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Gold Standard vs Energy-Backed Currency

drhead
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6/5/2013 12:08:56 PM
Posted: 3 years ago
A lot of people seem to be in favor of a gold standard for currency. However, I feel that there are a few problems with this. One would be the fact that the only things special about gold are that it is fairly scarce, it has plenty of useful properties (doesn't tarnish, very hard to create chemical reactions with, dense), and the fact that it is very shiny and people associate it with wealth. Other than that, it is just a metal that is useful for only certain things. There's also the fact that, should we ever expand beyond our own planet, we aren't guaranteed to find any more gold. Even if we don't do this, gold is very strictly finite. We will eventually mine every last scrap of it. However, when we recycle gold, we lose a little bit of it every time. Eventually, there won't be enough to go around. All of the gold we have now would fit in a 60-foot cube. At current prices, this is worth about 5.3 trillion dollars. Even if we implemented a worldwide gold standard, it would cause economic chaos that would only benefit those who actually own gold.

Now, one proposed alternative means of backing currency is energy. Energy would make a great means of backing currency. Think about what we are actually paying for when we buy products. If you look at the raw materials used to make something - I'll use my computer as an example - you'll find that raw material costs make up a very small part of the costs. I would be very surprised if the raw materials used to make my $2000 computer cost more than $100, considering how most of the raw materials would be sand and plastic, along with a few metal ores. We aren't paying for the raw materials. We didn't pay nature to drill for oil, or to dig up sand. The part that is being paid for is the energy used to get all of the miscellaneous crap into the form we like. This being said, goods can be looked at as a service of changing things a certain way and giving the results to anyone who will pay.

Now, think about what an economy is supposed to do. You're more or less trading services through equivalent exchange - profits represent the convenience of the buyer not having to do everything themselves, and worker wages are the cost of allowing the workers to remain alive. Of course it would cost me nothing but my own labor to go from Stone Age to Information Era in my backyard, though it is easier to let someone who already has the appropriate machinery do it for me. This points to energy as a natural unit for measuring the value of services, considering how said services ultimately point to energy when reduced to the most basic level. It makes a lot more sense than gold in this case - in fact, gold doesn't fit in here at all.

Lastly, I'd like to note that energy is much more useful than gold. Fiat currency is built on the premise that currency gets its own value from being accepted and useful for a variety of services. This is also what Bitcoin gets its value from - you can buy stuff with it, what else do you need besides that? Energy-backed currency would be useful, too. The best part, however, is that its backing is useful, too. Unlike matter, energy can be freely transformed into whatever form is needed. If I have gold and need silicon, I'm out of luck unless I have extremely advanced technologies available that simply don't exist yet. If I have electrical energy and need light, then the task of converting it is much simpler. It's not 100% efficient, but it can be done. Since we've established that energy is the basis of all goods and services, it should make only absolutely perfect sense that energy be traded for the results of specific applications of energy, not for a shiny metal.
Wall of Fail

"You reject religion... calling it a sickness, to what ends??? Are you a Homosexual??" - Dogknox
"For me, Evolution is a zombie theory. I mean imaginary cartoons and wishful thinking support it?" - Dragonfang
"There are no mental health benefits of atheism. It is devoid of rational thinking and mental protection." - Gabrian
Skepsikyma
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6/5/2013 9:26:14 PM
Posted: 3 years ago
I'm liking the idea of paying for food in calories based on production costs. I think that it'd put a lot of things in stark perspective.
"The Collectivist experiment is thoroughly suited (in appearance at least) to the Capitalist society which it proposes to replace. It works with the existing machinery of Capitalism, talks and thinks in the existing terms of Capitalism, appeals to just those appetites which Capitalism has aroused, and ridicules as fantastic and unheard-of just those things in society the memory of which Capitalism has killed among men wherever the blight of it has spread."
- Hilaire Belloc -
CanWeKnow
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6/6/2013 2:06:30 PM
Posted: 3 years ago
I think the problem here is that most people can't really wrap their mind around an energy-backed currency with one go. You say "energy-backed currency" and people go, "What?" "That's crazy, no it won't work." What we need to do is educate the public about how this currency works and WHY it works well as opposed to the alternatives. My only problem with the solution stems from my ignorance of how it would function actually. What would give any one country more wealth than another with this type of system? Does this solution limit energy currency to electric energy? Because we can use biomass as an energy source but not necessarily be able to convert it to electricity.
wrichcirw
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6/9/2013 12:50:08 AM
Posted: 3 years ago
At 6/5/2013 12:08:56 PM, drhead wrote:

[long essay]

Interesting concept.

