On Wed, 10 Jan 1996, Tim Philp wrote:
With the E-cash systems that I have seen, you generate your own E-cash and have it signed by a 'bank' At that moment, it becomes like cash in your wallet and you loose interest that this money could be earning.
From the standpoint of monetary economics, this is correct. The (ecash) bank has the right to use your deposits to give out loans. When you withdraw your money (and turn it into either cash or ecash) they (the bank) no longer have the right to turn your deposits into loans. Withdrawn cash/ecash can not earn interest.
This is the problem of (e)cash: if you have it on hand you _must_ forgo any interest earnings. Theoretically, the optimum holding of (e)cash is a function of interest rate (the greater the interest rate, the less cash on hand), transaction cost of making withdrawals (the easier and more convenient the withdrawals, the less cash on hand), and the "providence value" of cash (the more you value instant gratification, the more cash on hand). Thats why ATM machines have caused us to hold less cash. We can now keep money in the bank (letting it earn interest and letting the bank create loans with it) and withdraw from ATM terminals only when we need it. ------------------------------------------------------------------------------- Patiwat Panurach Whatever you can do, or dream you can, begin it. eMAIL: pati@ipied.tu.ac.th Boldness has genius, power and magic in it. m/18 junior Fac of Economics -Johann W.Von Goethe -------------------------------------------------------------------------------