Re: Inflation-index bonds and private e-currency

From:	IN%"rfiero@pophost.com"  "Richard Fiero"  1-OCT-1996 04:50:07.73

>E. Allen Smith wrote:
>> 	One of the attractions of privately-produced currencies is as a
>> hedge against inflation; this development may be a competitor to this
>> idea. On the other hand, this setup does have an unavailability in _time_
>> of the money (more so than other, equal-security bonds of the same duration),
>> which may offset its greater spendability.

>I don't get it. Why is this bond not saleable like any other? What 
>"privately-produced currencies" are a hedge against inflation? If 
>this bond is saleable like any other, why is the money unavailable? 
>What means "greater spendability?" Is this assumed to be yet another 
>government plot because it competes with other offerings and reduces 
>the cost of borrowing?

	The bond in question is salable... but its value is only
guaranteed (to the extent that any government promise is guaranteed) when it
comes due. Money supplies can be continuously adjusted by a private issue to
keep a privately-produced currency's value stable.
	Privately-produced currencies, with a few (unfortunately minor)
exceptions, are currently more of a free market economist idea than a reality;
current governments are quite close on keeping their monetary powers (witness
the protests in Europe against going the opposite way, to a common currency;
also witness governmental attempts at keeping the free market from determining
exchange rates). It is possible that private digital currencies will solve
this problem, since they are much cheaper to produce than paper money is to
print and can be traded privately much easier. There are likely to still be
some legal problems with them, although A. selecting the proper country to
base an issuer out of and B. not actually making avaliable through the issuer
the reverse transaction - privately produced money to governmental money -
only transactions for governmental money to privately produced money and
privately produced money for services and/or goods may do the trick.
	Greater spendability refers to that when this bond is converted to
government-backed dollars, most businesses will currently accept such dollars.
This is unlikely to be the case for the first few years for a private
currency, although an increased ease of exchange of a digital (as opposed to
governmental paper) currency may make up for this difficulty.
	I doubt that most of the governmental types involved in making this
decision know about privately produced currencies... but some may, and may
have encouraged central bankers et al (and those who oppose Greenspan for
his (quite admirable) opposition to inflation, like numerous politicians) to
encourage this idea; assuming complete innocence of a particular motive on
the part of any large organization is generally about as ignorant (and often
stupid) as assuming complete guilt. Moreover, government competition with
the private sector is rarely beneficial; in this particular area, I'd point
out that it isn't reducing the cost of borrowing, it's increasing it - when
lenders can lend to the government, they're _not_ lending to private
businesses and others who can make far better use of the money. This factor,
in a large part, is why most economists are in favor of a reduction in the
government deficit.
	-Allen

P.S. Sorry about the lateness of this reply, but I'm just getting around to
some of my earlier mail.

"E. Allen Smith writes:
> 	Privately-produced currencies, with a few (unfortunately minor)
> exceptions, are currently more of a free market economist idea than a reality;
> current governments are quite close on keeping their monetary powers (witness
> the protests in Europe against going the opposite way, to a common currency;
> also witness governmental attempts at keeping the free market from determining
> exchange rates).

I would argue that it is the people, not the governments, that don't want a 
common currency in Europe.  Of course it's a different story with the poor EU 
countries....


> It is possible that private digital currencies will solve
> this problem, since they are much cheaper to produce than paper money is to
> print and can be traded privately much easier.

But digital currencies will never become fiat currencies, let alone legal 
tender, unless governments say they are.  So why should they worry?  (OK, OK, 
they will worry about tax evasion etc. etc.)


> There are likely to still be
> some legal problems with them, although A. selecting the proper country to
> base an issuer out of and B. not actually making avaliable through the issuer
> the reverse transaction - privately produced money to governmental money -
> only transactions for governmental money to privately produced money and
> privately produced money for services and/or goods may do the trick.

You seem to be forgetting that trade is a two way operation.


> 	Greater spendability refers to that when this bond is converted to
> government-backed dollars, most businesses will currently accept such dollars.
> This is unlikely to be the case for the first few years for a private
> currency, although an increased ease of exchange of a digital (as opposed to
> governmental paper) currency may make up for this difficulty.

I doubt this - I'm sure companies as well as people are more inclined to trust 
some private organisations than they are governments.  Of course there will 
always be a cost attached to the risk and ease of use.


