*Just so you guys don’t worry. No, unfortunately this isn’t me finishing a novel. It’s family stuff, and it’s not bad, just busy. So Saturday went sideways and I don’t have time to put up the promo post today, so, have a ghost post. Promo post tomorrow. Thank you to Francis for stepping in – SAH*
We Need Non-inflationary Cash
by Francis Turner
This essay makes the case that we are in the process of needing a non-governmental form of cash. This is because governments are busy tracking what we do with the money they print and because they are mostly printing a lot more of it than they should so its purchasing power is going down (inflation). These factors make it a poor store of value and hence an unreliable unit of account and medium of exchange.
Note: readers who didn’t read my essay from about 7 years ago on Money and Cake, should probably do so, and it won’t do any harm for those that did to reread as a refresher. It’s a light-hearted introduction to most of the key concepts of money.
Note. I am not a tax lawyer. Nor do I even play on on TV. Your local tax-gatherers and governments may object to you trying to implement your own non-inflationary cash. This should not necessarily stop you from doing so, but you should plan accordingly.
What’s the problem
The fundamental problem is the governments and large commercial organizations are unkeen on the concept of people exchanging clinking and folding cash money for products and services as opposed to balances of electrons being changed in various locations. There is a global push for going ‘cashless’. I.e. doing what The Register called “Pay by bonk” or possibly pay by QR code or other mechanism. In Sweden the switch away from cash is very well advanced; if I recall correctly, a majority of shops, cafes and the like no longer accept cash at all. Other countries in the developed and developing world are not far behind.
This isn’t just a government thing there are lots of large companies who also like the idea of consumers not using cash. Companies like it because they can take a cut of every transaction. It’s small on a per transaction basis (1-3% usually) and usually taken from the seller, but it adds up enormously over millions of users and billions of transactions. In addition they can often track spending habits and target ads and offers to entice consumers to buy more. In fact it seems to be popular with most of the “bureaucratic-commercial” complex everywhere, particularly in the land of Winnie the Pooh, err West Taiwan.
In Canada Truckistan, the government has declared an emergency which allows it to tell banks to freeze arbitrary bank accounts without any evidence presented to a court or similar (and to let banks do the same thing on their own if they feel like it, with no fear of court order reprisal). So you can put your money into the bank but you may not be able to get it out. Of course they justify this as “temporary” and “only going after the evil REEEE bouncy castle protestors” but
a) this pretty much defines “thin end of the wedge” and
b) how does anyone appeal when they make a mistake (not if, when because they will)?
Meanwhile in the land of the ‘free’, the ‘Let’s Go, Brandon!’ administration and their buddies in congress are trying to get banks to report all transactions into and out of bank accounts with more than $600 in them.
This is, clearly, a potentially huge problem. It’s a problem two ways. First is the obvious government tracking one. Even if you assume the government is a wonderful organization staffed purely by the most competent and morally pure the chances of them making a mistake and bringing the full force of the law down on some poor housewife buying, say, fertilizer for her garden and a can of kerosene for emergency heating is higher than one might prefer. Given that in the world we live in the government is not staffed purely by ethical angels, the chances for abuse and error are very high indeed. And that doesn’t even get into the government criminalizing transactions that should be perfectly fine and so on.
Then there’s the problems of availability and fraud in a cashless society. If the power goes out you can’t buy a candle in a cashless society. You can’t buy anything if the internet goes down, if your financial provider has a problem and so on. Also if your provider is hacked (or your cash payment token is, or…) then you stand to lose more than just the cash in your wallet.
Fundamentally there’s a centralization and a corresponding lack of local personal control. There are benefits but there are plenty of drawbacks even before you worry that the government might abuse its knowledge of your financial life.
So keeping cash sounds like a good idea. However, there are potential downsides. Any replacement for cash needs to be able to avoid those downsides
The most obvious is to do with the supply of it. Currently there is, as mentioned earlier, a certain upward spring in the prices of things these days if you buy them in dollars (or pounds or euros – though here in Japan, in yen, not so much yet).
And that is a problem for people who like the idea of cash. As Zimbabwe, Venezuela, various other South American nations, Israel and Weimar Germany all can attest to, cash is a complete disaster if the currency is suffering from hyperinflation. In all these cases cash quickly became useless. Indeed even in times and places where inflation is in the 5%-20% per year range (i.e. much of the 1970s and early 1980s for most of the world) cash is a poor store of value although it still works as a method of payment. Cash coins are slightly better than notes though because the metal will have a base value, so much so that at various times people have taken low denomination coins of various countries and melted them down to sell as refined metals.
Plus the other problem with cash as a strictly physical object is that it is hard to pay for things remotely using it. Which is why bearer bonds, letters of credit, cheques/checks, hawala and so on developed all the way back in the 17th/18th centuries (or about a millennium earlier in the case of hawala).