The problem I see with this is that an "energy standard" would not be all-inclusive. As you mentioned, there are things that do not fall under the notion of "changing things a certain way and giving the results to anyone who will pay." Raw materials are one. Land is another. What about information? Intellectual property? How do you quantify this as energy units?

This is where money comes in. Money CAN include all of this, and energy as well. This is why it is dangerous to quantify money via an usable commodity like energy, because you will get distortions due to what such an unit of measurement would leave out. This is why banks hold gold, and not any other metal - gold has little to no industrial utility.

Otherwise, your analysis of goods especially was quite interesting.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
wrichcirw
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6/9/2013 12:50:55 AM
Posted: 3 years ago
At 6/5/2013 9:26:14 PM, Skepsikyma wrote:
I'm liking the idea of paying for food in calories based on production costs. I think that it'd put a lot of things in stark perspective.

I swear, it's frightening sometimes how we have similar ideas and concepts floating in our brains.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
drhead
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6/9/2013 11:04:53 AM
Posted: 3 years ago
At 6/9/2013 12:50:08 AM, wrichcirw wrote:
At 6/5/2013 12:08:56 PM, drhead wrote:

[long essay]

Interesting concept.

The problem I see with this is that an "energy standard" would not be all-inclusive. As you mentioned, there are things that do not fall under the notion of "changing things a certain way and giving the results to anyone who will pay." Raw materials are one. Land is another. What about information? Intellectual property? How do you quantify this as energy units?

Simple. Raw materials would be the energy expended in harvesting said resources. Land would be a bit of an issue, admittedly. Information and intellectual property would be, like raw materials, the cost of acquiring. The human brain runs on 20 watts of energy (quite funny when I note that my computer has a 750W power supply), so of course products of the mind can be quantified as energy. Quite simply, the price would be your R&D costs. The cost of movies and music and stuff wouldn't change - what the consumer pays for is more or less the production cost plus profit divided by a rough estimate of how many purchasers.

You could consider land's cost to be the energy expended in the process of maintaining it, and as the potential of harvesting energy from it. This would probably be best done as the amount of sunlight that hits any given plot of land (since this is the only energy that we have that is truly constant) - raw materials would have to be harvested, and, more importantly, discovered before they have any real value that can be acknowledged. The cost of maintaining land would work for untouched land, too - if someone hasn't maintained or improved land, it is of low value for someone who wants to improve it, since they would have to do all of that by themselves. However, it has the base value of what energy can potentially be acquired from it.

This is where money comes in. Money CAN include all of this, and energy as well. This is why it is dangerous to quantify money via an usable commodity like energy, because you will get distortions due to what such an unit of measurement would leave out. This is why banks hold gold, and not any other metal - gold has little to no industrial utility.

As one of the best conductors of electricity and as a metal that doesn't tarnish and which doesn't really react with anything, I have to disagree on it having little industrial utility. This is why I think it is best to use the 'all' side of an 'all-or-nothing' approach - something that has all utility, instead of some or nothing. Energy is the most useful thing that there is. You can even convert it to matter (along with antimatter in the same quantities) by smashing a bunch of photons together. It is the fundamental unit of everything.

Otherwise, your analysis of goods especially was quite interesting.
Wall of Fail

"You reject religion... calling it a sickness, to what ends??? Are you a Homosexual??" - Dogknox
"For me, Evolution is a zombie theory. I mean imaginary cartoons and wishful thinking support it?" - Dragonfang
"There are no mental health benefits of atheism. It is devoid of rational thinking and mental protection." - Gabrian
sadolite
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6/9/2013 12:27:13 PM
Posted: 3 years ago
Any standard would be better than and arbitrary standard like we have now. Sea shells would be better.
It's not your views that divide us, it's what you think my views should be that divides us.

