Those loans are in Euros and the banks are not likely to accept a Greek issued digital currency instead.

If you are a business selling to the Greeks, would you take payment in that? or would you demand dollars or Euros?

I know my answer.

You buy one, and two years later, you can redeem them for the amount you paid plus an extra percentage. If you want, you can sell them to someone else before the two years. So far, that's identical to a bond.

There is a minor difference, in that you can also redeem FT coins for the face value at any time between now and the expiration. But that simply makes it equivalent to a bond combined with a put option on that bond. And since the entity providing the option to redeem is the same entity that issues the bond, that option isn't so valuable -- if the Greek government defaults, then you're out of luck either way.

In the end, it doesn't seem like this would work any better (or worse) than just selling more bonds that aren't called "FT-coins". It will work if people have confidence in the Greek government's ability to pay them back. And if they don't, buyers will insist on very high interest rates.

The essential problem is that Greece can't actually print their own money. So they can only try to create these other things that aren't actually Euros. But they aren't quite equivalent. And that means that one of two things will happen
1) the FT-coins will be worth more than Euros, and people will simply hold them like bonds and not use them as currency
2) the FT-coins will be worth less than Euros, and people will all rush to redeem them, causing the government to go broke.

Still an interesting thing to think about. Too bad the title of the article has "bitcoin" in it, because this has nothing whatsoever to do with bitcoins.

Whereas bonds get traded on markets that are only frequented by investors.

I agree about the title - I did wonder about changing it for DU, just to avoid too much diversion.

I agree with the more easily traded thing, that is a difference. But still, I'm not sure how that gets around the underlying economic problems.

Even if you require banks and businesses to accept them for transactions at face value. I mean, if I own an FT-coin with a $1 face value, but which is trading for $1.05, I'm sure not going to use that to buy anything. On the other hand, if my FT-coin is trading for $0.95, even if I use it to buy something, the business is going to redeem it immediately, before the government defaults. So it will only really work if the market value and the face value remain identical, which is very unstable, particularly since the market value is going to increase as the redemption date approaches.

The article doesn't really seem to address the fact that, even though the Greek government would legally guarantee that FT-coins would be redeemable, this is the same guarantee that they made regarding the bonds they already issued and are about to default on unless they get a bailout.

and since they're always redeemable at face value, I would think they'd never trade for under $1 (give or take a risk of the Greek government going into default in the short period between the agreement to transfer the FT-coin, and the chance to redeem it).

Every time you check out at a store, you're going to need to check the internet to see what the market price is at that moment. So, for example, point-of-sale equipment would have to be upgraded so that it can look up the prices.

Multiple issue dates will add another layer of complication, since the price depends on the date. In effect, it's not just issuing one new currency, it's issuing a whole bunch of them, depending on how frequently new batches of FT-coins are created.

But, there are sort-of parallels already, for example, if you use a US credit card in Europe, the bank will look up the exchange rate and automatically convert. But, you do lose a little in this process -- there's a spread.

Yeah, maybe it could work. But, even so, given that the basic problem is that the Greek government has debt it can't pay, and it also can't print its way out if, it would seem easier to just sell ordinary bonds with the same face-value redemption option as a kind of bond insurance, and not require businesses to accept them for transactions. On the other hand, maybe the fact that they can be used as cash can be seen as a way to compel people (in Greece) to effectively buy Greek bonds who otherwise wouldn't. Sort of like a dollar bill that slowly appreciates over time.

Interesting to think about for sure.

I agree, they would never trade under $1 unless the government defaults. Depending on how the redemption procedure works. For example, if you can only redeem them once a day or during business hours, they could go negative overnight if people expect a default. That could get interesting...

Is this some type of 'New Socialism'? Sounds like a grand idea.
[hr][font color="blue"][center]If you don't give yourself the same benefit of a doubt you'd give anyone else, you're cheating someone.[/center][/font][hr]