From: "Arik Schenkler" <[EMAIL PROTECTED]> > I think that what guides you is not the redeemable option but the trust to > be able to redeem the currency at the time you wish to do that. (I could > better explain this in Hebrew.. -:)).
Ari: This kind of difficulty is why I like to insist on a simple, firm definition of "solvency". Here I define it in terms of internet gold: Definition: An Internet Gold System is "solvent" if it has enough physical gold free and clear to satisfy a complete & simultaneous bail-out of all internet gold in the system. Notice that I don't play games with probabilities here. If you maintain a fractional reserve system you can guarantee redemption with a certain probability, given some kind of Poisson distribution of redemption requests. I'm not playing that game. I'm talking about 100% certain, full redemption, even if all requests come at the same time. That way, all the gold has to be there at all times, sitting in a dark vault doing nothing but collecting dust. An Internet Gold Provider should be willing at all times to satisfy a complete and 100% "run" on the physical gold without turning anybody down. If this puts him out of business, then so be it. If he reneges on even one bail-out request, he is breaking his contract. The definition can be generalized to monetary systems that do not use physical gold as the immediately underlying asset: Definition: A monetary system is "solvent" if it has enough of the underlying asset free and clear to satisfy a complete & simultaneous bail-out of all the the underlying asset in the system. In the case of Internet Dollar, the underlying asset is US dollars. In the case of 1mdc, the underlying asset is e-gold grams. In the case of e-gold or GoldMoney, the underlying asset is physical gold bars. (No need to quibble over the term "asset". I merely mean the underlying thing that the customers of the monetary system view as valuable to them. If the customers are dung beetles, then the underlying asset can be dung. If dung can be an asset, then so can Federal Reserve Notes. :-) So Ari, I don't like your distinction between having a "redeemable option" and being able to "redeem the currency at the time you wish to do that". If it can't be explained in plain English (or Hebrew) I want nothing to do with it. You can either redeem it or you can't. If you're talking about probabilities, you're talking about a fractional reserve system. That's fine as long as you just be honest and call it a fractional reserve system. If you have a fully solvent monetary system, the probability of being able to redeem the underlying asset is essentially 100%, or as close to that as you can achieve on this earth. Regards, Patrick Chkoreff --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED] Use e-gold's Secure Randomized Keyboard (SRK) when accessing your e-gold account(s) via the web and shopping cart interfaces to help thwart keystroke loggers and common viruses.
