overcoming ecash deployment problems (Re: all about transferable off-line ecash)

[Adam Back]

I think you are assuming things about rational economic behavior when
a money system is subject to high deflation.

Consider during periods of high inflation people don't like holding
money, as it devalues too fast.  They will hold interest bearing
deposits instead.

During periods of high deflation, they will hold cash if it is the
most attractive "investment".  The result will be shortage of cash,
for people who actually want to use it to make purchases because
investors will buy all of it.

Perhaps there are some government monetary systems in history which
had this problem.  For example gold with sudden shortage of gold
supply, or similar.

Adam

On Thu, Jun 06, 2002 at 05:31:28PM +0300, Marcel Popescu wrote:
> From: "Adam Back" <adam at cypherspace.org>
> 
> > So this would be the argument for a closed supply of money in the
> > system, like the digicash betabucks where they stated up from that
> > they would only issue 1,000,000 betabucks.  People trade them based on
> > supply and demand.
> >
> > Perhaps.  Though at the time Wei Dai had some arguments at the time
> > that if they were popular, they would be a good investment and people
> > would have an incentive to hold on to them which would make them
> > difficult to obtain, highly inflationary, and hard to use.
> 
> I have missed that one; however, it is wrong - if people hold them, then
> they become MORE valuable, and thus you have high deflation - the purchasing
> power of money grows - which is great. And if their value gets so big that
> subdivisions start to become necessary, one can always convert them to "new
> betabucks", each old one being worth a million new ones. End of problem.
> 
> Mark