loans. 
> Withdrawn cash/ecash can not earn interest.
> 
> This is the problem of (e)cash: if you have it on hand you _must_ forgo
> any interest earnings.  Theoretically, the optimum holding of (e)cash is a
> function of interest rate (the greater the interest rate, the less cash on
> hand), transaction cost of making withdrawals (the easier and more
> convenient the withdrawals, the less cash on hand), and the "providence
> value" of cash (the more you value instant gratification, the more cash on
> hand). 
> 
> Thats why ATM machines have caused us to hold less cash.  We can now keep
> money in the bank (letting it earn interest and letting the bank create
> loans with it) and withdraw from ATM terminals only when we need it.
> 
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