[e-gold-list] RE: Fractional Reserve Banking... What is it good for?
On 26 Jun 2001, at 13:58, Viking Coder wrote: > They have. They made a proud, high-faluting claim of being 150% > backed. Then they described what they actually meant when they said > 150% backed; 50% paper fiat cash, 50% paper gold certificates, 50% > gold. Which means they aren't 100% backed by hard gold. Indeed, I think they did... but I have seen this claim only here on the e-gold list. It is nowhere to be found on their website nor is there any detailed on their coprorate governance. As such this backing is OK, depending on the nature of paper gold certificates. But until they really published what they are all about, I am not willing to take them seriously. 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]
[e-gold-list] RE: Fractional Reserve Banking... What is it good for?
> "The only one who is currently an "ether gold" is OSGold." > > If they are not 100% backed, then I fully agree with you, but where is the > evidence. It seems to me that we just don't know what OSGold is since they > have not disclosed it. They have. They made a proud, high-faluting claim of being 150% backed. Then they described what they actually meant when they said 150% backed; 50% paper fiat cash, 50% paper gold certificates, 50% gold. Which means they aren't 100% backed by hard gold. Viking Coder Worth Two Cents? http://www.two-cents-worth.com/?VikingCoder --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] RE: Fractional Reserve Banking... What is it good for?
"The only one who is currently an "ether gold" is OSGold." If they are not 100% backed, then I fully agree with you, but where is the evidence. It seems to me that we just don't know what OSGold is since they have not disclosed it. They might be 100% backed, they might be pure ether (no backing private fiat money). One would think that any currency issuer wishing to be taken seriously would at least have publically available annual audits by an outside firm. DigiGold would also fall under "AUG equivalent" if they went to their 25% backing plan. --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] RE: Fractional Reserve Banking... What is it good for?
> A currency that is 100% backed by gold may sell itself as "AUG" or "grams of
> gold".
To which e-gold & GoldMoney, and soon e-bullion, can all stand and proudly
proclaim. Standard Reserve's gold-backed side of their accounts also meet
this qualification, even if they are 1 step removed, being 100% backed by
e-gold.
> This in my mind would solve the problem of diluting the value of gold by
> selling "ether gold" ("ether gold" = selling units of gold that are not
> actually backed by gold.).
The only one who is currently an "ether gold" is OSGold.
Viking Coder
Worth Two Cents?
http://www.two-cents-worth.com/?VikingCoder
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[e-gold-list] RE: Fractional Reserve Banking... What is it good for?
> A currency that is 100% backed by gold may sell itself as "AUG" or "grams of
> gold".
To which e-gold & GoldMoney, and soon e-bullion, can all stand and proudly
proclaim. Standard Reserve's gold-backed side of their accounts also meet
this qualification, even if they are 1 step removed, being 100% backed by
e-gold.
> This in my mind would solve the problem of diluting the value of gold by
> selling "ether gold" ("ether gold" = selling units of gold that are not
> actually backed by gold.).
The only one who is currently an "ether gold" is OSGold.
Viking Coder
Worth Two Cents?
http://www.two-cents-worth.com/?VikingCoder
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[e-gold-list] RE: Fractional Reserve Banking... What is it good for?
I think, Sam, that you are on the right track there. Fractional reserve is
fine IF the institution tells the customer in the user agreement, "If you
ask for your money at any time we MIGHT give it to you, or we MIGHT NOT."
Perhaps a better way of dealing with that problem is short-term rolling CD's
where you lock your money in for a week or a month at a time. This gives
the institution some predicatability and run protection.
As the issue applies to gold digital currencies, I would suggest the
following standard should be adopted in the industry:
A currency that is 100% backed by gold may sell itself as "AUG" or "grams of
gold".
Any financial instrument, whether it be a currency, investment, or other,
that is only partially backed by gold or gold currency, and partially backed
by something else (whether something else is "nothing" or "gold stocks" or
"mutual funds" or "currency basket") may sell itself as "AUG equivalent" or
come up with some abbreviation so that the consumer can tell that this
product is measuring it's value in units of AUG, but isn't actually AUG.
Kind of like selling a mutual fund denominated in dollars instead of shares.
The mutual fund is not backed by dollars, but it is a liquid investment that
is easily converted to dollars, so you just denominate it in dollar
equivalents.
This in my mind would solve the problem of diluting the value of gold by
selling "ether gold" ("ether gold" = selling units of gold that are not
actually backed by gold.).
- Original Message -
From: "Samuel Mc Kee" <[EMAIL PROTECTED]>
To: "e-gold Discussion" <[EMAIL PROTECTED]>
Sent: Tuesday, June 26, 2001 11:16 AM
Subject: [e-gold-list] RE: Fractional Reserve Banking... What is it good
for?
> I am quite possibly going to brand myself a pariah on this list by
standing
> up in favor of fractional reserve banking, though certainly not its
current
> incarnation.
>
> There is nothing wrong with fractional reserves per se. The problem is the
> incestuous relationship between the "checking" and the "savings" parts of
a
> bank. The "checking" part should be 100% backed by cash in the vault. The
> "savings" part should be a completely seperate entity that holds an
account
> at the bank and has no claim on the bank other than the balance of its own
> checking account. The two institutions should be incorporated separately,
> and neither should own a piece of the other.
