On Thursday, October 30, 2003, at 02:35 PM, SnowDog wrote:
I wasn't making such a detailed observation. I am simply pointing out that
there are several definitions for 'money', each of which has use. ...
Likewise, would you ever have a
reason to include only notes redeemable for the gold? Again, the answer is
'yes', if you were trying to find total money in circulation, since the
notes circulate as money, too.
Sure, I can see how you might want to measure different things for different purposes. But I think if I wanted to measure the total "purchasing power" in the digital gold economy, I might start by defining it as follows: the total number of gold grams that would be spent if everyone suddenly and simultaneously spent every single digital gold asset they owned.
So for example, each e-gold, Goldmoney, e-bullion, Pecunix, and 1mdc account holder simultaneously spends every single gram in his account that he owns.
The first thing to note is that the e-gold grams residing in the 1mdc reserve account would NOT be spent in this scenario. That is because I stipulated that each account holder only spends the grams that he himself owns. The individual(s) holding the 1mdc reserve accounts do not own the e-gold grams in those accounts, so they do not spend them.
Therefore, the total number of grams spent in the total simultaneous spending binge is precisely the total of grams in the e-gold, Goldmoney, e-bullion, and Pecunix systems. The 1mdc grams are not included in this total. Or to look at it another way, the 1mdc grams ARE included in the total, but the e-gold grams in the 1mdc reserve are NOT. Same thing because either way you get the same total number of grams spent.
Now, to follow Robert's point, you might consider adding in something to represent the value in grams of all the TGC shares, on the grounds that they too can function as liquid, current money. TGC shares WOULD represent an additional component to the total number of grams traded in an all-out spending binge. That is because both the grams paid for those shares, and the shares themselves, can both be spent by their respective owners: TGC itself in the former case, and TGC shareholders in the latter case.
Of course, the question of who "owns" the gold grams paid for TGC shares is a bit subtle -- certainly TGC management controls those grams and can spend them as they see fit, but TGC shares do represent shareholder equity in the company, which includes all assets including the cash raised in the IPO.
But regardless of any such hair-splitting, both the cash raised in the IPO and the TGC shares themselves may simultaneously be spent with no violation of contract. So TGC shares, unlike 1mdc grams, can indeed be viewed as an increase in the money supply.
If anyone started a gold fractional reserve lending system, accepting for example a deposit of 10 grams and making loans of 100 grams as simple bookkeeping entries in accounts, and if people were damn fool enough to trade in those account balances as if they were real grams, then we would have to count those in our assessment of the "money supply" as well. I mean, if 100 grams of "fractional gold" could be spent about as easily and powerfully as 100 grams of e-gold, then I guess you'd have to include the fractional gold.
[Editorial comment: Goodness, how in the heck did anyone ever get snookered into this fractional reserve nonsense anyway?!!! Isn't it sort of blatantly ridiculous just on the face of it? I think it may be even more ridiculous (and harmful) than issuing fiat paper tokens themselves!]
I seem it as similar to the difference between M1 and M2. M1 is the total
amount of cash circulating in society and M2 includes other types of liquid
assets like checking account balances, which are directly convertable to
cash. Monitoring the size and growth of each are valuable to economists.
Not to quibble, SnowDog, but M1 itself includes both the cash AND the checking account balances. To get M2, you have to add in money market, small time deposits, and savings deposits.
I guess the idea is that cash and checking account balances are pretty much equally liquid, and the extra components in M2 are clearly less liquid.
-- Patrick
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