From: "Perry E. Metzger" <pmetzger@lehman.com>
Date: Thu, 21 Oct 93 08:47:56 PDT
To: cypherpunks@toad.com
Subject: Re: backing
In-Reply-To: <9310210452.AA27343@netcom5.netcom.com>
Message-ID: <9310211543.AA22017@snark.lehman.com>
MIME-Version: 1.0
Content-Type: text/plain



Doug Merritt says:
> F_GRIFFITH@CCSVAX.SFASU.EDU said:
> >Greshams law: "bad money drives out good"
> >i.e. where people have a choice (e.g. gold vs greenbacks post Civil
> >War), in making payments, they will use the lesser value money and
> >keep the higher value.  Thus, the lesser value money will circulate,
> >the higher value money will not.
> 
> So in essence you're saying that poorly-backed digital currency will
> win out over e.g. U.S. dollars?
> 
> That's an interesting concept.

A digital currency can be backed by gold held in some secure location
like the Zurich Free Transit Warehouse. U.S. Dollars are backed by
absolutely nothing other than blind faith in the U.S. Governement.
Who's kidding whom?

In any case, Gresham's Law applies to situations in which two coins of
differing metalic content are both made legal tender -- it doesn't
really apply in a general case.

Perry