>
> Ideally, if Sam's Savings has five million in deposits, one million in
> reserves, then the one million should be in a checking account owned by
> Sam's Savings at Joe Blow's Bank, and it should be 100% backed by cold,
hard
> cash in the vault. Sam's Savings would then pay monthly fees to Joe Blow's
> Bank to store the cash (does this sound familiar?). If Sam's Savings goes
> belly-up because of loan defaults, depositors and whoever else has a claim
> against it can come after the million but can't touch the rest of the
money
> in Joe Blow's vault because it never belonged to Sam's Savings in any way.
> If Joe's Bank goes belly-up...well, Joe's Bank _can't_ go belly-up.
>
> The virtue of this system is that people who want to earn interest can
> voluntarily deposit their money into Sam's Savings and understand that
they
> are taking a risk. People who want their money safe can keep it in a
> checking account at Joe Blow's bank and understand that they are giving up
a
> chance to earn interest and will actually pay monthly fees. It's their
> choice.
>
> Sadly, the banking system we actually have is the evil twin of the system
I
> just described. In our present banking system the two entities are
> comingled, so customers have no choice. Someone with all his money in a
> checking account is put at risk because the bank can go belly-up because
of
> bad loans.
>
> Of course, banks are "insured" by the FDIC. That simply means that
> taxpayers, who have no say in the banks' decision-making process, are
forced
> to pay for irresponsible decisions made by bank managers. When a bank
fails
> the politicians, bank regulators and all their relatives are warned in
> advance so that they can withdraw their funds. The remaining mess is then
> paid for by the taxpayers.
>
>
>
> ---
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>
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[e-gold-list] RE: Fractional Reserve Banking... What is it good for?
I am quite possibly going to brand myself a pariah on this list by standing up in favor of fractional reserve banking, though certainly not its current incarnation. There is nothing wrong with fractional reserves per se. The problem is the incestuous relationship between the "checking" and the "savings" parts of a bank. The "checking" part should be 100% backed by cash in the vault. The "savings" part should be a completely seperate entity that holds an account at the bank and has no claim on the bank other than the balance of its own checking account. The two institutions should be incorporated separately, and neither should own a piece of the other. Ideally, if Sam's Savings has five million in deposits, one million in reserves, then the one million should be in a checking account owned by Sam's Savings at Joe Blow's Bank, and it should be 100% backed by cold, hard cash in the vault. Sam's Savings would then pay monthly fees to Joe Blow's Bank to store the cash (does this sound familiar?). If Sam's Savings goes belly-up because of loan defaults, depositors and whoever else has a claim against it can come after the million but can't touch the rest of the money in Joe Blow's vault because it never belonged to Sam's Savings in any way. If Joe's Bank goes belly-up...well, Joe's Bank _can't_ go belly-up. The virtue of this system is that people who want to earn interest can voluntarily deposit their money into Sam's Savings and understand that they are taking a risk. People who want their money safe can keep it in a checking account at Joe Blow's bank and understand that they are giving up a chance to earn interest and will actually pay monthly fees. It's their choice. Sadly, the banking system we actually have is the evil twin of the system I just described. In our present banking system the two entities are comingled, so customers have no choice. Someone with all his money in a checking account is put at risk because the bank can go belly-up because of bad loans. Of course, banks are "insured" by the FDIC. That simply means that taxpayers, who have no say in the banks' decision-making process, are forced to pay for irresponsible decisions made by bank managers. When a bank fails the politicians, bank regulators and all their relatives are warned in advance so that they can withdraw their funds. The remaining mess is then paid for by the taxpayers. --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] RE: Fractional Reserve Banking... What is it good for?
Apparently Bruce Springsteen also has performed this song. The lyrics are at http://www.thuismarkt.nl/users/springsteen/Lyrics/War-7585.html > -Original Message- > From: Ian Green [mailto:[EMAIL PROTECTED]] > Sent: Tuesday, 26 June 2001 11:04 PM > To: e-gold Discussion > Subject: Fractional Reserve Banking... What is it good for? Can anyone come up with a funky rewrite slamming fractional reserve banking and promoting 100% gold-backed currency? (I'm sure it would be worth some donations from our e-gold friends!) :) Ian Green http://two-cents-worth.com/?107242 --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
David Hillary wrote: > Money is means of exchange, a transactional medium, means of payment, it > is created by banks whose balances can be used and are in fact used to > make payments. I don't agree with your definition of money at all. Nor is it the classical definition. Let's assume your definition is correct. What then is currency? > > For an explanation, buy 'Money - Ye shall have honest weights and > > measures': > > http://www.bearerinstruments.com/search.php3?Cat1=Publications > > > > > If a bank isn't a currency institution, then what is the difference > > between a bank and a currency institution? And, where does your > > definition of currency institution come from? Or is that another one of > > those phrases that gets thrown around a lot but never defined? > > A currency institutions is just an institutions that issues currency, > such as a currency board, for example the Hong Kong Monetary Austhority. > The HKMA issues HK dollars against a reserve of USD in US banks and US > bonds (i.e. a liquid reserve and an earning reserve). This currency is > the monetary base or high powered money for Hong Kong, banks use it to > create balances (using fractional reserve banking) in HKD. This is a > good illustration of how the value of currency is not diminished by > fractional reserve banking. No it's not. If the US government devalues the USD, using the fractional reserve banking system like it's done many times before for large devaluations and consistently for small devaluations, then the HKD gets devalued along with it. Fractional reserve banking is not a bad thing by itself, but if used to defraud and rob, like governments use fractional reserve banking, then it's a bad thing, and not "a good illustration of how the value of currency