34 ms·

What happens if there's a "bank run" where everyone waits for their GD to mature rather than spending it?

by comex 11y ago

msrpotus 11y ago
And in general, where does the money come from? You're proposing to start your own private central bank.
- Suncho 11y ago
  Yes. Our own private central bank.
  - notahacker 11y ago
    If it's fully private and not Fed-linked, where's all the money to meet the convertibility obligations coming from?
    - Suncho 11y ago
      It will be distributed in deposits across banks that do have deposits at the Fed. We'd try to do it in such a way as much of our reserves as possible are FDIC insured. Have you heard of CDARS? It would be similar to that. http://www.cdars.com http://www.cdars.com
      - notahacker 11y ago
        That's where you store it. Where does it come from? I understand initially you'd need investment. I understand that in future, a secondary market could come into existence which would allow Gresham dollars to be exchanged for real dollars, at slightly below par value. But in order to actually have a profitable business, you need to obtain more dollars than the GD you're giving out over a given period of time. How does that happen?
        Suncho 11y ago
        There are a few different ways we can build our USD reserves, but the primary one is through a crowd investment system that I've devised. Investors will be purchasing, at a pre-negotiated discount, GD to be delivered at a future date. I call them "Future Gresham Dollars." Investors can sell their FGD to other investors in a secondary market to profit early or they can hold them until we succeed and reap their exact pre-negotiated returns. We actually don't need to obtain more USD than the GD we're handing out. The phase during which we're backed by USD is only temporary. If we succeed, then GD is the coin of the realm and USD has become obsolete. The profits we generate (and the returns to our investors) will be in GD. If we fail, the investors get nothing, which is normal. Of course, we'd need measures in place to ensure that we don't abuse our power as the world's monetary authority. We shouldn't be allowed to create new money just to make ourselves and our friends rich.
        gruvious 11y ago
        I think these sort of measures could be built into the algorithms behind the management of the currency. The entire infrastructure could be run by bots. Cyber security will need to be tight, though probably not initially. As I understand it, this is about social justice, ie, leveling the playing field. Post-transition for GD would mean that all accounts are activated to receive basic income, and they would do so on an equal basis. Initially, the currency is seeded in communities that need BI the most, and then becomes contagious to the world at large. Ultimately, the system also prevents hoarding of currency and incentivizes exchanges.
        Suncho 11y ago
        I think these sort of measures could be built into the algorithms behind the management of the currency. That's the idea. I'd like to set it up so that everyone can see that we couldn't abuse the system even if we wanted to. As I understand it, this is about social justice, ie, leveling the playing field. It's primarily about economic stability. Social justice is a side effect. Post-transition for GD would mean that all accounts are activated to receive basic income, and they would do so on an equal basis. Yes. In fact, the plan is for all accounts owned by individuals to be receiving a basic income well before the transition date. Obviously, businesses do not receive a basic income. Initially, the currency is seeded in communities that need BI the most, and then becomes contagious to the world at large. Yes, but only because those who need it the most have the highest marginal propensity to consume. This maximizes the initial circulation of GD. If you give it to a rich person, they're far less likely to spend it. Ultimately, the system also prevents hoarding of currency and incentivizes exchanges. Hmm. I'm not sure what you mean. For Gresham Dollar to work, it assumes some level of "monetary entropy," (I just made that term up). In other words, money starts at a higher velocity but ends up accumulating in hoards. Basic income provides a steady supply of fresh money to counterbalance monetary entropy.
Suncho 11y ago
The psychology behind a currency run causes people to want to get rid of the untrusted currency as quickly as possible. In the case of Gresham Dollar, because we don't offer on-demand exchange, that means spending it. The less people trust Greshem Dollar, the more they will spend it and the less we will dip into our reserves. This is a key feature of Gresham Dollar. It's technically possible for us to fail because everyone holds onto their GD, but we won't. In any case, we'll always be very transparent about our USD reserve levels and how close we are to running out. I've devised a whole system for what happens in the event that our reserves get low. Thanks for the question!