If you think I will give up my rights and forsake social etiquette to make you "FEEL" better you are sadly mistaken

If liberal democrats would just stop shooting people gun violence would drop by 90%
DanT
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6/9/2013 2:32:52 PM
Posted: 3 years ago
At 6/9/2013 12:27:13 PM, sadolite wrote:
Any standard would be better than and arbitrary standard like we have now. Sea shells would be better.

Why? Money is simply a medium of exchange; it's commodity value has no relevance to its value as a currency. So long as the monetary supply is properly managed, I see no issue with fiat money.
"Chemical weapons are no different than any other types of weapons."~Lordknukle
wrichcirw
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6/9/2013 5:27:48 PM
Posted: 3 years ago
At 6/9/2013 11:04:53 AM, drhead wrote:
At 6/9/2013 12:50:08 AM, wrichcirw wrote:
At 6/5/2013 12:08:56 PM, drhead wrote:

[long essay]

Interesting concept.

The problem I see with this is that an "energy standard" would not be all-inclusive. As you mentioned, there are things that do not fall under the notion of "changing things a certain way and giving the results to anyone who will pay." Raw materials are one. Land is another. What about information? Intellectual property? How do you quantify this as energy units?

Simple. Raw materials would be the energy expended in harvesting said resources. Land would be a bit of an issue, admittedly. Information and intellectual property would be, like raw materials, the cost of acquiring. The human brain runs on 20 watts of energy (quite funny when I note that my computer has a 750W power supply), so of course products of the mind can be quantified as energy. Quite simply, the price would be your R&D costs. The cost of movies and music and stuff wouldn't change - what the consumer pays for is more or less the production cost plus profit divided by a rough estimate of how many purchasers.

You could consider land's cost to be the energy expended in the process of maintaining it, and as the potential of harvesting energy from it. This would probably be best done as the amount of sunlight that hits any given plot of land (since this is the only energy that we have that is truly constant) - raw materials would have to be harvested, and, more importantly, discovered before they have any real value that can be acknowledged. The cost of maintaining land would work for untouched land, too - if someone hasn't maintained or improved land, it is of low value for someone who wants to improve it, since they would have to do all of that by themselves. However, it has the base value of what energy can potentially be acquired from it.

This is where money comes in. Money CAN include all of this, and energy as well. This is why it is dangerous to quantify money via an usable commodity like energy, because you will get distortions due to what such an unit of measurement would leave out. This is why banks hold gold, and not any other metal - gold has little to no industrial utility.

As one of the best conductors of electricity and as a metal that doesn't tarnish and which doesn't really react with anything, I have to disagree on it having little industrial utility. This is why I think it is best to use the 'all' side of an 'all-or-nothing' approach - something that has all utility, instead of some or nothing. Energy is the most useful thing that there is. You can even convert it to matter (along with antimatter in the same quantities) by smashing a bunch of photons together. It is the fundamental unit of everything.

Otherwise, your analysis of goods especially was quite interesting.

Ok. I may quibble about certain details here and there but this does seem quite interesting.

So, let's accept your model as it is. What would be the "unit of exchange?" It can't be electricity, since electricity is not easily transferable...transfer costs would easily eat up such an avenue, and it can't be effectively stored (power loss in batteries).

What about an energy commodity, like oil or natgas? Well, this runs into supply problems, just like how a gold standard economy can experience significant inflation just because people found "gold mountain" somewhere. I suppose you can say that since these energy commodities have a clear industrial usage, that instead of inflation it would actually lead to real economic growth. Interesting. But, we can't carry oil barrels in our wallets, so what would be the actual unit of exchange?

Power credits? Ok, sure. But, then, how does this differ from the dollar today? What makes a "power credit" any different from fiat? After all, this "power credit" would have in and of itself zero utility; it merely represents the utility inherent in the energy-based economy...just like current fiat.

And what about lending? How would you control for lending in such monetary system?
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
AlbinoBunny
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6/9/2013 7:38:32 PM
Posted: 3 years ago
That's a lot of chocolate bars.
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drhead
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6/10/2013 12:16:20 PM
Posted: 3 years ago
At 6/9/2013 5:27:48 PM, wrichcirw wrote:
At 6/9/2013 11:04:53 AM, drhead wrote:
At 6/9/2013 12:50:08 AM, wrichcirw wrote:
At 6/5/2013 12:08:56 PM, drhead wrote:

[long essay]

Interesting concept.