is not diminished by fractional reserve banking.". The HKMA exchanges HKD for USD at a fixed > rate of 7.80 HKD=1 USD. It maintains reserve assets equal to the entire > monetary base. the reserve is made up of liquid reserves (USD bank > account balances) and USD bonds. The banks then take this currency > backed up by debt and use it as the basis for the creation of further > money in the form of their balances in fractional reserve banking. Thus > the actual USD bills held to back up the entire HK monetary system is > close to zero, Using the phrase "back up" a bit loosely, aren't you? but since 1983 the HKMA has sucessfully maintained the > HKD at or close to the target rate. Ok. There's such things as luck, and chutspah, for a while. > > >Banking is not fraud and its not warehousing. > > > > You're right on the warehousing part. Wrong on the fraud part. > > > > 'Money - Ye ... ' might be expensive relative to other books, but > > it's "Just this side of stealing" relative to the value of the > > knowledge in it. > > > > It usually pays to nail down the most basic stuff first. Then more > > advanced future thinking (time and energy being non-renewable > > resources let alone scarce) on the stuff tends not to be wasteful. > > > > Bob > > where is the fruad or trickery? who is hiding what from whom? Who is > misleading who? fractional reserve banking is not fraud. There are no > contracts being broken and no misleading or deceptive actions. At least you now know where to go to get your answers. Bob -- http://www.constructiongigs.com/ Use gold as money. It's easy. Create a free e-gold account here: http://www.e-gold.com/e-gold.asp?cid=101670 ConstructionGigs.com's PGP public key is here: http://www.constructiongigs.com/assets/DH-DSSkey.txt Fingerprint: 3C4D A63F 3C8B 2D7B 7E1A FFE8 9A2E 4D78 CAD6 66B7 --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
Bob wrote: > > David Hillary wrote: > > > > > Banks are not and do not pretend to be warehouses for stacks of paper > > notes or bullion or whatever. Banks are liquidity institutions which > > accept DEPOSITS hold LIQUID RESERVES and INVEST in DEBTS of various > > kinds. > > > > > Money is created by banks and currency institutions as well as gold > > producers. > > You're right in saying banks are not warehouses for bullion, but wrong > when you say money is created by banks, except maybe a long long time > ago. I'd include currency institutions, but I don't know your definition > of that phrase. Money and currency are two different things. Money is means of exchange, a transactional medium, means of payment, it is created by banks whose balances can be used and are in fact used to make payments. > > For an explanation, buy 'Money - Ye shall have honest weights and > measures': > http://www.bearerinstruments.com/search.php3?Cat1=Publications > > If a bank isn't a currency institution, then what is the difference > between a bank and a currency institution? And, where does your > definition of currency institution come from? Or is that another one of > those phrases that gets thrown around a lot but never defined? A currency institutions is just an institutions that issues currency, such as a currency board, for example the Hong Kong Monetary Austhority. The HKMA issues HK dollars against a reserve of USD in US banks and US bonds (i.e. a liquid reserve and an earning reserve). This currency is the monetary base or high powered money for Hong Kong, banks use it to create balances (using fractional reserve banking) in HKD. This is a good illustration of how the value of currency is not diminished by fractional reserve banking. The HKMA exchanges HKD for USD at a fixed rate of 7.80 HKD=1 USD. It maintains reserve assets equal to the entire monetary base. the reserve is made up of liquid reserves (USD bank account balances) and USD bonds. The banks then take this currency backed up by debt and use it as the basis for the creation of further money in the form of their balances in fractional reserve banking. Thus the actual USD bills held to back up the entire HK monetary system is close to zero, but since 1983 the HKMA has sucessfully maintained the HKD at or close to the target rate. Digigold and Standard Gold are currency institutions of the e-gold economy, which do or could use debt to back up their currencies. > > >Banking is not fraud and its not warehousing. > > You're right on the warehousing part. Wrong on the fraud part. > > 'Money - Ye ... ' might be expensive relative to other books, but > it's "Just this side of stealing" relative to the value of the > knowledge in it. > > It usually pays to nail down the most basic stuff first. Then more > advanced future thinking (time and energy being non-renewable > resources let alone scarce) on the stuff tends not to be wasteful. > > Bob where is the fruad or trickery? who is hiding what from whom? Who is misleading who? fractional reserve banking is not fraud. There are no contracts being broken and no misleading or deceptive actions. David Hillary --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
David Hillary wrote: > Banks are not and do not pretend to be warehouses for stacks of paper > notes or bullion or whatever. Banks are liquidity institutions which > accept DEPOSITS hold LIQUID RESERVES and INVEST in DEBTS of various > kinds. > Money is created by banks and currency institutions as well as gold > producers. You're right in saying banks are not warehouses for bullion, but wrong when you say money is created by banks, except maybe a long long time ago. I'd include currency institutions, but I don't know your definition of that phrase. Money and currency are two different things. For an explanation, buy 'Money - Ye shall have honest weights and measures': http://www.bearerinstruments.com/search.php3?Cat1=Publications If a bank isn't a currency institution, then what is the difference between a bank and a currency institution? And, where does your definition of currency institution come from? Or is that another one of those phrases that gets thrown around a lot but never defined? >Banking is not fraud and its not warehousing. You're right on the warehousing part. Wrong on the fraud part. 'Money - Ye ... ' might be expensive relative to other books, but it's "Just this side of stealing" relative to the value of the knowledge in it. It usually pays to nail down the most basic stuff first. Then more advanced future thinking (time and energy being non-renewable resources let alone scarce) on the stuff tends not to be wasteful. Bob --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
