On 13 Apr 2001, at 11:46, SnowDog wrote:
> I don't think your terminology is correct.
Maybe.
> I don't believe bonds can be
> issued that way.
Well any corporation can issue bonds, debentures, loans or else
against ist assets. The covered ratio between the face value of
these credit instruments and the corporation assets is something
that is flexible and depends on whatever regulations (internal and
external) that exists. The banking system has regulations, the gold
currency systems has none (except for that specific statement in
GoldMoney User Agreement).
> However, that's not the point I want to make here. Your
> question is about risk which cannot be controlled. I just want to
> point out that this type of risk is born by the institution practicing
> fractional reserve banking, and those who participate in it.
Agreed
> If a bank cannot pay its demand deposits, because it has issued
> too many loans for its deposited currency, then it will default and
> all risk will lie with those who loaned the bank their money. The
> underlying currency suffers no risk. If an e-gold bank wanted to
> issue loans in e-gold, and such a bank defaulted, then this
> bank and its members would suffer all the consequences. No >
other e-gold holder would be harmed.
I agree with this. But it could also be e-gold itself that issue those
loans and then the digital currency system that is e-gold could
become in default and go bankrupt.
No matter what, if the case you suggest happens, the reputation
and credibility of the e-gold system would be damaged. That in
itself could present some risks.
Claude
http://www.goldcurrencies.ca
http://www.ormetal.com
==================================
Claude Cormier Public Key
http://www.ormetal.com/PGPkey.html
==================================
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