> 	I doubt that most of the governmental types involved in making this
> decision know about privately produced currencies... but some may, and may
> have encouraged central bankers et al (and those who oppose Greenspan for
> his (quite admirable) opposition to inflation, like numerous politicians) to
> encourage this idea; assuming complete innocence of a particular motive on
> the part of any large organization is generally about as ignorant (and often
> stupid) as assuming complete guilt. Moreover, government competition with
> the private sector is rarely beneficial; in this particular area, I'd point
> out that it isn't reducing the cost of borrowing, it's increasing it - when
> lenders can lend to the government, they're _not_ lending to private
> businesses and others who can make far better use of the money. This factor,
> in a large part, is why most economists are in favor of a reduction in the
> government deficit.

Since you mentioned Greenspan, I thought I'd use the opportunity to quote him:

  "Regulation - which is based on force and fear - undermines the moral base
  of business dealings. It becomes cheaper to bribe a building inspector than
  to meet his standards of construction. A fly-by-night securities operator
  can quickly meet all the S.E.C. requirements, gain the inference of
  respectability, and proceed to fleece the public. In an unregulated
  economy, the operator would have had to spend a number of years in
  reputable dealings before he could earn a position of trust sufficient to
  induce a number of investors to place funds with him. Protection of the
  consumer by regulation is thus illusory."

    -- Alan Greenspan


> P.S. Sorry about the lateness of this reply, but I'm just getting around to
> some of my earlier mail.

Likewise.


Gary

Gary Howland wrote:

> But digital currencies will never become fiat currencies, let alone legal
> tender, unless governments say they are.  So why should they worry?  (OK, OK,
> they will worry about tax evasion etc. etc.)

  Exactly. How can they claim, on one hand, that something does not
qualify 
as currency, or as legal tender, and then turn around and tax it?
  If I have 10 Million UNITS that aren't considered to legally be of
value,
then I'm certainly not going to 'go easy' to tax court.
  Any currency that becomes sufficiently distributed and traded will
find
itself becoming a 'legal entity' in some form or another.  Once it has
been 'entityenized' (don't bother looking for that word in the
dictionary),
it will be a short step for it to achieve a quantifiable status among
other currencies.

  The bottom line has always been that anything which manages to reach a
sufficient level of use that it causes the government to want a 'piece
of
the pie' becomes regulated, taxed, and enters the mainstream of the
economic system.
  There has been a card-game going on in Texas for close to a hundred
years which works on a personal credit system and the IRS, to this 
point, has been able to do no better than require the players to
'report'
as income any credits that become translated into hard goods or taxable
services.
  If this card game involved sufficient revenue to make a serious impact
on this country's economic system, then there would undoubtedly already
be an act of congress addressing the issue of drawing to an inside
straight.
 
>   "Regulation - which is based on force and fear - undermines the moral base
>   of business dealings. 
>     -- Alan Greenspan

  I hope that the IRS didn't take this as a personal attack.

Toto

Toto wrote:
> Gary Howland wrote:
> > But digital currencies will never become fiat currencies, let alone legal
> > tender, unless governments say they are.  So why should they worry?  (OK, OK,
> > they will worry about tax evasion etc. etc.) 
> Exactly. How can they claim, on one hand, that something does not
> qualify as currency, or as legal tender, and then turn around and tax
> it? If I have 10 Million UNITS that aren't considered to legally be of
> value, then I'm certainly not going to 'go easy' to tax court.
> Any currency that becomes sufficiently distributed and traded will
> find itself becoming a 'legal entity' in some form or another. Once it
> has been 'entityenized' (don't bother looking for that word in the
> dictionary), it will be a short step for it to achieve a quantifiable
> status among other currencies.  [snip]

One should always look at the Mike Milken example of an alternate
currency.  This has not been reported from this point of view in, say,
the NY Times that I know of, but some "underground" publications have
done so.

The Wall Street Cabal (as they say) was genuinely frightened that since
Milken was so successful with high-yield bonds, they deliberately created
the term Junk Bonds and flooded the markets with appropriate propaganda,
and thereby killed off their competition.  How they turned it into a
criminal offense is truly an art.

Dale Thorn <dthorn@gte.net> writes:
> The Wall Street Cabal (as they say) was genuinely frightened that since
> Milken was so successful with high-yield bonds, they deliberately created
> the term Junk Bonds and flooded the markets with appropriate propaganda,
> and thereby killed off their competition.  How they turned it into a
> criminal offense is truly an art.

