From: wcs@anchor.ho.att.com (bill.stewart@pleasantonca.ncr.com +1-510-484-6204)
Date: Sun, 23 Jan 94 21:26:32 PST
To: MIKEINGLE@delphi.com
Subject: Re:  The Digital Barter Economy
Message-ID: <9401240525.AA19272@anchor.ho.att.com>
MIME-Version: 1.0
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As Mike Berch pointed out, an economy can grow just fine without
increasing the supply of whatever money is being used -
as long as the currency is easy enough to divide into smaller quantities.
That's one reason gold and silver are quite good, though paper money
and numbers in a ledger do quite well also.
Yes, there are difficulties with a fixed money supply in a growing
economy - money that you save keeps increasing in value,
and money that you borrow becomes harder to pay back.
That's ok - markets adjust the interest rates on borrowed money to 
accomodate people's expectations.  It's certainly better than
having one group of people decide that there should be more money
in the market, print it, and force everybody to accept it from them.

On the other hand, in an international free market, no single government's
fiat currency is mandated, and if the bank or its customers want to
hedge their bets by using multiple currencies, it may be worthwhile
to offer them, and any banking protocols we develop should probably
accommodate that.  Banks have to be more careful in a multi-currency
environment - if gold or yen go way up in value, people can do a run on 
gold or yen accounts even though the dollar accounts aren't getting hit.
(e.g. gold prices jumped about 20% at the beginning of the Yankee-UN-Iraqi
War, and anything slumps in value after *I* buy much of it.:-)
If a bank has all its assets in dollars, and Clinton decides to inflate
the currency to pay for Nationalized Health Care, same problem,
unless all its acocunts are in dollars and it has to convert when
trading with people who use other currencies.

As far as inflationary effects go, if you're a government and print
lots of fiat currency, the value of that currency goes down.
Same thing if you're issuing a private currency, except you can't
force your citizens to accept your zorkmids in exchange for real stuff.
So either you don't print more zorkmids than you can back with something,
or your accountholders get upset, withdraw their money, and
you're in big trouble unless you've got insurance - and insurance
companies tend to make sure you have a reasonable audit program
before they're willing to risk their money insuring you.

Private deposit insurance *is* available - a credit union down the
street from me insures accounts to $350K, which is $100K federal
and $250K private insurance.  The only reason it's not more widespread
is that people have tended to believe government insurance was enough.

			Bill
# Bill Stewart  NCR Corp, 6870 Koll Center Parkway, Pleasanton CA, 94566
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