- gus_massa 11y ago
  The other are two possible scenarios when the price is too low: * Someone with a deep pocket decides to buy as much as possible at a high discount, say 1 cent per dollar, and wait 30 days and get a 100x gain in a month. (There are some funds that specialize in this kind of operations with bond from developing countries. Usually it takes more than a month to get the money, but sooner or later the country has to pay, because whatever is in the land is essentially a collateral. (Hi from Argentina!)) * Nobody in their right mind would buy the money, no merchant, no exchange, no other user because all of them think that the value will continue to decrease. So the only option is to save them in a drawer and wait 30 days, and after 30 days they are convertible to dollars. (At the 29th day, you can choose to sell it to someone that will have to wait 30 days or exchange it for a few cents, or wait 24 hours and get a whole dollar.)
  - Suncho 11y ago
    These are important points. Thanks for bringing them up. * Someone with a deep pocket decides to buy as much as possible at a high discount, say 1 cent per dollar, and wait 30 days and get a 100x gain in a month. * We've addressed this concern in a very specific way through something I call the "activation cap" on GD, which limits the pace at which GD can convert to USD. The activation cap doesn't apply to merchants who have signed merchant contracts with us. But if you're a merchant partner, your contract stipulates that you have to maintain par 1-to-1 pricing between GD and USD, so merchant partners can't set separate prices or do this kind of arbitrage. When GD is added to an account, its lifetime begins counting down immediately. Starter and basic accounts (i.e. accounts with no merchant contract) are subject to the activation cap. The activation cap is is a limit to the amount of GD that can activate (i.e. begin counting down) in a period of time. GD countdowns remain suspended until there's room for them to activate without violating the cap. This helps prevent large hoards of GD from quickly expiring. For example, let's say the activation cap is $20/day. In other words, at most $20 GD will activate per day. If an account's only income consisted of a single lump sum of $60, that GD would then activate continuously over the course of three days, and hence would later expire continuously over the course of three days. The activation cap does not affect users whose total GD income remains below the cap. We will set the activation cap higher than (e.g. double) the basic income so that those who only receive the basic income remain unaffected by the activation cap. This is a form of capital control, to be sure. But since there are always merchants who will accept GD at par, I'm confident that the market value of GD won't deviate too far from USD. * Hi from Argentina! * Hi! I'm in the U.S., but I actually came up with the idea for Gresham Dollar when I was contemplating Greece's possible exit from the Eurozone and how they might smoothly transition to a new currency if their euro reserves were limited. My hope is to extend Gresham Dollar to international markets. * Nobody in their right mind would buy the money, no merchant, no exchange, no other user because all of them think that the value will continue to decrease. * That's fine. Initially, Gresham Dollar will be 100% backed by USD, and we'll be putting GD in the hands of people who otherwise won't have any money to spend, so I'm confident that we will convince some merchants to accept it Gresham Dollars. If people don't want to spend it, they can sit on it and allow it to convert to USD. * So the only option is to save them in a drawer and wait 30 days, and after 30 days they are convertible to dollars. (At the 29th day, you can choose to sell it to someone that will have to wait 30 days or exchange it for a few cents, or wait 24 hours and get a whole dollar.) * Yes. That makes sense. Usually, my "tomorrow dollar" is worth more to me than a "dollar in 30 days" is worth to you, so why would you give me fair value for it? The merchant partners are contracted to accept GD at par. You'll always be able to get your full dollar's worth, with a caveat being that the number of merchants who accept GD at par will initially be fairly small. But maybe I'm in a situation where I'm out of USD and I need to make a certain payment in USD. In that case, I may be willing to pay a premium to get that liquidity from you at 95 cents on the dollar, or whatever the market exchange rate happens to be. Cheers.

