The Instigator
TSLexi
Pro (for)
Tied
0 Points
The Contender
pdaines
Con (against)
Tied
0 Points

Should we transition to an electricity-backed dollar?

Do you like this debate?NoYes-1
Add this debate to Google Add this debate to Delicious Add this debate to FaceBook Add this debate to Digg  
Post Voting Period
The voting period for this debate has ended.
after 0 votes the winner is...
It's a Tie!
Voting Style: Open Point System: 7 Point
Started: 9/18/2013 Category: Economics
Updated: 3 years ago Status: Post Voting Period
Viewed: 791 times Debate No: 37894
Debate Rounds (5)
Comments (5)
Votes (0)

 

TSLexi

Pro

Our fiat money has wrecked our economy by facilitating massive deficit spending, resulting in the destruction of our purchasing power, increasing the real value of our ever-increasing national debt.

A gold standard would provide backing to our currency, however, gold per se is very disconnected to the economy...it's a rare, shiny, corrosion-resistant, pretty metal, and that's about it.

On a gold standard, discovery and extraction of gold will lead to economic disaster. Gold mining consumes valuable resources, and on a gold standard,will devalue the currency.

Economic progress becomes sluggish, as the currency supply cannot increase, and increasing the money supply drains the economy, both by consuming resources, and devaluing the currency.

There is a solution that provides all the benefits of having a backed currency, and allows the money supply to increase in proportion to economic progress: an electricity-backed dollar.

As economic growth occurs, more energy is required. So the currency supply will increase at the same rate as economic growth.

Implementing this is as simple as guaranteeing that a kilowatt-hour of electricity can be bought for a certain amount of dollars, and using monetary policy to keep the free-market price of electricity in a range somewhere below that.

If the free-market price goes above the conversion rate due to economic contraction, the government will reimburse the difference once the free-market rate goes back below the conversion rate. The currency to pay the difference can come from increasing taxes, selling bonds, and/or decreasing govt spending.

If the free-market rate goes below the range due to economic growth, the govt can print currency, decrease taxes, and/or increase govt spending.

Anyone can produce electricity, and anyone can access it. In theory, at least.

The money supply will be directly tied to economic growth. Economic growth will increase the money supply, as everyone needs energy, AND increases in the money supply will increase economic growth, as finding more efficient ways of producing electricity benefits everyone.

http://www.energybackedmoney.com...

We can avoid both the uncertainty of fiat money, and the gold standard's inability to expand the money supply.

If only we could find a proper way to hook up all those home solar systems to the grid. Net metering isn't really selling your excess electricity, it's just an accounting fiction.
pdaines

Con

Pro contends that the United States should move to an "electricity standard," in essence backing all of its currency with electricity. Pro contends that this would provide the stability of the gold standard, a direct link between the economy and the currency, and would not carry the problems of the gold standard. I contend that this plan is infeasible, that it fails to accomplish what the gold standard accomplished, and that it poses some potentially dire economic and environmental harms that have not been considered by Pro.

The gold standard was in place for so long because Gold is durable, useful in its own right, and of a relatively constant value. Electricity is not durable. In fact, if you do not use it right away, it ceases to exist. We may store electricity in batteries, but they too will slowly lose their charge over time. Besides, at least half of the electricity is lost at the very moment of charging the battery. Electricity is not constant in value. In fact, it fluctuates significantly depending on how it is produced. Hmm, let me think... ok I guess you are right. In the United States we will always produce our electricity from coal-burning power plants, not from the tens of thousands of windmills that have been constructed across the countryside, and the cost of building those plants certainly isn't going to increase exponentially in the next year as the EPA's new carbon limits go into effect this year. Sarcasm. The value of electricity will definitely fluctuate due to several factors other than economic health. Finally, you assume that electricity is always going to be at the backbone of our economy, and that we will never directly utilize another energy source to any significant degree. There is no backing for this assumption, and I reject it.

But, even if everything I just said were completely false, it would still be a bad idea to use electricity as backing for our currency for the same reason that we stopped using gold. These are precious resources, and we NEED THEM IN OUR ECONOMY. In order to back your currency with something, you must take it out of the economy. Gold is an exceptionally rare and useful material. Instead of using it as a material they made it even more rare by stockpiling it and hiding it away as backing for their currencies. It is just bad economics to not use one of your most valuable resources. In order to back up every US dollar with an equal value of electricity, we would have to remove a ridiculous amount of electricity from the economy. We would have to replace that electricity by burning more coal, releasing more CO2 into the atmosphere. If you want to give global warming its own Great Leap Forward (obscure Mao Zedong reference), then go ahead and think about switching to an electricity standard.

In the end, this is a ridiculously infeasible plan that carries potentially dire consequences and fails to provide any of its claimed benefits.
Debate Round No. 1
TSLexi

Pro

A currency can be backed by a commodity without having to actually be convertible into it.

The Fed can simply set a range for the market price of electricity. It can then use monetary policy to keep the price of electricity in that trading range.

For example, if the target range is $0.10-$0.15/kW-h, if the market price of electricity drops to $0.05/kW-h, the Fed can buy assets (preferably investment-grade corporate bond issues, quality IPOs, etc. The Fed should inject its freshly-printed dollars to where they can do some good, instead of just buying a bunch of Treasuries), the Government can lower taxes, or the Fed can buy Treasuries so the Government can spend more on welfare programs, etc.. This will inflate the currency so the price of electricity goes back into range.