[EMAIL PROTECTED] wrote: > > Hillary: > >It's not theft to provide a liquidity service. fractional reserve banking > > provides liquidity and is a free market credit configuration. Although > > it is possible that depositors will have a delay in redeeming their > > deposits or suffer a capital loss on their deposits, they are > > compensated for these risks by the payment of interest and the provision > > of liquidity. Fractional reserve banking economiese on the moneyary base > > and slightly reduces its value, but this loss of value is analgous to > > any commodity where users economise on its use, i.e. any commodity > > whatsoever. Economising on gold for monetary use is no different from > > any other cost-minimisation and transaction cost minimsation market > > process. > > I'm just a simple country boy. > The way I look at it is like this: > > It doesn't matter what commodity you're talking about, if you have an 1000 > units inventory of X, and you sell receipts for certain quantities of X to > the public, then total quantity of all the receipts issued should be less > than or equal to the 1000 units of X in your warehouse. If you knowingly > issue receipts for more units than you have for any good other than money, > it is legally considered to be fraud in almost all jurisdictions. > Fractional reserve banking constitutes selling receipts for more units of X > than you actually have. Banks are not and do not pretend to be warehouses for stacks of paper notes or bullion or whatever. Banks are liquidity institutions which accept DEPOSITS hold LIQUID RESERVES and INVEST in DEBTS of various kinds. Deposits at banks are as good as the reputation of the bank for maintaining liquidity and capitalisation. Holdings at a warehouse are as good as the security, fortification and reputation of the warehouse for securing property for owners. Banking is not fraud and its not warehousing. > > If you define another good, Y, that is made up of 25% X, and 75% something > else. That's fine. Sell it all day, just make sure you call it 'Y'. But > when you sell 25%X and call it X, it ain't X. The market now has to > determine the difference between real X and your stuff that you are calling > X, but isn't really X. By using the same units you are deceiving the market > into thinking that YOUR receipts for 1 unit of X are equivalent to 1 unit of > X, when in fact, they are only equivalent to 0.25 units of X. The economic value of X and Y could be the same, if the economic value of 'something else' is the same as the economic value of X. In the case of banking X and something else have the same value but different LIQUIDITY. 'Something else' is loan assets which have value but cannot be called in or sold, without significant loss of value, i.e. they lack liquidity. So the role of the banks is to manage and hold these illiquid assets, while providing liquidity for depositors. > > The following scenario would be fraudulent in the US: You have a house, > free of all encumbrances, and you want to get an equity loan. You apply to > two banks at the same time and their credit checks both go through close > enough that neither is aware of your application with the other. You then > sign deeds of trust with both banks, with neither knowing about the other. > You thus successfully use the same house for full collateral with two > different lenders at the same time. I know a guy who did this. If the > banks ever figure it out, he will probably go to jail. Why? He sold two > 100% receipts for the same house. (I am not talking about a 2nd mortgage. > Both deeds of trust say they are a 1st deed of trust. Obviously the lawyer > for the second bank that filed the trust deed didn't do his job.) Why is > this legal for money when is considered unethical and illegal for anything > else? Answer: because bankers are powerful and have been selling this > schtick for 300 years. One difference is that banks build reputation for ability to pay their debts (i.e. deposits) while the home-owner has an inferior reputation, not to mention that he is breaking the lending contracts he will have signed. Banks borrow from willing depositors, the banks are unwilling to lend against the house simultaneously. If airlines overbooked flights by 5% knowing that 90% of flights more than 5% of passengers do not turn up, and offered compensation to passengers who were declined booked travel, is that fraudulent? I don't know but i don't see any reason why it should be if passengers are informed of this policy. > > Back to fractional reserve... The following examples makes the assumption > that DigiGold invests the 75% of the e-gold deposits by creating new > DigiGold receipts and issuing them to borrowers. They may do it completely > differently, but for the sake of this example, we'll assume they lend out > DigiGold. > > Bob pays DigiGold 1 gram of e-gold for 1 gram of DigiGold. DigiGold credits > his account with 1 gr
[e-gold-list] Re: Fractional Reserve Banking
[EMAIL PROTECTED] wrote: > If > the market considers DigiGold to be the same as physical gold then the "gold > supply" has just increased by a tiny fraction of the world total. Nope, the market considers a unit of DigiGold a *fractional probability* of getting ahold of the designated mass of e-gold. The probability itself fluctuates depending on where you are in the queue to get paid, how much their reserve is, and the likelihood of a run on DigiGold. Normally the probability is near certainty, and so the exchange rate will hang around at nearly 1:1; instability will cause DigiGold to lose value. The market *doesn't* clump up fractional reserve units with 100% backed units, so the former doesn't inflate the latter. Hence it is not stealing. --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
[EMAIL PROTECTED] wrote: > > > > > Greed - the desire to improve one's situation > > Ambition is the desire to improve one's situation. The common culture has > many words to describe ethical self-advancement such as: motivated, > diligent, ambitious, hard-working, economical, frugal, productive, etc. "motivated": incorrect - designates zeal not its object. "diligent", "hard-working": designates an irrelevant negative (slog) or an irrelevant positive (non-laziness) sometimes involved in implementing honest greed. "economical", "frugal": designates an irrelevant positive (non-waste) sometimes involved in implementing honest greed, and connotes a polar opposite (self-denial). "productive": designates an irrelevant positive (getting results) involved as a side effect of honest greed. Has subtle connotations of a the converse of greed's intent (flow of value outwards from self). "ambitious": close, but normally connotes coercive-power-seeking (an irrelevant and possibly immoral thing) much more than it connotes personal-gain-seeking. > Greed is the desire for personal gain irrespective of morality. All words in the English language relating to greed either carry irrelevant side issues (veneration of slog, poverty, and altruism) or carry negative baggage implying coercion and immorality. This is basically a reflection of the cultural mindset. In order to talk about greed without stringing together constructs such as honest-self-gain-seeking the best solution is to reclaim the word "greed" in the same manner as has been done by eg: gays, with "queer". --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