What happens if there's a "bank run" where everyone waits for their GD to mature rather than spending it?

by comex 11y ago

What happens if there's a "bank run" where everyone waits for their GD to mature rather than spending it?

msrpotus 11y ago

And in general, where does the money come from? You're proposing to start your own private central bank.

Suncho 11y ago
Yes. Our own private central bank.
- notahacker 11y ago
  If it's fully private and not Fed-linked, where's all the money to meet the convertibility obligations coming from?
  - Suncho 11y ago
    It will be distributed in deposits across banks that do have deposits at the Fed. We'd try to do it in such a way as much of our reserves as possible are FDIC insured. Have you heard of CDARS? It would be similar to that. http://www.cdars.com http://www.cdars.com
    - notahacker 11y ago
      That's where you store it. Where does it come from? I understand initially you'd need investment. I understand that in future, a secondary market could come into existence which would allow Gresham dollars to be exchanged for real dollars, at slightly below par value. But in order to actually have a profitable business, you need to obtain more dollars than the GD you're giving out over a given period of time. How does that happen?
      - Suncho 11y ago
        There are a few different ways we can build our USD reserves, but the primary one is through a crowd investment system that I've devised. Investors will be purchasing, at a pre-negotiated discount, GD to be delivered at a future date. I call them "Future Gresham Dollars." Investors can sell their FGD to other investors in a secondary market to profit early or they can hold them until we succeed and reap their exact pre-negotiated returns. We actually don't need to obtain more USD than the GD we're handing out. The phase during which we're backed by USD is only temporary. If we succeed, then GD is the coin of the realm and USD has become obsolete. The profits we generate (and the returns to our investors) will be in GD. If we fail, the investors get nothing, which is normal. Of course, we'd need measures in place to ensure that we don't abuse our power as the world's monetary authority. We shouldn't be allowed to create new money just to make ourselves and our friends rich.
        gruvious 11y ago
        I think these sort of measures could be built into the algorithms behind the management of the currency. The entire infrastructure could be run by bots. Cyber security will need to be tight, though probably not initially. As I understand it, this is about social justice, ie, leveling the playing field. Post-transition for GD would mean that all accounts are activated to receive basic income, and they would do so on an equal basis. Initially, the currency is seeded in communities that need BI the most, and then becomes contagious to the world at large. Ultimately, the system also prevents hoarding of currency and incentivizes exchanges.
        Suncho 11y ago
        I think these sort of measures could be built into the algorithms behind the management of the currency. That's the idea. I'd like to set it up so that everyone can see that we couldn't abuse the system even if we wanted to. As I understand it, this is about social justice, ie, leveling the playing field. It's primarily about economic stability. Social justice is a side effect. Post-transition for GD would mean that all accounts are activated to receive basic income, and they would do so on an equal basis. Yes. In fact, the plan is for all accounts owned by individuals to be receiving a basic income well before the transition date. Obviously, businesses do not receive a basic income. Initially, the currency is seeded in communities that need BI the most, and then becomes contagious to the world at large. Yes, but only because those who need it the most have the highest marginal propensity to consume. This maximizes the initial circulation of GD. If you give it to a rich person, they're far less likely to spend it. Ultimately, the system also prevents hoarding of currency and incentivizes exchanges. Hmm. I'm not sure what you mean. For Gresham Dollar to work, it assumes some level of "monetary entropy," (I just made that term up). In other words, money starts at a higher velocity but ends up accumulating in hoards. Basic income provides a steady supply of fresh money to counterbalance monetary entropy.