The problem I see with this is that an "energy standard" would not be all-inclusive. As you mentioned, there are things that do not fall under the notion of "changing things a certain way and giving the results to anyone who will pay." Raw materials are one. Land is another. What about information? Intellectual property? How do you quantify this as energy units?

Simple. Raw materials would be the energy expended in harvesting said resources. Land would be a bit of an issue, admittedly. Information and intellectual property would be, like raw materials, the cost of acquiring. The human brain runs on 20 watts of energy (quite funny when I note that my computer has a 750W power supply), so of course products of the mind can be quantified as energy. Quite simply, the price would be your R&D costs. The cost of movies and music and stuff wouldn't change - what the consumer pays for is more or less the production cost plus profit divided by a rough estimate of how many purchasers.

You could consider land's cost to be the energy expended in the process of maintaining it, and as the potential of harvesting energy from it. This would probably be best done as the amount of sunlight that hits any given plot of land (since this is the only energy that we have that is truly constant) - raw materials would have to be harvested, and, more importantly, discovered before they have any real value that can be acknowledged. The cost of maintaining land would work for untouched land, too - if someone hasn't maintained or improved land, it is of low value for someone who wants to improve it, since they would have to do all of that by themselves. However, it has the base value of what energy can potentially be acquired from it.

This is where money comes in. Money CAN include all of this, and energy as well. This is why it is dangerous to quantify money via an usable commodity like energy, because you will get distortions due to what such an unit of measurement would leave out. This is why banks hold gold, and not any other metal - gold has little to no industrial utility.

As one of the best conductors of electricity and as a metal that doesn't tarnish and which doesn't really react with anything, I have to disagree on it having little industrial utility. This is why I think it is best to use the 'all' side of an 'all-or-nothing' approach - something that has all utility, instead of some or nothing. Energy is the most useful thing that there is. You can even convert it to matter (along with antimatter in the same quantities) by smashing a bunch of photons together. It is the fundamental unit of everything.

Otherwise, your analysis of goods especially was quite interesting.

Ok. I may quibble about certain details here and there but this does seem quite interesting.

So, let's accept your model as it is. What would be the "unit of exchange?" It can't be electricity, since electricity is not easily transferable...transfer costs would easily eat up such an avenue, and it can't be effectively stored (power loss in batteries).

What about an energy commodity, like oil or natgas? Well, this runs into supply problems, just like how a gold standard economy can experience significant inflation just because people found "gold mountain" somewhere. I suppose you can say that since these energy commodities have a clear industrial usage, that instead of inflation it would actually lead to real economic growth. Interesting. But, we can't carry oil barrels in our wallets, so what would be the actual unit of exchange?

Power credits? Ok, sure. But, then, how does this differ from the dollar today? What makes a "power credit" any different from fiat? After all, this "power credit" would have in and of itself zero utility; it merely represents the utility inherent in the energy-based economy...just like current fiat.

And what about lending? How would you control for lending in such monetary system?

The unit of exchange would be no different as far as transactions go. It'd be most like our previous system of gold-backed currency, except instead of "X amount of gold" you'd see "X amount of Joules" or "X amount of Kilowatt Hours". Storage wouldn't matter necessarily, the only thing that would matter is the government keeping good on their promise to convert notes to electricity when desired.

The government would have to inflate or deflate the money supply to keep the price of energy within a certain range. For example, if 1 dollar was guaranteed to be worth 5 kWh, the government might aim for $0.10 - $0.15 as a price. If the price goes over $0.20, consumers would be reimbursed for their overpaying after prices fall back to normal levels. There shouldn't be any cases where the price of electricity goes over $0.20 - if it costs more than that to produce 1 kWh of electricity, nobody will do it.
Wall of Fail

"You reject religion... calling it a sickness, to what ends??? Are you a Homosexual??" - Dogknox
"For me, Evolution is a zombie theory. I mean imaginary cartoons and wishful thinking support it?" - Dragonfang
"There are no mental health benefits of atheism. It is devoid of rational thinking and mental protection." - Gabrian
AlbinoBunny
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6/10/2013 12:43:19 PM
Posted: 3 years ago
So the government needs a method of energy generation, or would they bring in contractors?