Hillary: >It's not theft to provide a liquidity service. fractional reserve banking > provides liquidity and is a free market credit configuration. Although > it is possible that depositors will have a delay in redeeming their > deposits or suffer a capital loss on their deposits, they are > compensated for these risks by the payment of interest and the provision > of liquidity. Fractional reserve banking economiese on the moneyary base > and slightly reduces its value, but this loss of value is analgous to > any commodity where users economise on its use, i.e. any commodity > whatsoever. Economising on gold for monetary use is no different from > any other cost-minimisation and transaction cost minimsation market > process. I'm just a simple country boy. The way I look at it is like this: It doesn't matter what commodity you're talking about, if you have an 1000 units inventory of X, and you sell receipts for certain quantities of X to the public, then total quantity of all the receipts issued should be less than or equal to the 1000 units of X in your warehouse. If you knowingly issue receipts for more units than you have for any good other than money, it is legally considered to be fraud in almost all jurisdictions. Fractional reserve banking constitutes selling receipts for more units of X than you actually have. If you define another good, Y, that is made up of 25% X, and 75% something else. That's fine. Sell it all day, just make sure you call it 'Y'. But when you sell 25%X and call it X, it ain't X. The market now has to determine the difference between real X and your stuff that you are calling X, but isn't really X. By using the same units you are deceiving the market into thinking that YOUR receipts for 1 unit of X are equivalent to 1 unit of X, when in fact, they are only equivalent to 0.25 units of X. The following scenario would be fraudulent in the US: You have a house, free of all encumbrances, and you want to get an equity loan. You apply to two banks at the same time and their credit checks both go through close enough that neither is aware of your application with the other. You then sign deeds of trust with both banks, with neither knowing about the other. You thus successfully use the same house for full collateral with two different lenders at the same time. I know a guy who did this. If the banks ever figure it out, he will probably go to jail. Why? He sold two 100% receipts for the same house. (I am not talking about a 2nd mortgage. Both deeds of trust say they are a 1st deed of trust. Obviously the lawyer for the second bank that filed the trust deed didn't do his job.) Why is this legal for money when is considered unethical and illegal for anything else? Answer: because bankers are powerful and have been selling this schtick for 300 years. Back to fractional reserve... The following examples makes the assumption that DigiGold invests the 75% of the e-gold deposits by creating new DigiGold receipts and issuing them to borrowers. They may do it completely differently, but for the sake of this example, we'll assume they lend out DigiGold. Bob pays DigiGold 1 gram of e-gold for 1 gram of DigiGold. DigiGold credits his account with 1 gram of gold. DigiGold then lends 3 grams of DigiGold to Bill at interest. On DigiGold's books there are now receipts issued for 4 grams of gold. But there is only 1 gram of real gold (e-gold) there. If the market considers DigiGold to be the same as physical gold then the "gold supply" has just increased by a tiny fraction of the world total. The scarcity of gold relative to other goods and services has just decreased by a tiny fraction because the market cannot tell the difference between the receipts for real gold and the receipts for gold that does not exist. So by creating the 3 grams of ethergold, DigiGold reduced the value of real gold by (3 grams/TOTAL GLOBAL GOLD INVENTORY). It is an infitesimal amount, to be sure, but everyone who owns real gold was slightly hurt by the creation of the fictional gold. If a whole banking industry develops that does this then holders of real gold will see their gold decrease in value relative to other goods and services, because the market treats paper receipts for gold as if they were real gold. Thus, interest rates in gold rise to account for the inflation that results. The inflation causes a negative feedback loop that pressures gold holders to invest their gold in a fractional reserve institution at an interest rate high enough to account for the inflation caused by the fractional reserve system. The problem is not "using money efficiently". The problem is selling or lending more units of money than you really have. Lending at interest with a fixed time contract, such as a CD, does not create more money because it is listed as a loan (non-liquid asset) on the balance sheet of the creditor, but is listed as a liability on the balance sheet of the borrower. The title
[e-gold-list] Re: Fractional Reserve Banking
> > > Greed - the desire to improve one's situation Ambition is the desire to improve one's situation. The common culture has many words to describe ethical self-advancement such as: motivated, diligent, ambitious, hard-working, economical, frugal, productive, etc. Greed is the desire for personal gain irrespective of morality. Protect your privacy! - Get Freedom 2.0 at http://www.freedom.net --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
> > Greed - the desire to improve one's situation - is not a failing; it > > is a virtue. > > True. As craig said, we don't have the proper words to describe the good > form of greed vs. the common connotation of greed. Well, we do have the > word 'avarice'. There are plenty of proper words in the English language to describe the qualities that the common culture falsely associates with greed. larceny, mendacity, looting, victimizing, blood-sucking, ad infinitum The reason that the common culture identifies such qualities with the desire to advance one's life is that it falsely believes that such means are necessary to selfish ends when the truth is that they are incompatible with true selfishness. > > No, that is not why there is government intervention. That is only > > an excuse. Governments intervene because those who have the power > > consider it to their advantage to do so. > > Yeah. I wasn't saying we needed government intervention. I said that > is why we had it. Yes I understood that was what you were saying. And I said that was NOT why we had it; that that is only an excuse made up to rationalize after the fact something the powerful decide to do for other reasons (it gives them more power). [Just because a politician says he is going to take your savings to feed the widows and orphans does not mean that is the real reason he does it.] CCS --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