So to sum up, we have a requirement for something that can act as a reasonable store of value and unit of account (in Japan the yen has been amazingly stable for the last three decades but most other currencies have not, and in Japan the cause has been periods of no growth and deflation), be easily exchanged by buyers and sellers for good and services and yet not fall under the control of the government.
Fundamental requirements
Our cash needs to be the following:
Non-inflationary (and non-deflationary).
A ton of things work better if the cost of something is predictable because the currency itself is stable. This doesn’t apply necessarily to every transaction, but the ability to be able to plan investments and calculate expected returns is made far, far easier when the unit of account remains constant over time. In most of the developed world people who are younger than about 40 have no idea what even fairly moderate 5-10% annual inflation does to your financial planning (though in a year or two they will) but it is an important issue. It is worth noting that some currencies have historically been reliable (the pound sterling for the long 19th century up to ~1914, the US dollar for much of the twentieth) while others (the French Franc, the Italian Lira) have not.
As noted in the last 30 some years the Japanese Yen has been amazingly stable in terms of in country pricing. I first came to Tokyo in 1991 and prices for all sorts of things – from soft drinks from vending machines to train tickets to restaurant meals to property prices – have remained very much the same. Some have probably gone down a bit (property in some places, some restaurant deals) but generally speaking things have been stable.
The key seems to be that the money supply should not expand (or contract) in relation to the underlying economy. As we are (re)discovering with all the covidiocy money printing, when you increase the amount of money in circulation without increasing the economy to absorb it, you see prices rise. And, as we will undoubtedly see in the next few years, having got on the inflation train it is very tricky for a national economy/currency to get back off it again. [We know how to do it though. You raise interest rates and cut government spending (and government money printing) and it stops. But it is a painful adjustment as was discovered by all the countries in the 1980s that did it to end their 1970s stagflation.]
For our replacement money we want something that is a good proxy for the underlying economy. An example could be crude oil or the various refined products of it. It is true that the crude oil price varies considerably in dollars or other currencies but crude oil itself has tended to be produced (and consumed) in roughly proportionate amounts to the size of the global economy (see this graph). So if you had a currency of pints of crude then it would not be inflationary or deflationary (also it is worth noting that prior to the end of Bretton Woods and the 1970s oil shock, crude was remarkably consistent in US$ as this graph illustrates)
Independent and Decentralized
Independent means independent from governments. See above note about covidiocy and inflation for reasons why this is bad. It would be nice if it were hard to track by governments so they couldn’t tax you but that’s a nice-to-have, a must-have is that governments (or anyone else) cannot print more of it to suit their own needs.
It would be good if the currency had no single control point but could be replicated by anyone. That makes it hard to shut down if (when) governments get upset about it. They may manage to stamp out Alice’s Spondoolicks, but Bob’s Quatloos (which are readily convertible to/from Spondoolicks) can continue to be used just fine. Also if it turns out that Charlie has been sneakily coining extra Charlicrowns the only people who are impacted are those who have some. Owners of Spondoolicks, Quatloos or Dave’s Doubloons are just fine.
Decentralization also helps with scalability. While it is true that in the past a reference currency (the Thaler, thePound Sterling, the US Dollar) was extremely helpful, in a world where information is easily passed everywhere and where we all have handy dandy massively powerful computers in our pockets, it’s quite not a problem for everyone to have the exchange rates of Doubloons to Quatloos, Quatloos to Spondoolicks and Sponddolicks to Charliecrowns and therefore calcluate how many Doubloons make a Charliecrown.
Based on Something Physical
Actually this may be a nice to have, rather than a must have. But currencies based on actual gold (or wheat or cowrie shells…) have built in warning signs for when they are being inflated because you can do the sums and see that 1 billion ounces of gold probably doesn’t fit in that warehouse over there. Relatedly it is also possible to audit banks etc, and actually count the reserves of gold or wheat or cowrie shells. People can, of course, have fake bars of gold, plastic cowrie shells etc, but it is trickier to do compared to just modifying a few electrons here and there.
Hard to counterfeit or fake
I’d prefer impossible to counterfeit, but I’m prepared to go with hard. Most current cash can be counterfeited but the percentage of counterfeit cash is probably well under 1% of all cash. Again the point here is that someone (a government) cannot simply make more without investment in whatever backs the currency. A currency that can be faked is one that will soon be one that people lack trust in so we need to avoid that. One benefit of a decentralized system is that it should be possible to decouple and deprecate specific instances if they turn out to have been abused without losing trust in the entire currency. There are examples of this working in various places with existing currencies. For example in both Scotland and Hong Kong bank notes can be printed by a number of banks not just the government/central bank. If a particular bank gets into trouble then its notes may end up trading for less than face value.
Functional when the power is off
As you may have noticed significant parts of the world are learning the downsides to “green” energy with respect to its intermittency and general unreliability. The PRC has shot itself in the foot by trying to boycott Australian coal thinking that domestic suppliers and other countries could provide it instead (narrator voice: but they couldn’t). The Europeans have shut most of their coal, some of their nukes and gone for a mix of renewables and gas. And the gas all comes from that beacon of good governance and free-markets: Russia. Parts of the US (California particularly) are doing the same.
