At 3:50 PM 4/3/96, Hal wrote:
Or do you mean that people who receive ecash will not want to deposit in their bank accounts, but just turn around and spend it?
Yes. Or maybe even invest it there. I was just finished a little 800 word blurb for Wired's Idees Fortes section on, (guess what?) "Geodesic Capital", which talked about just such a scenario. I believe money which is never redeemed back at the bank is called signorage in the currency biz. Whatever signorage *actually* is, Kawika Daquio of the ABA (B for "Banking"), the Fed makes $20 billion a year on it. Not much against a trillion dollar federal budget, but, hey, every little bit helps... Stuff that doesn't get returned also useful for other stuff, like the reputation of the currency. When was the last time someone went in and cashed in their dollars for gold, or silver, at the Fed? It's legally impossible now, but the French did it until Nixon stopped it by floating the dollar, in the early seventies, if you remember, and it used to be done by normal people all the time. Pierpont Morgan had to bail out Presedent Garfield?, Cleveland? with a European treasury bond flotation because there was a run on the treasury at the turn of the century.
I will point out that with regular currency, most merchants who receive it just deposit it at the bank, save for a bit passed out as change.
Unless, of course, they're in Russia (remember the money plane?), and other places. That's where that $20MMM comes from, I think, but I'm not sure.
Supermarkets don't actually take the cash their customers give them and hand it to their suppliers. They deposit it and pay with checks. So the "life cycle" of a $20 bill is pretty much from the bank, to the customer, to the merchant, and back to the bank, only to repeat the cycle.
Maybe I'm talking about net balances on the net. e$ in circulation overall. I'm really starting to stretch here, you can tell. My guess is in the old days before book-entry stuff like credit cards, and even pervasive checking accounts, cash had to be more physically robust, because it probably stayed out longer. Remember those old double-eagles? Gold is certainly durable. More probably people just exchanged worn-out bills for cleaner ones, but that meant that the money stayed in cash.
Ecash, it seems to me, is already able to circulate to this extent, although of course it is not yet widely used.
Indeed. On both counts. :-). If my WAG about digital cash certificates eventually replacing demand deposits comes about (my claim is that they'll eventually be cheaper, and maybe more secure someday), then money would tend to stay on the net. That's when I figure we'll have actual e$-currency. On the other hand, one of the best deterrents against someone cracking or stealing the bank's key is to "expire" your currency issues, so there might be some "rolling over" of the the money on the net, expecially if it's anonymous. Just like they traded in worn-out bills in the old days. Hmmm. As usual, I seem to be loosing my wiggle room here. Welcome to quibble-punks. ;-). (Me! Not you, Hal!) Cheers, Bob Hettinga ----------------- Robert Hettinga (rah@shipwright.com) e$, 44 Farquhar Street, Boston, MA 02131 USA "Reality is not optional." --Thomas Sowell The e$ Home Page: http://thumper.vmeng.com/pub/rah/