Patrick wrote:
It's a wild wacky spending binge from top to bottom! Prices are going through the roof! And why? Because when you bail an asset into a vault and get a note for that asset, then both the original asset AND the note both "EXIST!" And when two items that are both technically defined as money both EXIST, then well, by DEFINITION the money supply has fully DOUBLED!
John wrote:
You are talking about a fractional reserve system like US banks. ...
I wrote that entirely sarcastically, John. I agree that gold certificates are absolutely nothing like fractional reserve lending. The former has no effect on the money supply; the latter has a profound effect -- indeed, the most profound effect of all, far greater than the effect of printing presses.
So is e-gold fractional reserve? No. Therefore e-gold is not increasing the
money supply. If the gold in the vault was being used by someone as money
and at the same time that gold was used to make goldgrams being spent by
someone else, *that* grows the money supply, that is fractional reserve.
E-gold is not fractional reserve.
Definitely.
If you bail a gold coin into my vault and I issue a note for that coin,
then *POOF*! Suddenly the "money supply" has doubled ...
It's not really about price increases. When you issue a note for the coin,
both the coin and the note exist, sure. But the coin -ceases to be money- in
any functional way. It is certainly not part of the money supply, which is
the supply of available money circulating in the economy.
John, again I was being utterly sarcastic.
What you say is true, although as I pointed out I think a more coherent way to view it is that the physical coin does remain part of the money supply, and the note itself merely represents that coin in trade. Thus, the note does not in itself add anything to the money supply.
But no matter how you view it, you do get the same total number, yes.
Robert B.Z. wrote:
If JP chose to use the e-gold to buy TGC shares, then that part of the portion would indeed be activated and we would suddenly be looking at the perceived inflationary tendencies I ahve been talking about for three days now. ...
John wrote:
Before JP bought the share, both the TGC share and the e-gold existed. He
bought the share with e-gold, the ownership of these two things changed
hands. How is this inflationary?
Please recall that Robert wrote the above screed. As JP suggests, Robert is a phenomenally clever and enterprising fellow but entirely, delightfully, mad! :-)
I agree that the mere change of ownership of two things is not in itself inflationary in any sense of the word.
I have conceded that the act of ISSUING shares might prove inflationary, to the extent that those shares are considered to be "money." However, I still maintain that it is unlikely that those shares will be as liquid in trade as purely monetary gold itself.
-- Patrick
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