I don't know much about economics, but I think it's interesting that with the gold standard, you could exchange it back and forth, and with energy, you can expend it. You can use the energy up.

If generating energy becomes a lot easier, a lot more can be generated, would hyperinflation ensue?
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sadolite
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6/10/2013 2:34:09 PM
Posted: 3 years ago
At 6/9/2013 2:32:52 PM, DanT wrote:
At 6/9/2013 12:27:13 PM, sadolite wrote:
Any standard would be better than and arbitrary standard like we have now. Sea shells would be better.

Why? Money is simply a medium of exchange; it's commodity value has no relevance to its value as a currency. So long as the monetary supply is properly managed, I see no issue with fiat money.

"So long as the monetary supply is properly managed," and how is that working out?

You can't print fake gold or even sea shells. If govt wants to spend more money it has to come up with more sea shells, plain and simple.
It's not your views that divide us, it's what you think my views should be that divides us.

If you think I will give up my rights and forsake social etiquette to make you "FEEL" better you are sadly mistaken

If liberal democrats would just stop shooting people gun violence would drop by 90%
CanWeKnow
Posts: 217
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6/10/2013 10:59:00 PM
Posted: 3 years ago
That's why I didn't quite understand how countries would compete in this model. If the world had energy backed currency than the country who is producing the most power has the most spending power. This is would probably result in an energy race to find the best long term solution. What happens when we have so much power that there is a surplus? People will probably still have to work in order to farm, operate generators, build houses. I think the only way to put value behind the currency again is to now quantify it using human labor energy. I'm not sure what this would do to population growth. Government knows that we can't keep growing and be sustainable, so power would lie with whoever has the largest carrying capacity for their geography. Each person could convert their biological energy into money through labor. Actually, I know i've just been rambling now, but I don't see how it could be such a bad idea, because physical force is how we have determined things since the dawn of time. If one nation has more physical force than all we are doing is taking potential violence and converting it into currency. It won't be physical influence anymore, just economic influence. Humans aren't that cruel either, I think eventually we would get to a point where we treated everyone fairly equally, regardless of how many people a region holds.

Sorry, I know I'm rambling, I just got lost in my own thoughts.
CanWeKnow
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6/10/2013 11:11:48 PM
Posted: 3 years ago
If one country spent labor power then they would at any time have to back that up with physical labor. Right now we are in debt to a lot of countries, including China. The problem is that it's harder for humans to put a tangible value on fiat debt. No nation would be inclined to be indebted to another because it would mean they have to send over laborers from their own country to build up another country in order to pay back what they owe. We can still trade labor in the form of currency as long as we don't borrow from the country we are trading from. Each country can provide for itself because it's potential labor is it's wealth. We can trade just to trade, with the only profit from the trades being used to compensate the traders.
drhead
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6/11/2013 12:55:50 AM
Posted: 3 years ago
At 6/10/2013 12:43:19 PM, AlbinoBunny wrote:
So the government needs a method of energy generation, or would they bring in contractors?

I don't know much about economics, but I think it's interesting that with the gold standard, you could exchange it back and forth, and with energy, you can expend it. You can use the energy up.

If generating energy becomes a lot easier, a lot more can be generated, would hyperinflation ensue?

Power would be generated by private companies just as normal. The government just inflates or deflates the currency to keep the price of energy at a certain point between 50%-75% of whatever is guaranteed, and reimburses if the price goes over the guaranteed amount once prices go back down.

