From: jim bell <jimbell@pacifier.com>
Date: Mon, 8 Apr 1996 06:08:06 +0800
To: Wei Dai <hoz@univel.telescan.com>
Subject: Re: the cost of untracability?
Message-ID: <m0u5yIb-0008z6C@pacifier.com>
MIME-Version: 1.0
Content-Type: text/plain


At 05:30 AM 4/7/96 -0700, Wei Dai wrote:

>I think you're right.  There is no need for the issuer to pay explicit
>interest.  The easiest way to eliminate signorage would be to steadily
>increase the value of each denomination of ecash.  It would be kind of
>like a mutual fund that doesn't pay dividends.  In fact, if the ecash is
>backed by a portfolio of investment securities and its value floats with
>the value of the portfolio, then it would be almost exactly like a mutual
>fund.
>
>Of course, as Jonathan Wienke pointed out, the IRS would not be very happy
>about this.  Then again, the IRS would not be happy with a lot of the
>technology discussed on this list.

Some more than others, huh?  B^)

FWIW, I think that there is no capital-gains-type tax on currency 
conversions.  In other words, if I take dollars and buy yen today, and the 
interconvert rate changes and I convert back and make a "profit," that is 
not considered income.  If that's the case, then ecash has an excellent 
precedent behind it to avoid any taxes on interest, especially if that 
interest is, in effect, paid by increasing the inherent value of the currency.

And most of the "interest" will simply be the avoided inflation loss that 
would have otherwise occurred.  Buying ecash may be equivalent to buying an 
absolutely non-inflating currency that the government can't manipulate.

Jim Bell
jimbell@pacifier.com