> CCS wrote > > Greed - the desire to improve one's situation - is not a failing; it > is a virtue. True. As craig said, we don't have the proper words to describe the good form of greed vs. the common connotation of greed. Well, we do have the word 'avarice'. "Greed is good!" I have heard that phrase twice. Once was from Michael Douglas in "Wall Street" The other time was during a competitive discussion, :) , with the most die-hard republican that I have ever met. > > However, without sufficient communication, capitalism > > can burn itself out because there are no feedback mechanisms. > > It is not true that there are _no_ feedback mechanisms. They just > are not as effective when communication is poorer. The feedback mechanisms took a while to kick and ultimately resulted in government intervention. This is because nobody else was powerful enough to intervene. > > > This is why we have had government intervention. > > No, that is not why there is government intervention. That is only > an excuse. Governments intervene because those who have the power > consider it to their advantage to do so. > Yeah. I wasn't saying we needed government intervention. I said that is why we had it. Viking Coder Worth Two Cents? http://www.2cw.org/VikingCoder --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
[EMAIL PROTECTED] wrote: > > "What you say is true (altho it would violate the terms of governance > of the e-gold system) but it is beside the point of what I understood > to be the original topic. Namely, the assertion that the use by > a 3rd party, such as SR, of e-gold to back another currency, such > as AUG, would introduce risk to e-gold itself." > > That was not the point of my original post , actually. The point was, > fractional reserve banking in gold will do one or both of the following: > > 1. It will increase the supply of "gold" on paper - thus contributing to > gold's loss of value against other goods and services, hurting all holders > of gold, even if only infitesimally. The widespread adoption of this > practice will most certainly keep the price of gold down just as gold > derivatives on paper are assisting to keep the price down today. To put it > in the simplest terms - fractional reserve banking and/or derivatives will > cause the total amount of gold in everyone's books to greatly exceed the > actual amount of gold in the world. The growth of this paper gold supply > steals value from the holders of gold by passing something as gold that > really isn't. its not theft to provide a liquidity service. fractional reserve banking provides liquidity and is a free market credit configuration. Although it is possible that depositors will have a delay in redeeming their deposits or suffer a capital loss on their deposits, they are compensated for these risks by the payment of interest and the provision of liquidity. Fractional reserve banking economiese on the moneyary base and slightly reduces its value, but this loss of value is analgous to any commodity where users economise on its use, i.e. any commodity whatsoever. Economising on gold for monetary use is no different from any other cost-minimisation and transaction cost minimsation market process. Fractional reserve deposits for gold are gold substitutes, denominated in gold and redeemable for gold, and can act as money, transfering value from payer to payee. > > 2. It will cause the particular currency that is being issued to devalue > against 100% backed currencies. > > While the growth of the "ether-gold" supply will hurt the currency of the > fractional-reserve institution the most, it will also hurt ALL holders of > real gold by "adding dross" to dilute the pure metal. It is a subtle form > of theft. It breaks the command "thou shalt not steal" which is fundamental > to the success of a free-market economy. The value of gold deniminated demand deposits is pegged to the value of gold by the deposit taking institution and cannot differ much from its peg. It is not theft to offer a valued service (liquidity and interest together) to the market, to those who wish to freely avail themselves of the service. It is not theft for suppliers to create substitutes for goods and for consumers to buy them, even though it harms the produces of the original good. Competition reduces profits but this is not theft. The price of gold is determined by supply and demand, not fixed by God or the state or anything else. The market should be free to economise on its use of gold and to create gold substitutes, whether for industrial or monetary purposes. > I would also like to reiterate that there is nothing wrong with lending or > creating debt-based instruments, as long as it is done in such a way that > only one person actually owns the gold at a given instant in time. In other > words, when I lend 1000 grams at interest to the bank, Metalsavings, or > whatever, I should not have a demand account that says I have 1000 grams of > gold. In order to lend at interest without creating a fractional reserve > system, there has to be a time contract associated with the loan. I give up > the money to the borrower for x period of time to be paid pack at y% > interest. Lenders have a clear choice about lending their funds: 1. lend to banks in the form of interest bearing demand deposits or 2. lend to companies in the form of buying securitised debt (bonds) Typically 1. offers a lower rate of interest because the additional liquidity of the asset has an economic value, as does the reduced risk that comes from pooling of debt risks. 2. typically offers a higher rate of interest because lenders must be compensated for reduced liquidity and less pooling of risk. This proves that liquidity has a market value and is a good people are willing to pay for, and that fractional reserve banks provide this good. > > I agree that the GoldMoney clause is rather vague. If GoldGrams are money > and I want to borrow $1000 from a bank using my 100 grams of GoldMoney as > collateral, why shouldn't I? It would be interesting to find out > GoldMoney's intent behind the clause. > > HK Kid David Hillary --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
Tristan Petersen wrote: > > >> > Capitalism succeeds because it is based upon one of humanity's > >> > greatest failings... Greed. > >> > >> Greed - the desire to improve one's situation - is not a failing; it > >> is a virtue. > > > >Wow, I agree! > > .. > > "The Utopia of Greed" in Atlas Shrugged comes to mind :) 'cept the best way to achieve it is to parrallel, circumvent, and outcompete the old larceny - instead of trying to "go on strike". Or to flip the same idea to its other side: the internet, the pan-national economy, and the world's tax havens will play the part of "Galt's Gulch". --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
