On 13 Apr 2001, at 11:38, CCS wrote:
> > Because you introduce a new risk. The unit of account of the new digital
> > currency system is then no longer backed 100% by an hard asset (gold) as
> > soon as you use credit instruments to increase your broad money base.
>
> Huh??? A risk for which currency? There are two units of account
> involved. Nothing has changed for the backing unit.
True, the risk is for the digital currency system as a whole.
Say e-gold (or any other gold currency issuer) starts issuing e-gold
Bonds. For each grams in reserve they issue 10 grams worth of
paper e-gold bonds. This creates risk for the holders of these
bonds which are now part of this digital currency system. Altough
the basic unit of account is a gram of gold, the fractional reserve
system makes it that it there are now 10 holders of an e-gold bond
with a face value of 'x' gram that have a claim on the same 'x'
gram(s) of gold.
Since we don't know what happen with the proceeds from the
issuance of these e-gold bonds, the risk cannot be controlled.
That is how I understand fractional reserve banking.
Claude
http://www.goldcurrencies.ca
http://www.ormetal.com
==================================
Claude Cormier Public Key
http://www.ormetal.com/PGPkey.html
==================================
---
You are currently subscribed to e-gold-list as: archive@jab.org
To unsubscribe send a blank email to [EMAIL PROTECTED]
