It seems to me that going back to the gold standard would be impractical for a few countries. However, convincing arguments have been made that the fiat system has failed.
Is it feasible to back a country's currency with a commodity such as oil? I wonder if perhaps that could help out the stability of many OPEC economies.
Art transcends ideology.
http://mises.org/Community/blogs/ruben
IMHO, I think you have that backwards. Also, I recently signed up to this website to see if there's constructive ways to look for real answers to our financial and political problems. It seems most times 'Libertarians' and other outside the popular culture groups fight and argue (I mean discuss) among themselves and very little is accomplished. I would love to see a grass roots movement of limited government (constitutional) and honest money start to sweep our nation. I'm interested in joining a study group or forming one to start with educating people to alternatives.
Christopher M. Mahon
http://ambidextrouscivicdiscourse.blogspot.com/
Ruben,
This is a great question, I've been looking into this myself. I think with the substantial defeat of the Republicans this November and the apparent defeat of 'Free Market' Capitalism (Facist style). The ground is fertile for som real economic answers and political/social directions. I personally believe we need to get back to limited government bound by the restraints of our constitution (originalism) with powers outside of that relegated to individuals and state governments. Regarding our currency, it needs to be tied to something, gold has always stood the test of time, even though it has been manipulated from time to time. Ron Paul, Murray Rothchild and Larry Parks have commented on the need to return to gold although they do not advocate a 'Gold Standard', which was used initially by Britain. But they believe by abolishing 'legal tender' laws that the market's themselves will choose value.
Ruben:It seems to me that going back to the gold standard would be impractical for a few countries.
February 17 - 1600 - Giordano Bruno is burnt alive by the catholic church. Aquinas : "much more reason is there for heretics, as soon as they are convicted of heresy, to be not only excommunicated but even put to death."
Murray Rothchild?
-Jon
Freedom of markets is positively correlated with the degree of evolution in any society...
I will elaborate. Oil is also referred to as black gold. Many countries have extensive underground or storage reserves of oil. And other countries have instead extensive reserves of oil. So let us suppose that, should at any time in the future the governments of various countries decide to get rif of their fiat currencies, some will go back to the gold standard and some will venture into the oil standard.
However, gold always stays there. It complies with the definition of storage of value. On the other hand, oil is used for gasoline and combustion and evaporates, it is a consumption good. Is it possible to use a consumption commodity as the backup of a currency?
'bard', I have a friend named Rothchild, retailer.
In the early twentieth century, coffee used to back several South American currencies. Perhaps wheat, corn, cotton, etc. could also do the job. Especially for very impoverished third world countries with rampant inflation and fiat currencies pegged to other fiat currencies from developed countries. I just wish to know if it is possible to moneteraly back an economy with the commodities it locally produces
Rubén: In the early twentieth century, coffee used to back several South American currencies. Perhaps wheat, corn, cotton, etc. could also do the job. Especially for very impoverished third world countries with rampant inflation and fiat currencies pegged to other fiat currencies from developed countries. I just wish to know if it is possible to moneteraly back an economy with the commodities it locally produces
... or back it with a basket of commodities. Why limit it to one? Each country would back their currency with any number of commodities--preferably those manufactured, processed, or mined domestically--and the value of the currency would be derived from the market values of those commodities. It might make the currency more stable (i.e.: less susceptible to manipulation of value).
"All men having power ought to be distrusted to a certain degree." -James Madison
"If government were efficient, it would cease to exist."
Keep in mind it's still fiat money if you can't redeem it. So the issuer of such notes backed by consumption products would have to stockpile them. But most of them are perishable, so they have two choices:
I'm not entirely sure this would work, but I'd be interested to hear more.
I am thinking about freezing the monetary base as a reform. Would end inflation but not using resources and increasing their price.
Eduard - Gabriel Munteanu: Keep in mind it's still fiat money if you can't redeem it. So the issuer of such notes backed by consumption products would have to stockpile them. But most of them are perishable, so they have two choices: Replenish the stockpile once it degrades - this would have rather high costs. Be a trader who maintains a steady goods flow, always keeping a constant reserve and selling in a first-in-first-out order - not easy either. I'm not entirely sure this would work, but I'd be interested to hear more.
And one more thing... consumption goods are usually not as valuable as gold. This is a problem, because one would need large storage space for such goods. Think about potato banks and how large their vaults would need to be.
Eduard - Gabriel Munteanu: Eduard - Gabriel Munteanu: Keep in mind it's still fiat money if you can't redeem it. So the issuer of such notes backed by consumption products would have to stockpile them. But most of them are perishable, so they have two choices: Replenish the stockpile once it degrades - this would have rather high costs. Be a trader who maintains a steady goods flow, always keeping a constant reserve and selling in a first-in-first-out order - not easy either. I'm not entirely sure this would work, but I'd be interested to hear more. And one more thing... consumption goods are usually not as valuable as gold. This is a problem, because one would need large storage space for such goods. Think about potato banks and how large their vaults would need to be.
I would think storage media (Blank CDR's, DVD's etc.) would be easier to store & more useful as currency (& by proxy, information, as a currency?)Self-producing such on a small scale might be a bit esoteric, though.
"Look at me, I'm quoting another user to show how wrong I think they are, out of arrogance of my own position. Wait, this is my own quote, oh shi-" ~ Nitroadict
Thank you everybody for your insights.
I still wish to go back to the case of oil for currencies in major oil producing countries, OPEC & Non OPEC members alike. Petroleum is as valuable and as useful as gold and it is not a perishable good. I even think there would be the added environmental benefit of using gasoline somewhat more sparingly than today so that those reserves continue backing up a currency.
The case of storage media as a currency sounds very interesting and worth further thoughts, however their intrinsec value deflates over the time due to technologica advances. Wouldn't that decrease in the intrinsec value of the currency hurt the economy?
Rubén: The case of storage media as a currency sounds very interesting and worth further thoughts, however their intrinsec value deflates over the time due to technologica advances. Wouldn't that decrease in the intrinsec value of the currency hurt the economy?
No, the intrinsic value does not go down. Instead, other products with higher intrinsic value appear.
If we talk about gold or oil as a currency, a decrease in its market value does not hurt the economy. This is because increasing the available quantity helps satisfy more needs and redirects market efforts to other needed resources.
However, I don't think information is a good currency. Information gets outdated rather fast and can be easily reproduced once it was created.
Storage media could be an option, but there is a problem. While you can use buy two pieces of gold and join them to suit your needs, people would prefer higher capacity media for some purposes. More specifically, consider the fact that 30 CDs can't be suitably used to replace a Blu-ray disc. In contrast, gold/oil can't be packed tighter, nor it gets more useful in such a form. So technological advances will obsolete the old stock, no matter its size.
I realized these issues after I had posted my reply. They definitely add an interesting obstacle to implementing such a system due to their bulk and shelf-life. My thinking is that we can get around these issues by making the currency a derivative of their values, i.e.: the market values of those commodities listed on the different exchanges. This would reduce the need to have the commodity on-hand in storage. Since consumption commodities are harvested nearly year round, there will nearly always be a supply available.
I'm not entirely sure that this would work; I'm just brainstorming the idea as I sit at home sick with the flu... maybe I'm delirious from a combination of illness and cough medication.