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August 06, 2007


Jon Matonis

Hi Sameer, while your comments are correct in a money economy where issuer trust is not an issue, the fact that an appreciating metal asset is providing a "medium of exchange" function in addition to the "store of value" function should not necessarily be seen as a negative. A stable money is indeed desireable, but stable against what benchmark - a gallon of petrol, a man's suit, the Dollar or Euro? The "better money" is the one that retains its stability in an environment where issuer trust is not an issue. Of course, we have to trust digital gold issuers to maintain reserves and to publish regular vault audits, but we do not have to trust them to avoid the temptation of seigniorage (http://en.wikipedia.org/wiki/Seigniorage), which is the prerogative of kings!

Sameer Parekh

Hi, Doug, nice to see your blog. I would argue that a "good money" is not just one whose value does not decline over time, but one whose value remains stable over time. You do allude to that in saying that 'in some circumstances' an increase in value is disruptive, but I think that is inadequate. The ideal money, the platonic money, I suppose you could say, is solely a store of value. (which can be readily transferred to facilitate commerce) It is nothing more. It is not an investment. If a money gains value over time, then it begins to resemble an investment rather than a mere store of value. In the real world, no money can meet the platonic ideal, as its value will increase and decrease over time due to the complexities of the market, but the best money, in my view, will have the most stable value. If you want your assets to increase in value over time to account for the time value of money, then you should not hold money, you should hold investments. Thus a money that increases in value 3% per year is not as good a money as one which decreases in value 0.5% per year, contrary to your assertion that the better money is the one that does not lose value.

Jim Davidson

Doug - congratulations on your new blog! It is excellent, and good to see. I am glad to see you making your case. Best wishes for a full recovery from the awful behavior of the government. Standing for value and honesty is tough work, but it is all the more important for the difficulties. Good luck and God bless you.

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