[OPE-L:1843] Re: electronic cash

Paul Cockshott (wpc@cs.strath.ac.uk)
Sun, 21 Apr 1996 11:27:51 -0700

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Refering to electronic money Jerry wrote

* Wouldn't it - ironically - lead to a partial return to the barter
system? For instance, if currency in circulation was eliminated, if
you wanted to "sell" a chair to me, how would that exchange be effected?
Wouldn't we either have to go to a bank to have the transaction recorded
(an unlikely occurrence) or wouldn't I have to exchange some object or
service for the chair? Or, relating to the above, suppose a capitalist
employs undocumented laborers. Wouldn't it mean, in practice, that the
workers would have to be paid directly with consumption goods?

Paul C
Proponents of digital cash envisage it in the form of numbers representing
quanta of money which have be double encrypted using some public key
crytosystem. One encryption is performed by the payer, and the other
by the bank of the payer. The bank keeps a record of the numbers that
have been issued. The first encryption, when reversed ( using the
payers public key) verifies who was making the payment. The second,
when reversed, using the banks public key, verifies that the digicash
was issued by the bank.

The digital cash, however, like Marx's labour tokens does not circulate
instead it is used for one transaction and then canceled. The payees, transfer
the digicash number to the bank which then credits their accounts.
The cash is never re-used, and never circulates. There is however, nothing
to prevent private trading provided that one party has an appropriate on-line
terminal which can dial up the bank's computer. This dialing up is necessary
to validate that the digital cash token has not already been used once.
Remember that any digital cash, is only a bit string, and as such can
be perfectly forged at almost zero cost. It is thus necessary to validate,
with the issueing bank, that it has not yet been used.


* What would happen in a crisis or hyperinflation if capitalists and/or
workers demanded payment in some more tangible material object like gold
or silver or some other state token of account, e.g. the dollar?

Paul C
The problem is essentially the same as that of all fiduciary issues, and
the consequences of unrestricted issue remain the same as they were in
Law's time.

Within a state, the state token of account could well become a validated
record of deposit holding with the state bank. There would be no need for
this to take the form of sheets of paper, or metal tokens. Digital records
of deposits held would be equally valid.

If the state bank consistently creates excess deposit accounts for the
government the danger of hyperinflation and reversion to some
other unit of account always remains, but this is no different from today.

Paul Cockshott (clyder@gn.apc.org)