Claude,
> > What are the comparable figures for fiat currency? Do you know?
>
> I don't have the number but I am sure it is very high.
I would still like to know what it really is. Out of every $1000 in
circulation how many $ change hands each day? I'd be surprised if it
is anywhere near 10%.
> But I don't think that the velocity matters. No matter how the velocity
> of digital gold currencies and and the velocity of fiat paper
> compares, the question remains.. what is supporting the value of
> the fiat curency.
What is supporting its value is: DEMAND.
> If we want it to be supported by something else
> than "a promise to pay", we need a 1:1 ratio between the
> governement currency and the hard asset supporting its value.
Velocity does matter because it is a direct factor in the demand. The
reason is that you don't need so much currency if it is used more
efficiently. Therefore, in the GBC eventuality the demand will be less
than you expect based on present demand for less efficient fiat
currencies.
So in trying to anticipate what the price of gold would be if all
money were gold (backed, at least) you can't simply divide the currency
in use now (the current currency in use) by the stock of gold. You have
to anticipate what the demand for the gold currency would be IF gold
backed currencies were used.
You may be right that fiat velocity is very high. I don't know. I'd
be interested in real figures.
But what makes me doubt that it compares favorably with e-gold the the
following. Your typical check, ACH transfer or even wire transfer takes
on the order of days to clear. This occupies the fiat for that period of
time. To make the same payment with e-gold takes a few minutes (less if
it is not done manualy). So while one fiat payment is being made you
could use the same value of e-gold to make, say, 1000 payments. Thus to
conduct the same amount of commerce might require .001 as much value of
e-gold. Thus the commercial demand for gold (and hence the portion of the
price of gold due to this demand) if e-gold were used for all commerce
might be 1000 time less than you have estimated.
Best,
CCS
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Craig Spencer
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