Re: e$: The Book-Entry/Certificate Distinction

At 10:02 AM 8/23/95, Perry E. Metzger wrote:

>Actually, what you've just described is general commercial paper, not
>just a bond. Anything that lists a sum certain in money to be paid on
>a date certain (with various other parameters, too, like a place) is
>negotiable commercial paper. Checks, notes, and other instruments are
>all commercial paper. They are not, by the way, certificates in the
>sense that I suspect you mean.

I really don't know. If a digital personal debt certificate isn't a bond,
but is a subset of commercial paper, we may be quibbling about definitions,
like Tim was saying.

So, let's look at this for a second. First, a check is a kind of
certificate pointing to a book entry in a bank somewhere, payable upon
demand. A note or commercial paper is a promise to pay money plus interest,
cash included, at a certain time in the future. So's a bond, but the
duration is longer. It's easy to see how they're all certificates, though
they can be held at a clearinghouse and thus be be book-entries. Clear as
mud, I guess... I'll try better next time when I've gotten more running
room.

We agree that it's a fixed income instrument of some kind, right?
Certainly it's not completely anonymous, but your pseudonymous key can
borrow money if its reputation is clean enough.

Cheers,
Bob Hettinga

-----------------
Robert Hettinga (rah@shipwright.com)
Shipwright Development Corporation, 44 Farquhar Street, Boston, MA 02131
USA (617) 323-7923
"Reality is not optional." --Thomas Sowell
>>>>Phree Phil: Email: zldf@clark.net  http://www.netresponse.com/zldf <<<<<

Robert Hettinga writes:
> So, let's look at this for a second. First, a check is a kind of
> certificate pointing to a book entry in a bank somewhere, payable upon
> demand.

Actually, it isn't. Its an instruction to the bank to pay to someone's
order. Note that the existance of a check doesn't guarantee that there
are funds in the bank that can pay. The check isn't a certificate of
the existance of funds -- only of the existance of an order by the
account holder.

> A note or commercial paper is a promise to pay money plus interest,
> cash included, at a certain time in the future. So's a bond, but the
> duration is longer. It's easy to see how they're all certificates, though
> they can be held at a clearinghouse and thus be be book-entries.

Well, the point that I'm trying to make is that a bond certificate is,
provided you don't think its a forgery, an actual bond. It isn't,
however, the actual underlying money, because the issuer can
default. If someone is trying to buy a bond the bond certificate in
some sense allows you to clear the transfer, but it clears the
transfer of the bond, not the payment of the obligation. I'm probably
being a bit obtuse here, but I suspect my point is made...

Perry