From: John Gilmore <gnu@toad.com>
Date: Fri, 24 Nov 1995 04:41:21 +0800
To: cypherpunks@toad.com
Subject: Bitbux could eliminate some domestic currencies?
Message-ID: <9511232021.AA20165@toad.com>
MIME-Version: 1.0
Content-Type: text/plain


Date: Mon, 13 Nov 1995 17:35:39 -0500
From: Dave Farber <farber@central.cis.upenn.edu>
Subject: IP: cybercash! Holy Mackeral, Andy!
To: interesting-people@eff.org (interesting-people mailing list)

>From a letter in [My dog, I mean my software, ate this part of the msg -- gnu]

"Sir, Prof Alec Chrystal ... argues that because cash is unimportant, its
replacement by smart cards will have little impact. However, cash is
virtually the only kind of money issued by government (in the UK, more than
99 per cent). If a government cannot issue cash because e-money facilitates
the use of another country's currency  for domestic transactions, it will
lose virtually all its seignorage. The government will have to issue some
=A323 billion extra gilts and then pay about =A32 billion every year in=
 extra
interest.

"Moreover, cash circulates much more quickly than bank deposits (it has a
high velocity-adjusted weight). Cash was used for almost 15 billion retail
transactions in the UK in 1993, versus 4 billion for all other methods. So
the currency in which retail transactions is priced is in practice
determined by the denomination of cash. E-money would threaten this
dominance, allowing people to stop using domestic currency completely
(other than for paying taxes).

"The importance of e-money replacing cash is greater than possible effects
on exchange rates. Rather, it might make certain currencies to all intents
and purposes disappear."

Giles Keating
head of global economics
CS First Boston
London, UK