>> > Capitalism succeeds because it is based upon one of humanity's >> > greatest failings... Greed. >> >> Greed - the desire to improve one's situation - is not a failing; it >> is a virtue. > >Wow, I agree! .. "The Utopia of Greed" in Atlas Shrugged comes to mind :) Tristan --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
> > Capitalism succeeds because it is based upon one of humanity's > > greatest failings... Greed. > > Greed - the desire to improve one's situation - is not a failing; it > is a virtue. Wow, I agree! There are those who set their image of man to be somewhat different than man is. Then when man doesn't live up to their image, they say that man has failed. The ideal -- virtue -- is in defined by what man IS, not by what some people would LIKE him to be. Greed is good! However, the English Language, as extent as it is, is limited. There are those who tie greed in with the desire to exceed at ALL costs, even those costs which specifically violate the rights of others. Yet, there is no word to make the distinction between the two: the type of greed where one desires to strive and succeed to be the best that one can be, making as much money as possible; and the second type of greed where one simply takes from others, more and more, without regard to human rights. Craig --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
I commend your attitude but dissagree with some of your specific comments. > Capitalism succeeds because it is based upon one of humanity's > greatest failings... Greed. Greed - the desire to improve one's situation - is not a failing; it is a virtue. > However, without sufficient communication, capitalism > can burn itself out because there are no feedback mechanisms. It is not true that there are _no_ feedback mechanisms. They just are not as effective when communication is poorer. And the proper comparison is not with non-existant idealized outcomes but with real alternatives, which are all worse. > This is why we have had government intervention. No, that is not why there is government intervention. That is only an excuse. Governments intervene because those who have the power consider it to their advantage to do so. > The government institutes law after law to regulate Capitalism into > some sort of Socialism. Socialism would be a great system to live > under, ... NO. Even taken on its own terms socialism is a terrible, destructive system to live under. The results are bad because the ideas are bad, morally evil. Best, CCS --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
> HK Kid wrote > "What you say is true (altho it would violate the terms of governance > of the e-gold system) but it is beside the point of what I understood > to be the original topic. Namely, the assertion that the use by > a 3rd party, such as SR, of e-gold to back another currency, such > as AUG, would introduce risk to e-gold itself." > Why did you paraphrase two distinct, contradictory comments from two different people into one quoted statement? > 1. It will increase the supply of "gold" on paper - thus contributing to > gold's loss of value against other goods and services, hurting all holders > of gold, even if only infitesimally. The widespread adoption of this > practice will most certainly keep the price of gold down just as gold > derivatives on paper are assisting to keep the price down today. >From what I understand... The gold derivatives aren't driving the price of gold down anywhere near as much as our governments doing strategic dumping of their gold reserves on the market. > To put it in the simplest terms - fractional reserve banking and/or > derivatives will cause the total amount of gold in everyone's books to greatly > exceed the actual amount of gold in the world. However e-gold is 100% backed by gold. Not paper gold, the purty, heavy, shiny variety. > While the growth of the "ether-gold" supply will hurt the currency of the > fractional-reserve institution the most, it will also hurt ALL holders of > real gold by "adding dross" to dilute the pure metal. It is a subtle form > of theft. It breaks the command "thou shalt not steal" which is fundamental > to the success of a free-market economy. There is no such commandment neccesary. The free-market economy is capitalism with instant communication via the net and without government intervention, right? Anybody who acts deceitfully will not be dealt with anymore. Reputation is your most valuable commodity in a free-market economy. Capitalism succeeds because it is based upon one of humanity's greatest failings... Greed. However, without sufficient communication, capitalism can burn itself out because there are no feedback mechanisms. This is why we have had government intervention. The government institutes law after law to regulate Capitalism into some sort of Socialism. Socialism would be a great system to live under, however it doesn't take into account the one thing that Capitalism does; Greed. However, now, with the instant world-wide communication provided by the internet, the feedback mechanisms are now beginning to exist. Anybody who doesn't ensure the purity of their product and passes it off as so will not be in business for long. If there is no government intervention, an added responsibility is needed. "Caveat Emptor" becomes completely true again. Viking Coder Worth Two Cents? http://www.2cw.org/VikingCoder --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
"What you say is true (altho it would violate the terms of governance of the e-gold system) but it is beside the point of what I understood to be the original topic. Namely, the assertion that the use by a 3rd party, such as SR, of e-gold to back another currency, such as AUG, would introduce risk to e-gold itself." That was not the point of my original post , actually. The point was, fractional reserve banking in gold will do one or both of the following: 1. It will increase the supply of "gold" on paper - thus contributing to gold's loss of value against other goods and services, hurting all holders of gold, even if only infitesimally. The widespread adoption of this practice will most certainly keep the price of gold down just as gold derivatives on paper are assisting to keep the price down today. To put it in the simplest terms - fractional reserve banking and/or derivatives will cause the total amount of gold in everyone's books to greatly exceed the actual amount of gold in the world. The growth of this paper gold supply steals value from the holders of gold by passing something as gold