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
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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
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