> > So far so good. > > But now you have arrived at 8000oz in bank deposits while there is only > > 1000oz in real gold (coins). > > These banks will be forced to do the same what the USA did: announce that > > bank deposits are no longer redeemable for real gold. > > If people come to cash out 20% of their bank deposits you already need > > 1600oz of coins and there is only 1000oz of them... > > And that's what I was saying: as soon as you introduce borrowing and > > interest rates, you already off the gold standard. > > No, the interest rate regulates the stock of gold coin/bullion and its > distribution between banks and non-banks. The model where the entire gold > stock is in the banks is not actually realistic.
Hmmm, you talk about banks offering interest rates, so why the gold would NOT be in the banks? Probably 90% of the gold will be in the bank. If 20% of the 8000oz bank deposits in your example are to be cashed out, there is simply not enough gold on your little planet. > So in your hypothetical example where 1 600 oz of gold is withdrawn from the > banks, before this is half way done, the interest rate would have increased > greatly stopping the banks from running out of bullion. Investors would not > only be tempted to hold bank deposits paying attractive interest rates, they > could also buy discounted capital assets. > > There is also a question of why there would be an increased demand for > non-bank goldholdings. No reason is ever provided. And without a reason, > there is no motive, making it counter-factual. The reason can be very simple. One of the banks is rumoured to have made some bad non-performing loans, and likely to go belly-up, et voila, people rush to the bank to get their gold out, probably not just 1600oz, but the entire 8000oz that is on deposit. And there is only 1000oz of coins in your bank... Oh yes, there may be another 1000oz around that had not been deposited in a bank, but the banks can offer whatever high interest rate they want, they are not capable of redeeming 8000oz of deposits. Big problems... As soon as you introduce borrowing in a gold-only economy , you create more ounces on deposit than there is real gold in the system. Hence you are not capable of redeeming the deposits for real gold anymore. As soon as you introduce borrowing, you introduce paper money. In a paper economy you CAN print the extra dollars if everybody comes to cash out his deposits. It may take a few days and force the banks to close temporarily, but they can eventually print them. Danny --- You are currently subscribed to e-gold-list as: [EMAIL PROTECTED] 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.