that really isn't. 2. It will cause the particular currency that is being issued to devalue against 100% backed currencies. While the growth of the "ether-gold" supply will hurt the currency of the fractional-reserve institution the most, it will also hurt ALL holders of real gold by "adding dross" to dilute the pure metal. It is a subtle form of theft. It breaks the command "thou shalt not steal" which is fundamental to the success of a free-market economy. I would also like to reiterate that there is nothing wrong with lending or creating debt-based instruments, as long as it is done in such a way that only one person actually owns the gold at a given instant in time. In other words, when I lend 1000 grams at interest to the bank, Metalsavings, or whatever, I should not have a demand account that says I have 1000 grams of gold. In order to lend at interest without creating a fractional reserve system, there has to be a time contract associated with the loan. I give up the money to the borrower for x period of time to be paid pack at y% interest. I agree that the GoldMoney clause is rather vague. If GoldGrams are money and I want to borrow $1000 from a bank using my 100 grams of GoldMoney as collateral, why shouldn't I? It would be interesting to find out GoldMoney's intent behind the clause. HK Kid Protect your privacy! - Get Freedom 2.0 at http://www.freedom.net --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
On 13 Apr 2001, at 16:14, Viking Coder wrote: > Just as if the following press release came though... > "Secret Service raids E-GOLD exchange provider" > which get's shortened to > "Secret Service raids e-gold" > People usually don't read the article, just the headline. I'm guilty of > this myself sometimes. Exactly. This very good example triggered a lot of negative reactions on one of the gold circles I belong to and where I was promoting the idea of gold currencies. Claude --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
> > Why should e-gold's reputation be damaged if Digigold or SR (in the > > future), or any other frac. reserve, fails? ..The backing that was > > previously not in general circulation, now is. How does this damage > > e-gold's reputation or credibility? > > Well I am sure that if you read in the Press that a digital currency X > that was partially backed by e-gold, has gone bankrupt..or > whatever.. It would not create a positive perception in the market > place. > > Claude Just as if the following press release came though... "Secret Service raids E-GOLD exchange provider" which get's shortened to "Secret Service raids e-gold" People usually don't read the article, just the headline. I'm guilty of this myself sometimes. Viking Coder Worth Two Cents? http://www.2cw.org/VikingCoder --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
> Claude wrote > 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. This would be in direct violation of the user agreement. e-gold ltd. cannot simply create e-gold out of thin air. e-gold ltd. does not and cannot have any liabilities. This includes stock in other corporations, any fiat currency, loans, etc... What started this thread was the assumption that a 3rd party use of e-gold as a basis for fractional reserve banking would damage e-gold and remove it from it's lofty status as 100% backed. This is what I still do not understand. > CCS wrote > The amount of e-gold in circulation would drop by [x amount] since its use as > a currency reserve takes it out of circulation. Out of general cirulation, yes. That gold does not show up in the velocity stats anymore. However, it is still part of the e-gold in circulation. e-gold can still claim to have 4 tons of gold in circulation even if 3 tons are used as the backing for various frac. reserve currencies. > Claude wrote > 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. Why should e-gold's reputation be damaged if Digigold or SR (in the future), or any other frac. reserve, fails? e-gold didn't fail. e-gold ltd. isn't bankrupt. The metal is still in the vault, and it is still greater than the electronic metal in circulation. The backing that was previously not in general circulation, now is. How does this damage e-gold's reputation or credibility? Viking Coder Worth Two Cents? http://www.2cw.org/VikingCoder --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
On 13 Apr 2001, at 14:11, CCS wrote: > Namely, the assertion that the use by a 3rd party, > such as SR, of e-gold to back another currency, such as AUG, would > introduce risk to e-gold itself. I don't remember saying this. The risk I mentioned was for the currency that is introducing fractional reserve banking. I agree with you. In the case, you mention, there would be no risk to e-gold itself. Claude --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
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 == --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
> > > 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. What you say is true (altho it would violate the terms of governance of the e-gold system) but it is beside the point of what I understood to be the original topic. Namely, the assertion that the use by a 3rd party, such as SR, of e-gold to back another currency, such as AUG, would introduce risk to e-gold itself. CCS --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
> 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. I don't think your terminology is correct. I don't believe bonds can be issued that way. 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. 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 don't like fractional reserve banking, but I do believe that if the US government had allowed some major banks to fail, in the 1830s, instead of propping them up, then the people would have learned that they WERE taking risk when they put their money in such banks. I think this would have created a demand for 100% reserve banks in the 19th century, which would have thwarted many of the problems that seemed to plague that century when various banks went under. Who knows... if it had become well known that people were taking the risk, 100%-reserve banks may even be the norm today, especially since bank accounts which charge bank fees seem to overwhelm interest bearing accounts these days. Aren't checking accounts far more common than savings accounts these days? If so, then do banks really need to participate in fractional reserve banking today? There might be fewer banks, but with their fees as high as they are, they should be able to do well. The fees on the average checking account, here in the US, are FAR higher than E-Gold's fees. Sincerely, Craig --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED]
[e-gold-list] Re: Fractional Reserve Banking
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]
