At 07:11 AM 1/8/2003 -0600, SnowDog wrote:
Fractional reserve lending of e-gold grams themselves is not possible.A gold standard, and fractional reserve banking are two different things. The US has always had fractional reserve banking. I can't imagine that any future gold standard would restrict banks from loaning out money. If banks loan money, there's going to be fractional reserve banking, because the people who borrow the money will put it in a bank and increase the reserves in the second bank, though the money also exists in the accounts in the first bank.
Let's say I want to start a company that lends out actual e-gold grams on a fractional reserve basis. I take in e-gold deposits, and I then I lend out ten times as much e-gold as I have on deposit.
I can't really do this, can I? That's because I cannot create e-gold grams out of thin air the way lending banks can create dollars out of thin air. Unless E-gold gives me the ability to create e-gold grams electronically without depositing more gold, it is impossible for me to lend out any more e-gold grams than I actually have on deposit. Sure, I could lend out some of my own personal e-gold grams, but then that would be yet another deposit.
Now consider the E-gold Trust themselves. They are not allowed to create more digital grams than they have in reserve. They are not allowed to lend out their gold bars. So clearly they cannot be a fractional reserve lending company either.
That is why I conclude that it is not possible to lend e-gold grams themselves on a fractional reserve basis. The only way to approximate it would be to create derivative units based on e-gold grams and lend those derivative units. But then you wouldn't be lending the e-gold grams. When you made the loan, you wouldn't be spending e-gold grams to an e-gold account, you'd be spending derivative units to a derivative account.
In the case of dollars, the Fed has merely declared that the derivative units are counted as actual dollars themselves. They have set up an equivalence that is not possible to set up within the e-gold system. Fractional reserve lending of e-gold grams themselves is not possible.
-- Patrick
http://fexl.com
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