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That's just not true. The whole purpose of clearing and settlement systems is to guarantee delivery of cash versus contract. To do this, the clearing & settlement agent works as a deposit safe. It collects from Party A, collects from Party B - and once both are in the safe... handles the transaction. That way, there is no risk that Party A send cash to Party B without receiving contract from Party B. It's a question of timing and neutral 3rd party.
by vladimir on Wed May 20th, 2009 at 03:49:28 AM EST
[ Parent ]
That seems to be my case you're making, no?

The state is the ultimate solvent, neutral third party (you forgot that the third party in question has to be solvent too... that's the problem with AIG, not that they are not trusted to be neutral).

If the state is not a solvent, neutral third party, then you have bigger problems than the fate of your monetary system.

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed May 20th, 2009 at 04:11:02 AM EST
[ Parent ]

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