From: m5@vail.tivoli.com (Mike McNally)
Date: Tue, 15 Mar 94 05:30:58 PST
To: Mark Hittinger <bugs@netsys.com>
Subject: re: re: digital cash
In-Reply-To: <199403150601.AA18237@netsys.com>
Message-ID: <9403151330.AA26352@vail.tivoli.com>
MIME-Version: 1.0
Content-Type: text/plain



Mark Hittinger writes:
 > >I can't for the life of me understand the difference between a
 > >"representation" of dollars and something "convertable" into dollars.
 > 
 > Actually there is a very important distinction.  It has to do with time.

I disagree, and below you disprove yourself.

 > Suppose digital cash is denominated in dollars.  Digital cash then 
 > represents dollars.  Suppose we have a year with 10% inflation.  Your
 > digital cash holdings are reduced in real value because of the
 > behavior of the paper currency.

Indeed, just as a check.

 > Suppose digital cash is not denominated in dollars but instead...
 > gold ... Dollars would then be convertible into digital cash at
 > some market determined exchange rate.  Again suppose there is a
 > year with 10% inflation. Your digital cash would convert to a
 > different number of paper dollars. 

Right: maybe more, maybe less.  The global monetary system is not
based on immutable metals prices.  You cannot guarantee that gold will
track the inflation of the dollar, which itself can only be measured
relative to other currencies.  Even during times of widespread
inflation, some things don't track; if you bought a diginote in 1978
and insited that it be issued in terms of a quantity of 8K RAM chips,
you'd be holding something pretty much worthless today.  (Then again,
8K RAMs might hold historical value :-)

The exact same relationship holds whether the digicash is issued on a
base of Swiss Francs, Mexican Pesos, or pet rocks.  Everything floats.
I really can't think of a way of anchoring the at-issue-time "value"
of a digicash note that's not either ridiculous or pointless.

 > The difference between representation of dollars and conversion
 > into dollars is therefore one of time and one of governmental
 > manipulations. 

Investing in gold at any given time may or may not be wiser or safer
than investing in dollars.  Your example fails.



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