From: "Perry E. Metzger" <pmetzger@lehman.com>
Date: Thu, 21 Oct 93 13:22:49 PDT
To: cypherpunks@toad.com
Subject: Re: backing
In-Reply-To: <9310211952.AA19206@jobe.shell.portal.com.shell.portal.com>
Message-ID: <9310212018.AA22264@snark.lehman.com>
MIME-Version: 1.0
Content-Type: text/plain



Hal Finney says:
> Perry wrote:
> > > 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?
> 
> Banks are contractually obligated to turn over mortgage notes in exchange
> for U.S. dollars.  These contracts are valid over approximately 30
> years, and provide unencumbered title to valuable property.  These and
> similar contracts may be said to give value to dollars independent of
> government promises.

The mortgage contracts are not equivalent to the property -- in
particular, the property can rise rapidly in dollar denominated value
while the mortgage notes become worthless in a hyperinflation
situation.

Perry