Before Milken, it was impossible for a small company or municipality without
a stellar credit history to sell bonds to the public. They had to borrow
from the Wall St Cabal at usurious rates. Milken made it possible for them
to bypass the Cabal. He was convicted of some truly bizarre charges (let
Uni explain what exactly he was guilty of) and given a truly bizarre
sentense by judge Kimba Wood (who, by the way, was Clinton's first choice
for AG before Rhyno). Still, his brainchild, junk bonds, are alive and well.

---

Dr.Dimitri Vulis KOTM
Brighton Beach Boardwalk BBS, Forest Hills, N.Y.: +1-718-261-2013, 14.4Kbps

Dale Thorn wrote:

> The Wall Street Cabal (as they say) was genuinely frightened that since
> Milken was so successful with high-yield bonds, they deliberately created
> the term Junk Bonds and flooded the markets with appropriate propaganda,
> and thereby killed off their competition.  How they turned it into a
> criminal offense is truly an art.

  Is this anything similar to, say, calling certain posts by list
members
'spam', flooding the list with 'external' spam, and then using the
resulting
uproar to take care of perceived 'internal' problems?

Toto <toto@sk.sympatico.ca> writes:

> Dale Thorn wrote:
>
> > The Wall Street Cabal (as they say) was genuinely frightened that since
> > Milken was so successful with high-yield bonds, they deliberately created
> > the term Junk Bonds and flooded the markets with appropriate propaganda,
> > and thereby killed off their competition.  How they turned it into a
> > criminal offense is truly an art.
>
>   Is this anything similar to, say, calling certain posts by list
> members
> 'spam', flooding the list with 'external' spam, and then using the
> resulting
> uproar to take care of perceived 'internal' problems?

You mean the way Ray Arachelian from Earthweb, LLC, flooded this mailing
list with a mail loop around Xmas and tried to blame it on me? Or the way
Ray Arachelian forges shit in my name and then complains about his own
forgeries? This Armenian creep is truly despicable.

---

Dr.Dimitri Vulis KOTM
Brighton Beach Boardwalk BBS, Forest Hills, N.Y.: +1-718-261-2013, 14.4Kbps

Toto <toto@sk.sympatico.ca> writes:
> Dale Thorn wrote:
> > The Wall Street Cabal (as they say) was genuinely frightened that since
> > Milken was so successful with high-yield bonds, they deliberately created
> > the term Junk Bonds and flooded the markets with appropriate propaganda,
> > and thereby killed off their competition.  How they turned it into a
> > criminal offense is truly an art.

> Is this anything similar to, say, calling certain posts by list
> members 'spam', flooding the list with 'external' spam, and then
> using the resulting uproar to take care of perceived 'internal' problems?

The old "create the provocation then step in with the solution" trick?

It must have been the Final Provocation, since we're about to get the
Final Solution.

Dale Thorn <dthorn@gte.net> writes:

> Toto <toto@sk.sympatico.ca> writes:
> > Dale Thorn wrote:
> > > The Wall Street Cabal (as they say) was genuinely frightened that since
> > > Milken was so successful with high-yield bonds, they deliberately created
> > > the term Junk Bonds and flooded the markets with appropriate propaganda,
> > > and thereby killed off their competition.  How they turned it into a
> > > criminal offense is truly an art.
>
> > Is this anything similar to, say, calling certain posts by list
> > members 'spam', flooding the list with 'external' spam, and then
> > using the resulting uproar to take care of perceived 'internal' problems?
>
> The old "create the provocation then step in with the solution" trick?
>
> It must have been the Final Provocation, since we're about to get the
> Final Solution.

Look, the Reichstag is on fire!

---

Dr.Dimitri Vulis KOTM
Brighton Beach Boardwalk BBS, Forest Hills, N.Y.: +1-718-261-2013, 14.4Kbps

Dale Thorn wrote:
> 
> Toto <toto@sk.sympatico.ca> writes:
> > Is this anything similar to, say, calling certain posts by list
> > members 'spam', flooding the list with 'external' spam, and then
> > using the resulting uproar to take care of perceived 'internal' problems?
> 
> The old "create the provocation then step in with the solution" trick?
> 
> It must have been the Final Provocation, since we're about to get the
> Final Solution.

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