> > > Because you introduce a new risk. The unit of account of the new digital
> > > currency system is then no longer backed 100% by an hard asset (gold) as
> > > soon as you use credit instruments to increase your broad money base.
> >
> > Huh??? A risk for which currency? There are two units of account
> > involved. Nothing has changed for the backing unit.
>
> True, the risk is for the digital currency system as a whole.
> Say e-gold (or any other gold currency issuer) starts issuing e-gold
> Bonds. For each grams in reserve they issue 10 grams worth of
> paper e-gold bonds. This creates risk for the holders of these
> bonds which are now part of this digital currency system. Altough
> the basic unit of account is a gram of gold, the fractional reserve
> system makes it that it there are now 10 holders of an e-gold bond
> with a face value of 'x' gram that have a claim on the same 'x'
> gram(s) of gold.
What you say is true (altho it would violate the terms of governance
of the e-gold system) but it is beside the point of what I understood
to be the original topic. Namely, the assertion that the use by
a 3rd party, such as SR, of e-gold to back another currency, such
as AUG, would introduce risk to e-gold itself.
CCS
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