Also, you're wrong about using energy up - conservation of energy dictates that that energy must go somewhere.
Wall of Fail

"You reject religion... calling it a sickness, to what ends??? Are you a Homosexual??" - Dogknox
"For me, Evolution is a zombie theory. I mean imaginary cartoons and wishful thinking support it?" - Dragonfang
"There are no mental health benefits of atheism. It is devoid of rational thinking and mental protection." - Gabrian
drhead
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6/11/2013 12:58:14 AM
Posted: 3 years ago
At 6/10/2013 10:59:00 PM, CanWeKnow wrote:
That's why I didn't quite understand how countries would compete in this model. If the world had energy backed currency than the country who is producing the most power has the most spending power. This is would probably result in an energy race to find the best long term solution. What happens when we have so much power that there is a surplus? People will probably still have to work in order to farm, operate generators, build houses. I think the only way to put value behind the currency again is to now quantify it using human labor energy. I'm not sure what this would do to population growth. Government knows that we can't keep growing and be sustainable, so power would lie with whoever has the largest carrying capacity for their geography. Each person could convert their biological energy into money through labor. Actually, I know i've just been rambling now, but I don't see how it could be such a bad idea, because physical force is how we have determined things since the dawn of time. If one nation has more physical force than all we are doing is taking potential violence and converting it into currency. It won't be physical influence anymore, just economic influence. Humans aren't that cruel either, I think eventually we would get to a point where we treated everyone fairly equally, regardless of how many people a region holds.

Sorry, I know I'm rambling, I just got lost in my own thoughts.

Think about it, though. What if we created an army of indestructible or self-maintaining androids to do all work for us? This is one of the interesting things about this model - it would definitely encourage this.
Wall of Fail

"You reject religion... calling it a sickness, to what ends??? Are you a Homosexual??" - Dogknox
"For me, Evolution is a zombie theory. I mean imaginary cartoons and wishful thinking support it?" - Dragonfang
"There are no mental health benefits of atheism. It is devoid of rational thinking and mental protection." - Gabrian
llamainmypocket
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6/11/2013 1:05:21 AM
Posted: 3 years ago
The problem with a commodity backed currency is that it leaves the value of that currency to the mercy of the volatile commodity market. The price of currencies is relatively stable by comparison to commodities which can and do crash.

In economics inflation and deflation are code for rising and falling prices as well as expansion and contraction in the economy. To let the chance volatility of a commodity dictate recession is not sound economics. It would lead to epic disaster.

It is a very romantic idea though. There's a certain beauty in the idea of a stable currency that represents something real. Also, the lack of supply for gold to facilitate a currency would be resolved by using the other precious metals. You would see silver, platinum, palladium all rise to that occasion. There price would increase until the supply meets the demand of value as being money.

What would work is a global reserve currency which is pegged to a basket of the largest economies... It would swap out currencies from time to time like the Dow Jones industrial average swaps companies. Then you have stability and therefore a good medium for exchange.

I personally think that the current system works just fine. Central Banks just need to stop printing dollars. Enough is enough.
AlbinoBunny
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6/11/2013 9:37:13 AM
Posted: 3 years ago
At 6/11/2013 12:55:50 AM, drhead wrote:
At 6/10/2013 12:43:19 PM, AlbinoBunny wrote:
So the government needs a method of energy generation, or would they bring in contractors?

I don't know much about economics, but I think it's interesting that with the gold standard, you could exchange it back and forth, and with energy, you can expend it. You can use the energy up.

If generating energy becomes a lot easier, a lot more can be generated, would hyperinflation ensue?

Power would be generated by private companies just as normal. The government just inflates or deflates the currency to keep the price of energy at a certain point between 50%-75% of whatever is guaranteed, and reimburses if the price goes over the guaranteed amount once prices go back down.

Also, you're wrong about using energy up - conservation of energy dictates that that energy must go somewhere.

Yeah, into whatever you want to power. Light, heat and movement etc.

I can still see at some point in the future, energy becoming a lot cheaper. Would this cause hyperinflation?
bladerunner060 | bsh1 , 2014! Presidency campaign!

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drhead
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6/11/2013 10:48:18 AM
Posted: 3 years ago
At 6/11/2013 9:37:13 AM, AlbinoBunny wrote:
At 6/11/2013 12:55:50 AM, drhead wrote:
At 6/10/2013 12:43:19 PM, AlbinoBunny wrote:
So the government needs a method of energy generation, or would they bring in contractors?

I don't know much about economics, but I think it's interesting that with the gold standard, you could exchange it back and forth, and with energy, you can expend it. You can use the energy up.

If generating energy becomes a lot easier, a lot more can be generated, would hyperinflation ensue?

