Bob wrote:
>
> Craig Spencer wrote:
>
> > Both are transferable *derivatives* of gold. That is, they are
> > contractual obligations whose value derives from that of gold.
>
> I'm not so sure about that Craig. A derivative's value is a function
> of more than the underlying security.
You are completely right that a derivative's value is a function of
more than the underlying security. That is not contrary to my
statement. E-gold is a particularly simple derivative but I did not
mean that it derives *only* from gold. Your example pointing out
that, in e-gold's case, it also depends on the reputation of the
operators is a good one. Another example is that the value of e-gold
and GoldMoney should differ slightly because of their different
governing contracts.
> > The principal contractual commitment is the obligation to
> > redeem e-gold in gold on demand (under certain circumstances).
>
> Currently, for almost all people who have ... some gold in
> e-gold ... have to plain 'ol go out and buy some coins or
> stuff at a regular jewelry or coin dealer who uses the e-gold
> payment system.So I suppose the word redemption could be used,
No, that is not really redemption. Note that I did choose my words
carefully and said that e-gold only promises redemption "under
certain circumstances". Those that you pose above are not those
"certain circumstances". The point is that without ANY means of
redemption e-gold would not have value for long. Ultimately,
the willingness of your e-gold taking coin dealer to sell you
gold for e-gold depends on the ability of someone who accumulated
over $100,000 worth of e-gold to redeem it for bullion.
Best,
CCS
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