NODE 01a1fdfdRe: backing?
doug@netcom.com (Doug Merritt)Mon, 18 Oct 93 22:32:23 PDT
tcmay@netcom.com (Timothy C. May) said:
>* The role of *gold* is tangential and secondary. Any stable currency
>would suffice, and in fact gold bullion would be no more desirable
>than yen or Deutschmarks.
You are a modern person in this thinking. Not all are. The uncoupling of
the U.S. dollar from a government-specified gold standard in the 1970's
is *still* a controversial issue with some people (not all of whom are
idiots, by the way, although I personally with disagree with 95% of them).
It is practically a truism that bull markets bring out modern thinking
about currency and that bear markets bring out gold-standard thinking
about currency.
Low-margin speculators regularly make money by predicting that kind of
psychological reaction alone. (The "low-margin" qualifier is a short-hand
to say that "no, *you* can't count on making money that way." :-) I assume
that some will disagree that *anyone* makes money that way, but that's not
really my point.
My point is, for digital currency, it makes sense to model non-digital
forms. There will be times that people feel insecure and believe (for
whatever reason) that gold-backed digital currency is the way to go.
Other people in other times won't be interested in gold-backed digital
currency, and that brings up different algorithms.
The psychology of the market (past, present and future) seems to me to
say that one shouldn't consider algorithms of only one form.
Anyone for digital currency mutual funds? :-)
Doug
NODE 30be48f8Re: backing?
"Perry E. Metzger" <pmetzger@lehman.com>Tue, 19 Oct 93 06:02:24 PDT
Doug Merritt says:
> tcmay@netcom.com (Timothy C. May) said:
> >* The role of *gold* is tangential and secondary. Any stable currency
> >would suffice, and in fact gold bullion would be no more desirable
> >than yen or Deutschmarks.
>
> You are a modern person in this thinking. Not all are. The uncoupling of
> the U.S. dollar from a government-specified gold standard in the 1970's
> is *still* a controversial issue with some people (not all of whom are
> idiots, by the way, although I personally with disagree with 95% of them).
Average inflation since 1970 has been higher than before 1970.
Average inflation between the elimination of gold drawing rights and
the banning of gold ownership by private citizens and 1970 were higher
than in the immediate period before that.
Average inflation from the establishment of the Federal Reserve to the
depression was higher than in period before that, when inflation
scarcely occured for almost 120 years.
Seems to be a pattern to me, buddy boy.
> It is practically a truism that bull markets bring out modern thinking
> about currency and that bear markets bring out gold-standard thinking
> about currency.
Not bear markets. Inflation.
> My point is, for digital currency, it makes sense to model non-digital
> forms.
Lets model the non-digital forms. Non-digital currency for
approximately three thousand years was gold or promisary notes to pay
in gold. In every time and place that this was eliminated, the
currency eventually collapsed, from the systematic debasement of
currency by the last Roman Emperors to revolutionary France all the
way to Weimar Germany and soon the former Soviet Union. I agree that
we should follow the historical models. Gold cannot be printed, is
cheap to store, and is widely recognized as having value.
Perry