Re: new money systems

["William H. Geiger III" <whgiii@amaranth.com>]

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In <97Jun26.113748edt.32257@brickwall.ceddec.com>, on 06/26/97 
   at 11:37 AM, tzeruch@ceddec.com said:

>Yes, but each currency would then have to be exchanged (at a discount!) 
>and that almost every time any transaction occured.  Unless you are
>willing to exchange any amount of currency without making any profit on
>it, not even to cover expenses or fluctuations in value, this won't work
>-
>it is trivial to convert currency, but it is not without cost.

I don't want to get to deep into this curency issue but from my experiance
not all exchanges are done at a cost.

This is directly related to the stability of the curency being exchanged.
If I am exchanging US $ with a low inflation rate (say 4%) for IT lira
with a high inflation rate (say 250%) it is to the advantage of the person
holding the lira to give me a good rate of exchange for my stable dollars.
Also if I may not actually need to make the exchange at all as many Italin
merchants would prefer to be paid in US $ rather than IT lira and will
discount his services on the simple fact that I am paying him in stable
curency. From my travels I have found whole cities where there is an
underground economy all in US $ because the local curency is worthless.
These areas tend to have a thriving barder system also for the same
reasons (a loaf of bread is still worth a loaf of bread regardless what
the pinheads in the government do to screw up the economy).

Where I see the cost of exchange is when dealing with curencies that are
of relativly the same stablilty US $ (4%) Japan Yen (6%). Then there is
not the overwhelming advantage to the person holding the Yens to exchange
for the US $.

There are exceptions to this also. Say you have Widgets Inc (USA) & Cogs
LTD. (Japan) who do a large amount of business in each others countries
and between each other. It may be to their advantage to accept purchaces
in each others currencies as to avoid the cost & hassels of going through
exchanges.

Just some food for thought. :)

PS: the inflation rates were just given as examples I have no ideal what
the current inflation rates are in the above mentioned countries.


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William H. Geiger III  http://www.amaranth.com/~whgiii
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