re: re: digital cash

>>Mark Hittinger says:
>> Are you guys going to simply represent dollars with your digital cash
>> or will you attempt to create your own currency that may simply be
>> converted to/from dollars?

Perry responds:

>I can't for the life of me understand the difference between a
>"representation" of dollars and something "convertable" into dollars.

Actually there is a very important distinction.  It has to do with time.

Suppose digital cash is denominated in dollars.  Digital cash then 
represents dollars.  Suppose we have a year with 10% inflation.  Your
digital cash holdings are reduced in real value because of the
behavior of the paper currency.

Suppose digital cash is not denominated in dollars but instead is
made to represent portions of gold stashed in a Swiss wharehouse.
Dollars would then be convertible into digital cash at some market
determined exchange rate.  Again suppose there is a year with 10% inflation.
Your digital cash would convert to a different number of paper dollars.

The difference between representation of dollars and conversion into
dollars is therefore one of time and one of governmental manipulations.

These are very important differences for attentive capitalists.
---------
I'd like a 250 Mhz 128 bit hybrid processor with 64 meg of 8 way interleaved
memory, a 10 megabyte per second i/o channel, two 3 gig hard disks, two dat
drives with compression, and a large diet coke.
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Mark Hittinger writes:
 > >I can't for the life of me understand the difference between a
 > >"representation" of dollars and something "convertable" into dollars.
 > 
 > Actually there is a very important distinction.  It has to do with time.

I disagree, and below you disprove yourself.

 > Suppose digital cash is denominated in dollars.  Digital cash then 
 > represents dollars.  Suppose we have a year with 10% inflation.  Your
 > digital cash holdings are reduced in real value because of the
 > behavior of the paper currency.

Indeed, just as a check.

 > Suppose digital cash is not denominated in dollars but instead...
 > gold ... Dollars would then be convertible into digital cash at
 > some market determined exchange rate.  Again suppose there is a
 > year with 10% inflation. Your digital cash would convert to a
 > different number of paper dollars. 

Right: maybe more, maybe less.  The global monetary system is not
based on immutable metals prices.  You cannot guarantee that gold will
track the inflation of the dollar, which itself can only be measured
relative to other currencies.  Even during times of widespread
inflation, some things don't track; if you bought a diginote in 1978
and insited that it be issued in terms of a quantity of 8K RAM chips,
you'd be holding something pretty much worthless today.  (Then again,
8K RAMs might hold historical value :-)

The exact same relationship holds whether the digicash is issued on a
base of Swiss Francs, Mexican Pesos, or pet rocks.  Everything floats.
I really can't think of a way of anchoring the at-issue-time "value"
of a digicash note that's not either ridiculous or pointless.

 > The difference between representation of dollars and conversion
 > into dollars is therefore one of time and one of governmental
 > manipulations. 

Investing in gold at any given time may or may not be wiser or safer
than investing in dollars.  Your example fails.



--
| GOOD TIME FOR MOVIE - GOING ||| Mike McNally <m5@tivoli.com>       |
| TAKE TWA TO CAIRO.          ||| Tivoli Systems, Austin, TX:        |
|     (actual fortune cookie) ||| "Like A Little Bit of Semi-Heaven" |

>I really can't think of a way of anchoring the at-issue-time "value"
>of a digicash note that's not either ridiculous or pointless.

Not only ridiculous, but impossible.  Even with one currency, it's
impossible.  Let us assume that all dollars have the same value.
(This ends up not being true with certain types of intervention--I
digress.)  Now, in the case of a Great Depression, say, where there is
actually less economic output, the number of dollars has not
decreased, and so each dollar buys less.

It's real value which is important in this case, not nominal value.

There is no guarantor of value.  If there were ever claimed one, I
would be suspicious that it was backed by coercion.

Eric

> Not only ridiculous, but impossible.  Even with one currency, it's
> impossible.  Let us assume that all dollars have the same value.
> (This ends up not being true with certain types of intervention--I
> digress.)  Now, in the case of a Great Depression, say, where there is
> actually less economic output, the number of dollars has not
> decreased, and so each dollar buys less.
> 
> It's real value which is important in this case, not nominal value.

Absolutely.  What most folk don't realize is that >ALL< money is inherently
useless until all the folks involved in its trade deem it of value and of
use.  Money sitting in one's pocket is also useless.  Sure we put the little
suckers in savings and make interest off'em, but only because the bank
moves them around for us, lending to those who don't really need it. :-)

Money is analogous to electrons.  Moving it around, it does a lot of work
for us.  Keeping it as static electricity is totally useless.  Putting it
in a capacitor, has some use.  Sometimes you need a cartain ammount of
electrons to be able to do a certain ammount of work, however if you leave it
there forever, the charge will eventually leak out (like inflation...)

Depressions and such are the result of money not moving anywhere... there's
a really cool story somewhere by Aliester Crowley on the adventures of a
particular bit of paper money exchanging hands, getting everyone involved
in its adventures to either do work or services, and to provide work and
services in return...

(That's why I believe those who wish to do away with money are idiots.
Without it, there's no common denominator on what a service, object or
whatever is worth.  No real way to establish the worth of something. Sure
there's barter, but its far too limited as a means of circulating services
and goods...  Money, paper, gold, or digital is only worth what we tell it
to be worth...  hell, if it were legal (and safe) we'd be using plutonium
coins instead of money... :-)

Just my digitial $0.02...


 
> There is no guarantor of value.  If there were ever claimed one, I
> would be suspicious that it was backed by coercion.
> 
> Eric
>