Suncho 11y ago

The psychology behind a currency run causes people to want to get rid of the untrusted currency as quickly as possible. In the case of Gresham Dollar, because we don't offer on-demand exchange, that means spending it. The less people trust Greshem Dollar, the more they will spend it and the less we will dip into our reserves. This is a key feature of Gresham Dollar. It's technically possible for us to fail because everyone holds onto their GD, but we won't. In any case, we'll always be very transparent about our USD reserve levels and how close we are to running out. I've devised a whole system for what happens in the event that our reserves get low. Thanks for the question!

gus_massa 11y ago
The other are two possible scenarios when the price is too low: * Someone with a deep pocket decides to buy as much as possible at a high discount, say 1 cent per dollar, and wait 30 days and get a 100x gain in a month. (There are some funds that specialize in this kind of operations with bond from developing countries. Usually it takes more than a month to get the money, but sooner or later the country has to pay, because whatever is in the land is essentially a collateral. (Hi from Argentina!)) * Nobody in their right mind would buy the money, no merchant, no exchange, no other user because all of them think that the value will continue to decrease. So the only option is to save them in a drawer and wait 30 days, and after 30 days they are convertible to dollars. (At the 29th day, you can choose to sell it to someone that will have to wait 30 days or exchange it for a few cents, or wait 24 hours and get a whole dollar.)
- Suncho 11y ago
  These are important points. Thanks for bringing them up. * Someone with a deep pocket decides to buy as much as possible at a high discount, say 1 cent per dollar, and wait 30 days and get a 100x gain in a month. * We've addressed this concern in a very specific way through something I call the "activation cap" on GD, which limits the pace at which GD can convert to USD. The activation cap doesn't apply to merchants who have signed merchant contracts with us. But if you're a merchant partner, your contract stipulates that you have to maintain par 1-to-1 pricing between GD and USD, so merchant partners can't set separate prices or do this kind of arbitrage. When GD is added to an account, its lifetime begins counting down immediately. Starter and basic accounts (i.e. accounts with no merchant contract) are subject to the activation cap. The activation cap is is a limit to the amount of GD that can activate (i.e. begin counting down) in a period of time. GD countdowns remain suspended until there's room for them to activate without violating the cap. This helps prevent large hoards of GD from quickly expiring. For example, let's say the activation cap is $20/day. In other words, at most $20 GD will activate per day. If an account's only income consisted of a single lump sum of $60, that GD would then activate continuously over the course of three days, and hence would later expire continuously over the course of three days. The activation cap does not affect users whose total GD income remains below the cap. We will set the activation cap higher than (e.g. double) the basic income so that those who only receive the basic income remain unaffected by the activation cap. This is a form of capital control, to be sure. But since there are always merchants who will accept GD at par, I'm confident that the market value of GD won't deviate too far from USD. * Hi from Argentina! * Hi! I'm in the U.S., but I actually came up with the idea for Gresham Dollar when I was contemplating Greece's possible exit from the Eurozone and how they might smoothly transition to a new currency if their euro reserves were limited. My hope is to extend Gresham Dollar to international markets. * Nobody in their right mind would buy the money, no merchant, no exchange, no other user because all of them think that the value will continue to decrease. * That's fine. Initially, Gresham Dollar will be 100% backed by USD, and we'll be putting GD in the hands of people who otherwise won't have any money to spend, so I'm confident that we will convince some merchants to accept it Gresham Dollars. If people don't want to spend it, they can sit on it and allow it to convert to USD. * So the only option is to save them in a drawer and wait 30 days, and after 30 days they are convertible to dollars. (At the 29th day, you can choose to sell it to someone that will have to wait 30 days or exchange it for a few cents, or wait 24 hours and get a whole dollar.) * Yes. That makes sense. Usually, my "tomorrow dollar" is worth more to me than a "dollar in 30 days" is worth to you, so why would you give me fair value for it? The merchant partners are contracted to accept GD at par. You'll always be able to get your full dollar's worth, with a caveat being that the number of merchants who accept GD at par will initially be fairly small. But maybe I'm in a situation where I'm out of USD and I need to make a certain payment in USD. In that case, I may be willing to pay a premium to get that liquidity from you at 95 cents on the dollar, or whatever the market exchange rate happens to be. Cheers.