Editor, Wall Street Journal Re: The Dollar’s World, Theory vs. Reality 15 August 2001, p. A14 Charles Kadlec is advocating monetary reform that emphasizes price stability and reduces the role of centrally planned discretionary elasticity…but uncritically embodies the premise that money is a public good. Price stability isn’t the problem. Contractual stability — performance according to the rule of law — is. When a sovereign repudiates his monetary obligations the damage is uncompensated. A rehash of the gold standard or explicit definition of some other numeraire won’t change this. Likewise, a supranational central bank would only exacerbate the tendency. There is, however, a paradigm that systematically eliminates the flaws that have doomed every antecedent monetary regime to inevitable corruption. The elements are: 1) privately issued base money that circulates efficiently via a remote payment system but entails no credit or liquidity risk, 2) a second tier currency board (also a private firm) that uses the base money as its redemption medium. Both layers are real time gross settlement (RTGS) systems. Both operate on a strict debit basis and can therefore permit direct end user access without exposing themselves to credit risk. The base money, being non-fiduciary (unable to derive revenue from a treasury function), is fee based. The second tier currency entails no fees of any sort because the issuer may hold remunerative assets. This differs radically from the classic gold standard because it entails a realistic redemption discipline. Anyone at any time has recourse to the non-financial base money without loss of access to efficient transaction mechanisms. Both systems expose automation interfaces facilitating the emergence of multilateral netting arrangements. Direct end user access and immediate settlement also means that real time settlement of securities trading becomes feasible, especially using the currency board’s fee-less medium. Dr. Douglas Jackson Chairman, e-gold Ltd www.e-gold.com --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED] Did you know that e-gold Ltd. stores more gold on behalf of customers than many countries? See http://www.gold.org/Gra/Gra1.htm and the e-gold Examiner at http://www.e-gold.com/examiner.html for details.
