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Naturally no-one will hand over value in exchange for a prepay credit instrument unless there is an expectation of access to delivery either by the issuer or someone else.

Clearly there is a need for a guarantee of performance, but a unit of currency - whether in bearer (certificate) form or registered to an account - does not confer upon the issuer a dated obligation to supply upon presentation of the instrument as does a (dated) futures contract.

What it does do is confer an obligation on the issuer to accept it in payment for supply.

In relation to Mig's point, we have to look at availability over time,

There's no reason why an energy generator could not sell entitlements to 10 years' worth of production, or a property owner 10 years' worth of rent.

But they will do so at a discount which reflects the return demanded by investors in respect of that form of value; their judgement of the likelihood of continuing production (or in the case of a property, occupation); and their expectations as to what the unit of currency will be worth in the future by reference to a unit of account.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Sep 7th, 2013 at 05:35:08 PM EST
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