Big Bang Thought Experiment

[Jim Choate]

On Tue, 25 Dec 2001, Tim May wrote:

> On Tuesday, December 25, 2001, at 01:50 PM, Adam Shostack wrote:
> 
> > Many posts have talked about a both a 'fixed level' of money, and a
> > commission.  I find this odd, especially as there will be no way to
> > add funds to the system.  If you have a commission on every exchange,
> > the money essentially deflates (there will be less of it tomorow than
> > there is today, making it more scarce, and thus more valuable.)  Thus 
> > it makes sense to hold onto it, making it illiquid, which is a bad thing 
> > for a currency.  Since this is magic money, why not issue more of it now 
> > and again?
> 
> For all intents and purposes, the total supply of gold has been 
> relatively constant for decades. A fraction of the total is mined and 
> brought to market each year, but only a small fraction of the total.
> 
> And yet the assay and marking cost (several percent) has not crippled 
> gold.

But gold is, at least for this sort of discussion, illiquid. How many gold
coins do you have in your pocket right now? I'll wager asymptotic to nill.

> Further, the fee for assaying and marking (melting, minting, stamping 
> gold bars, etc.) is a fee for a service, and goes back into circulation. 

Actually the payment for the fee for the assayist and the mint aren't
likely to come out of the metal they are processing today. Now if we were
talking of a 'frontier' sort of situation then you wouldn't have those
fees going back into circulation, at least not immediately. In that case
the 'cut' would be collected over some suitable period of time and then
sold. Or the assayist could simply take their cut on the upstream broker
payment (this assumes of course they have sufficient liquid capital in
hand). 

> I expect the operators of a money changing operation would similarly 
> aggregate their 1% or whatever and use the aggregated fee as their 
> compensation for providing a service.

But these examples, at least from the perspective of the money changer are
dealing with effectively 'unlimited' cash pools to draw from.

Your objections to Adams points don't hold.


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