Matthew Bernardini writes:
I am new to this list, so excuse me if this topic has already been discussed, but I think you need to take a 200 level course in economics called Money and Banking. I think the idea is so obsessed with tax-evasion and privacy protection that you have ignored all the economic consequences of the ideas you are proposing.
The whole idea of my article was to take a look at the digital/private/offshore bank concept in the light of economic reality and the actual capital/financial markets. My credentials in economics are informal rather than formal, though I did write my senior paper in law school on an economic topic (airline regulation). I am certainly not a specialist but would like to think that I am not ignorant regarding banking economics and monetary theory.
1) Who will insure your money ? Can you trust anyone but the US gov't to back your funds ? Even in the S&L scandal the gov't refunded money to people that weren't insured by the FDIC. Do you think they would come to the cypher-punk rescue if your money up and flew to Brazil ?
Actually, I would trust practically anyone *but* the U.S. Government to back my funds! I am very much opposed to mandatory, monopolistic governmental deposit insurance, since it gives the illusion that the government actually knows what is going on inside your bank, and completely isolates bank customers from ever having to inquire into the reputation or financial worthiness of a bank. This distorts the hell out of the market. Because of the FSLIC, people just blithely put their money into random S&Ls, some of which were totally corrupt organizations, because Uncle Sam would be there to rescue their butts. (At our expense.) I could go on about this, but this isn't a libertarian economics seminar -- suffice it to say that I believe there is a significant market ot be made in private deposit insurance, and that is what I would look for to insure my ideal/future bank deposits.
2) A doctoral thesis could be written about this one, but what about the Federal Reserve ? You would wreak havoc on interest rates, inflation, international balance of payments, and international trade. How would this electronic bank adjust for inflation or an expanding/shrinking electronic money supply ? Take a look at some historical texts that describe the problems that the Early American Revolutionaries had in breaking from the British Currency. It took several failed efforts, and the currency of the United States has been constatnly evolving ever since.
Central banks (e.g., the Federal Reserve) are dangerous because they allow governments to manipulate the money supply for political purposes. The power of *individual* central banks has been weakening steadily in favor of to international currency rate agreements (like the ERM), and eventually, at least for international purposes, are likely to be supplanted by a much more stable market-based system of global currency arbitrage. This is already taking shape, as major multinational players presently seek to reduce their currency exchange risk by complex, software-model-driven hedging programs. (You might want to look into the products/services of companies like Capital Market Technologies or BARRA.)
3) Interest Rates and Inflation ...
4) Interest Rates and Inflation ....
5) You guessed it, Interest Rates and Inflation.
Interest rates (at least the "real" portion that is not ascribable to inflation) are market-driven. I don't understand how this is affected by private/offshore/digital banking.
What about Capital Markets ? What about foreign labor unit exchanges? Is mexican labor worth as much as US labor?
Again, how are these specifically related to the issues at hand? Banks act as depositaries, transaction processors, and lenders. Each of these services are market-based, fee-for-service activities. As far as currency, the bank can either avoid the exchange risk entirely (either by hedging, or by requiring that members/customers use a specified currency), or alternatively can go into the currency arbitrage business itself as a profit center. (Though the nature of the market is such that the more arbitrageurs there are, the less profit there is in arbitrage.) Fundamental questions of labor economics (etc.) do not seem to be involved at this level, so far as I can tell. -- Michael C. Berch mcb@net.bio.net / mcb@postmodern.com