Conversely, if the price of electricity goes to $0.25/kW-h, the Fed can sell assets, the Government can raise taxes or lower spending. This will deflate the currency, so the price of electricity will go back within range.

If the economy is growing, the price of electricity, while nominally stable, will keep getting cheaper in real terms. If you look at the price of electricity from 1971 to 2008, and if you look at the money supply over that dame period, the money supply increased 13x, while the price of electricity only increased by 5x. So the price of electricity drops by an average of 2% pa.

If a commodity-backed currency is properly managed, there will never be a need to convert the currency.

If everyone had solar panels that could properly load-share with the grid (net metering is purely an accounting trick to pay you for nothing), the economy would grow under this system, as more available electricity means the price will drop, which means a) money that can be spent in other economic sectors, and b) later, more currency will be injected, which means more investment.

Seriously, please read: http://www.energybackedmoney.com...
pdaines

Con

I have yet to see a single benefit of this scheme. The idea of backing our currency with a commodity is to ensure that the currency has real value. It prevents the government from messing with the economy. There are two ways to interpret what you are saying.

1) We fix the price of electricity to the dollar. This does not prevent the fed from printing ridiculous sums of money at will.

2) We tell the fed to manipulate our currency to keep it in line with energy prices. This does not prevent the fed from printing money. It just tells the fed not to. And actually, it doesn't even do that. It actually encourages the fed to mess with everything on a regular basis. Unless you plan on instituting some kind of hard enforcement mechanism (which seems unreasonable -- there are limits to the extent that the fed can reasonably manipulate our currency), this plan is unworkable.

Pro fails to address my very serious contention that the system would be susceptible to wild swings as new technology evolves and upends the energy market. The stability of the gold standard would not exist. Pro has failed to conceptualize any benefits to his system over the status quo.

Pro has failed also to provide documentation of real harms in the status quo. Pro claims without support that "fiat money has wrecked our economy" that fiat money facilitates "massive deficit spending" and that this has resulted in the "destruction of our purchasing power" and "increased the real value of our ever-increasing national debt."

How exactly has fiat money wrecked our economy? I would personally blame the deregulatory policies of republicans during the post-Reagan conservative era. It is an interesting coincidence that the same libertarian types who push for deregulation are so strongly giving the blame to fiat currency for a problem so clearly linked to their policy preference. I am not saying anything here other than that real justification is necessary.

Pro cannot have his cake and eat it too. If fiat money has facilitated deficit spending, then the national debt must be comprised of the same meaningless fiat money, which means that at least the idea of fiat money decreases the "real value" of the national debt. Consider that our fiat money allows us to print a trillion dollar banknote at any time and deposit it in the treasury.

"On a gold standard, discovery and extraction of gold will lead to economic disaster. Gold mining consumes valuable resources, and on a gold standard,will devalue the currency." But what if we are not actually stocking up gold? What if we are just tying the value of the dollar to gold? The proposition has clearly changed the substance of the debate midway through. As the opposition, I would like to cry foul for a moving target.

Pro has been inconsistent in the resolution for which he argues. He has failed to substantiate claims of harm and benefit. The opposition has clearly established harms and a lack of benefits to each of the possible resolutions that Pro might be considering. Pro has failed to address a primary harm considered by opposition, that the electricity standard would yield an unstable and fluctuant currency, worse in fact than the status quo. Pro has failed to put forth either a prima facie case for the resolution, or a sound defense of said case.
Debate Round No. 2
TSLexi

Pro

TSLexi forfeited this round.
pdaines

Con

pdaines forfeited this round.
Debate Round No. 3
TSLexi

Pro

TSLexi forfeited this round.
pdaines

Con

pdaines forfeited this round.
Debate Round No. 4
TSLexi

Pro

TSLexi forfeited this round.
pdaines

Con

pdaines forfeited this round.
Debate Round No. 5
5 comments have been posted on this debate. Showing 1 through 5 records.
Posted by robertacollier 2 years ago
robertacollier
This person is a scammer. Just google her name. She/he/it posts all kinds of nonsense in various forums. Just look at the idiocy of this post. Who would even believe this is serious?

The purpose of the scamming is to build profiles in various forums around the internet. These profiles are then sold in packages of 100, 500, 1000 or more. Once the user profile is established on a forum, a bot can automatically start threads with links and spam ads.

The user says he/she/it is transgender. Google the name and see all the dating sites and sex sites.
Posted by TSLexi 4 years ago
TSLexi
Campbellp10, you have completely not understood my argument in any way, shape, or form.
Posted by campbellp10 4 years ago
campbellp10
I think you have the term "backed" confused. We already have "fiat" currency which is essentially backed entirely by credit. An "Electricity backed" dollar would mean that the value (worth) of our currency is entirely dependent on how much electricity we have. For example, a "gold backed" dollar wasn't MADE OF GOLD but it was a REPRESENTATION of gold stores that were supposedly in a vault somewhere. I think what you mean is that "We ought to eliminate paper currency in lieu of electronic transactions". This, of course, is not the semantic equivalent of an "electricity backed" currency.
Posted by Zach1 4 years ago
Zach1
Look this is not a new concept. I hope you don't think you're the first person to suggest this. It's not a question of should we. The government likes the fiat currency system because it lets them do whatever the hell they want. They won't go back to the gold standard, and certainly won't move on to the energy standard. Nothing will change until we fix the problems that have turned the American public into a brainwashed, uneducated, and compliant mass of citizens.
Posted by Ragnar 4 years ago
Ragnar
Nice troll debate.
No votes have been placed for this debate.