Power would be generated by private companies just as normal. The government just inflates or deflates the currency to keep the price of energy at a certain point between 50%-75% of whatever is guaranteed, and reimburses if the price goes over the guaranteed amount once prices go back down.

Also, you're wrong about using energy up - conservation of energy dictates that that energy must go somewhere.

Yeah, into whatever you want to power. Light, heat and movement etc.

I can still see at some point in the future, energy becoming a lot cheaper. Would this cause hyperinflation?

Obviously, we do want energy to become cheaper, so when that happens, the government would print a lot of money to inflate the currency. They'd essentially reduce taxes and use money they printed to inflate the currency on purpose to make the price of electricity the "same" as it was before (it still is cheaper to produce than before, but it is worth the same amount of money). The beauty of this is that the opposite would be done if the currency was overinflated - taxes would increase, and the extra money would go into a void to reduce the money supply. This would mean unhappy citizens, and unhappy citizens often don't vote the same people back in office.

So to summarize, the value of money falls with the price of energy, which means things cost more as time goes on, but people have more money, so it doesn't really make much of a difference. The inflation is there, however it isn't as bad as inflation under a gold standard since the amount of the backing of the currency increases with the amount of the currency. The most important part is how to distribute the new currency when that time comes around. The method I mentioned above would work absolutely dreadfully with a progressive tax if trying to avoid income inequality (which would be a real concern when inflating the currency), so it isn't by any means the best way.
Wall of Fail

"You reject religion... calling it a sickness, to what ends??? Are you a Homosexual??" - Dogknox
"For me, Evolution is a zombie theory. I mean imaginary cartoons and wishful thinking support it?" - Dragonfang
"There are no mental health benefits of atheism. It is devoid of rational thinking and mental protection." - Gabrian
drhead
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6/11/2013 11:08:52 AM
Posted: 3 years ago
At 6/11/2013 1:05:21 AM, llamainmypocket wrote:
The problem with a commodity backed currency is that it leaves the value of that currency to the mercy of the volatile commodity market. The price of currencies is relatively stable by comparison to commodities which can and do crash.

In economics inflation and deflation are code for rising and falling prices as well as expansion and contraction in the economy. To let the chance volatility of a commodity dictate recession is not sound economics. It would lead to epic disaster.


It is a very romantic idea though. There's a certain beauty in the idea of a stable currency that represents something real. Also, the lack of supply for gold to facilitate a currency would be resolved by using the other precious metals. You would see silver, platinum, palladium all rise to that occasion. There price would increase until the supply meets the demand of value as being money.

What would work is a global reserve currency which is pegged to a basket of the largest economies... It would swap out currencies from time to time like the Dow Jones industrial average swaps companies. Then you have stability and therefore a good medium for exchange.

I personally think that the current system works just fine. Central Banks just need to stop printing dollars. Enough is enough.

Global reserve currency sounds nice. I can see your argument - things like the energy crunch in the 70s might be bad, however I think that with nuclear power (and, possibly in the near future, fusion), as well as advances in wind and solar power, energy should only get cheaper. If we advance to the point where we can generate power by deuterium fusion, then with the amount of deuterium we have in our oceans, we will have enough power for more than a billion years. Our planet will be uninhabitable due to non-anthropogenic causes before we run out of power.

Out of all of the commodities that could have been picked, I think energy could be considered the most reliable. However, if there is an energy crisis, all that would be needed is a deflation of the currency.
Wall of Fail

"You reject religion... calling it a sickness, to what ends??? Are you a Homosexual??" - Dogknox
"For me, Evolution is a zombie theory. I mean imaginary cartoons and wishful thinking support it?" - Dragonfang
"There are no mental health benefits of atheism. It is devoid of rational thinking and mental protection." - Gabrian
llamainmypocket
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6/11/2013 12:45:44 PM
Posted: 3 years ago
I'm very hopeful for the future. Energy is the most abundant resource in the universe. We just need to convert it into a usable stated with a modest degree of efficiency. Burn A to get heat is caveman technology. I want us to efficiently convert matter into energy so that we are at the limits of what technology and physics allow.
llamainmypocket
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6/12/2013 12:27:13 AM
Posted: 3 years ago
At 6/12/2013 12:04:49 AM, Jake-migkillertwo wrote:
Um, what's wrong with fiat money again?

