From: Robert Hettinga <rah@shipwright.com>
Date: Wed, 8 Jul 1998 12:10:31 -0700 (PDT)
To: Ryan Lackey <rdl@mit.edu>
Subject: Re: IP: "CyberCash can't oust credit cards"
In-Reply-To: <v0401173cb1c905791ce6@[139.167.130.246]>
Message-ID: <v04011702b1c96aa1fb69@[139.167.130.247]>
MIME-Version: 1.0
Content-Type: text/plain


At 12:24 PM -0400 on 7/8/98, Ryan Lackey wrote:



> My banks eat the foreign ATM costs as a customer value-add expense.

Yes, but what do they do for customers of *other* banks? They *charge* them
for it. Which is exactly what any underwriter should do to put money onto
the net. There is no difference between an underwriter of digital cash and
a provider of a third-party cash machine, be it at a bank other than your
own, or, more equivalent, those private ATM machines you see all over the
place now.


> I argue that they had already shot their feet full of holes to the extent
>that
> nothing they did would have saved them by that point, but Mark Twain is a
> complex enough example that it might be worth just ignoring.  I don't know
> if their experiment will even be a footnote to the footnote to history that
> is DigiCash.

Well, certainly no more than Otto Lillienthal was... :-).


> I've already shown why it is in the best interest of the issuer to
>participate.
> The next step is to convince merchants it is worth doing.

 By making it so cheap for them to use that it becomes ubiquitous? ;-).



> The half-life of a given dollar of digital cash will be *infinite* if there
> is an expanding base of users, a cheaper secondary market for getting
> electronic
> cash than the cash out and cash back in system, and there is never a big
>panic.

Big pile of "ifs" there. I expect that all you really need are other
digital bearer assets which provide a better return than cash. :-).



> I thought seignorage was a net profit for the Fed, after printing/handling.
> They *do* give the Treasury a kickback for this, and I'm not sure how the
> budget
> actually works, but I think they pay all distribution/printing/etc. costs
> themselves, and thus this is actually spare money.

Okay. Since the actual, financial definition of seignorage is in fact the
difference between what money's worth and what it costs to produce it,
you're probably right. :-). Nonetheless, income on seignorage is miniscule
to other income that the Fed makes, and that's a fact. Greenspan has gone
on record (see the Forbes article) as saying that it would be no skin off
his nose if the Fed never saw any of it.

> It doesn't really apply here, since many of those costs are fundamentally
> different in the electronic cash world than in the printed cash world.

Well, yeah, to the extent that the cost structure is somewhat :-)
different. Unique, non-replicable money-bits *are* easier to print and
control than paper ones after all. Some people say three orders of
magnitude cheaper. ;-).


> Greenspan is/was a libertarian, and would probably be ok with private
> electronic
> banknotes putting him out of business, as long as it was better for the
>economy
> and people as a whole.

Agreed, and he's said as much, like I've said. Controlling the money
supply's more what Greenspan's interested in, and, frankly, given the
amount of eurodollars (the "other" e$ :-)) held in dollar-denominated
accounts in foriegn banks, it's probably safe to say that that's going to
be more of a problem for him as time goes on. And, of course, the physical
cash sitting in some Russian mattresses is, well, seignorage.

Cheers
-----------------
Robert A. Hettinga <mailto: rah@philodox.com>
Philodox Financial Technology Evangelism <http://www.philodox.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
The Philodox Symposium on Digital Bearer Transaction Settlement
  July 23-24, 1998: <http://www.philodox.com/symposiuminfo.html>