"Chris Rasch <[EMAIL PROTECTED]>" wrote: > It will be interesting to see what happens when more and more transactions > occur via these currencies. One caveat: much of that growth rate appears to > be due to online Ponzi and MLM schemes.] Say, hypothetically, that the demand for gold as currency becomes so strong that it starts to affect the price (apart from the pre-existing market pressures from industrial and jewelry uses) by outstripping production. This might occur during a economic boom. Then, would not gold stockpiles increase in value w/o having provided a service, undermining gold's accuracy as a unit of wealth? The equivalent would be a government recalling fiat paper currency at too high a rate or printing currency at too slow a rate, causing "artificial" deflation in cash holdings. Now, this does not affect E-Gold in the forseeable future, as they rely on expenditures being in fiat currencies, acting as a medium of exchange. This is harmless as gold has exhibited stability comparable to some of the world's best currencies during the last decade or so. But, if the world were to revert to "notes" (paper or electronic) that represent masses of gold, then this problem of deflation may crop up with strong economic growth. Questions: * What metrics do benevolent and intelligent gov'ts use to decide how fast they print money? I suppose these metrics are similar to ones used to measure the growth or atrophy of an economy. * Can a system be implemented in the private sector that provides an (in/de)flation free currency which accurately represents wealth creation? Possible solutions: Well, any company or consortium, like E-Gold or PayPal, can issue currency. But what formulae would they use to manage their currency properly? * Track the price of a single commodity, such as gold, and issue currency at such a rate as to keep the price more or less stable. Adjustments have to be made if the demand for the commodity changes. * Track a bunch of commodities to more easily absorb short-term supply/demand fluctuations in any single commodity. This also prevents "gaming" by entities that strongly control singe commodities. Nothing jumps out as being the obvious solution ... Regards, Sourav Mandal PS: I apologize for any naivete -- I have no formal education in monetary theory or policy. ------------------------------------------------------------ Sourav K. Mandal [EMAIL PROTECTED] http://www.ikaran.com/Sourav.Mandal/ "... and he wondered whether the peculiar solemnity of looking at the sky comes, not from what one contemplates, but from that uplift of one's head." ---- Fountainhead, Rand