In my opinion? Nothing. We need a baseless currency. What's wrong with the world is spending. If government doesn't cut it out then the market will cut it from our hides. Is there really any difference between the one method and the other? Yeah probably but we will live within our means one way or the other. Sooner or later. With or without lube. :-)
Jake-migkillertwo
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6/12/2013 7:16:14 PM
Posted: 3 years ago
At 6/12/2013 12:27:13 AM, llamainmypocket wrote:
At 6/12/2013 12:04:49 AM, Jake-migkillertwo wrote:
Um, what's wrong with fiat money again?

In my opinion? Nothing. We need a baseless currency. What's wrong with the world is spending. If government doesn't cut it out then the market will cut it from our hides. Is there really any difference between the one method and the other? Yeah probably but we will live within our means one way or the other. Sooner or later. With or without lube. :-)

sloganeering=/=economics
CanWeKnow
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6/13/2013 1:26:41 PM
Posted: 3 years ago
Nothing is wrong with the system, per say, but there is something wrong with it's practices. We want to create a system that encourages sustainable economic practices rather than encouraging taking shortcuts.
Yippie
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8/19/2013 10:45:06 AM
Posted: 3 years ago
i think its a genius idea. This same had me thinking for the last months. The first person who came up with this seems to have been Henry Ford.

Energy is everything in our society, from firewood to airplanes. so linking energy to currency is a very logical step to take. as the top poster already explained you can convert any item in terms of energy. but what will this mean?

Some people in above posting are afraid of hyperinflation. but they forget, that in case of 'hyperinflation' of energy currency, we do not get poor, but we get richer.
Every extra kWh of energy that is added to humanity, will make that someone, somewhere, can drive his car or grow a strawberry. Eventually we have so much energy that we can make all work to be done by robots.

Imagine for example someone who finds a way to catch lightning. He/she will be a rich man, but i think that's pretty well deserved. compare it with the lone ranger who finds gold. But what actually did he accomplish with this find? He actually found a way to get energy cheaper from the sun (eventually all energy comes from the sun, whether it is oil, wood, wind...). This means that, other energy providers like oil, will become less interesting, because their ROI, in terms of energy, is less good then electricity for free from lightning.

Now this rich person could put his energy in portable batteries and go to the grocery store, where the grocer literally can use this currency to grow new food. Imagine the grocer uses a former office building in the center of the city to grow his food, because with plenty of energy you don't need the sun directly like on farm land. To do that though, we need to invent a method to carry large amounts of energy around. In star trek, they already do that and trade dilythium crystals, but we are not that far yet i think. We could be close though. Currently you need a car battery to carry 1 Kwh around.

Another possibility is to print money that is backed by a kWh. This will probably work because it is possible to store energy long term, e.g. in hydrogen. The danger side to it, is that is will still be possible for (energy)banks to practice fractional reserve banking with it, in kilowatts. This should be stopped by law.
But i do predict there will be energy banks that can store your energy, or convert your form of energy to another, all linked to the kWh-standard.

Another aspect of this energy-backed money is that it will be painfully clear directly how much energy some things will cost, and translated, how much we were 'borrowing' from the oil. Imagine for example, that if you would have a bike that runs a generator, how long you would have to cycle to get 1 enough energy to make a pound of cheese. Pretty long i suspect. which makes it clear that we need to harvest energy from nature in order to survive as humans.

Economy will make , in the energy backed money system, that we will :
1. Make every item as cheap as possible, in energy terms.
2. Every human will start to create their own energy ( money) if possible.
Especially this last point will hopefully make that people massively start using solar or wind energy. And thus the world gets again, richer.

What we as humanity need is a website where everyone can look up what items are worth in terms of kilowatts. How much energy would it cost to make a bread, a bottle of wine, or a car ? i think it will turn into a science pretty soon to calculate that all. Of course some products will have hard to determine values in it, like the intellectual work that is included in an item. I think that part of the value will be determined by supply and demand. If your neighbor is smarter then you he can make something cheaper.

If we accept this energy money system the world will become a very nice place to live in. since suddenly we are not using negative debt based fiat money anymore, but something that is truly constructive.