If the power flickers on and off that will affect everything that requires electricity including the internet and services based off it, as well as smartphones and so on. It would be really nice if, when push comes to shove, you can pay for that gallon of fuel, roll of toilet paper or loaf of bread in some kind of off-line token. Ideally (see below re remotely transferable) there would be a way to print out tokens, use them and have the recipient scan them back in and destroy them.
Anonymous
We need to not be able to track the origins of cash or who pays whom with it. See above re: governmental oversight. But it isn’t just governments. Any number of large commercial organizations (e.g. Amazon, Walmart or your friendly local supermarket with their loyalty card) love the idea of tracking what you spend your money on so they can target ads and offers to entice you to spend more. All of this tracking has privacy implications. Given that you can’t trust institutions to either hold the data securely or use it ethically, anonymity is a really really good idea.
Remotely transferable
There has to be a way to pay a distant supplier for a product they will ship you that does not involve you, the supplier or a middleman trucking a physical lump of money from point A to point B. It must be noted that systems like Hawala have done this mostly successfully for a thousand years or more so you don’t need an internet (or even a telegram system) to do this. But – obviously – it will be better if it is possible to use the internet if it is available.
Convertible into fiat currencies when required
Paying for things in quatloos, spondoolicks or whatever is fine as long as the other party accepts them. Unfortunately in the near future people you want to pay for goods or services are likely to insist on dollars, euros, pounds, yen etc. so there ought to be a good way to swap quatloos for the required currency. There will also be a need to convert dollars, euros, pounds, yen etc. into quatloos. It is perfectly fine for the conversion process to be costly but it needs to exist.
Usable for small purchases
It seems obvious now but in the past less divisible coins have been a problem. If you get paid 10 spondoolicks a day you probably want to be able to buy things in small fractions of a spondoolick. So the currency needs to be able to support denominations that are small enough. Roughly speaking the current major currencies all have their smallest coin as something that is too small to buy a single thing these days (but you could 40 or so years ago), but where a small number of them can buy say, a single candy or something equally minor.
Why not Bitcoin? or $otherCryptocurrency
Current blockchain based cryptocurrencies don’t work well as quickly transferable cash and have a bunch of other issues. This long blog post covers a fair number of them (you may ignore the glowball wormening part).
A few of the issues: Transactions take a while to be confirmed (minutes to hours) and it is typically complicated to handle fractions of a coin. If you want 1000 widgets to be delivered next Tuesday then a cryptocurrency is fine. If you want to buy an ice-cream or a cup of coffee to eat/drink right now it is not so easy.
Bitcoin is designed to become progressively harder to mine. That’s not stable because it’s not tied to the size of the economy.
No current cryptocurrencies that I am aware of are designed to be turned into physical tokens.
Most cryptocurrencies (bitcoin particularly) are not anonymous either. They are pseudonymous which is similar but not as strong on the identity protection front. It is possible to track every bitcoin transaction back to the origin and people do that, which is why ransomware crooks no longer want bitcoins.
That’s not to say a new cash currency would not use cryptography – in fact it almost certainly will use it for something – but not as the source of the underlying value.
So what do we want?
We want some kind of hard to fake physical token that is based on possession of a physical thing of value.
That physical thing needs to be something that is universally understandable, and available. And it should be reasonably portable at need (think bars of bullion vs say ownership of a plot of land) even if most of the time it doesn’t get transported
That physical thing needs to be (roughly) tied to the size of the economy so that it won’t cause or be subject to inflation or deflation
There should be a mechanism to transfer promises of tokens to distant locations (“I promise to pay the bearer 1oz gold”).
Energy as the fundamental physical base
I think a good thing to base the currency on is energy. That could be just a measure in Joules or BTUs or it could be physical things that have known energy values such as gallons of gasoline or pounds of coal, or it could be both.
I do not claim that an energy based currency will work. But I think it meets most, if not all, of the criteria above. It’s readily understood, readily available, easily transportable and energy usage is tied to economic activity. Its also easy to understand exchanging it, so 1 gallon gasoline == N KwH of electricity == Y lbs of coal and so on.
Tokens
You can print any token you want, but if you add a serial number that includes some crypto validation key that will be helpful for identifying fakes. There probably should be an online “validate this token” thing that can be used to confirm that the serial number is legit.
But it’s you who is on the line to produce the energy if requested. So potentially bank runs could happen but that doesn’t necessarily destabilize the whole system. It would make sense if the people who backed the tokens were people with ownership of energy (e.g. the owners of fracking wells). But you could run an electricity generator and a hydroelectric dam or simply build a load of tanks and store gasoline (or diesel or..) in them if you wanted to. Or people could trust you when you promised to pay for them to refill their car at a gas station. Or… there are lots of options and lots of ways to store energy and use the store to back a currency.
Online resources would be useful to confirm the validity of non-local tokens and some might not be always accepted by everyone. Perhaps you would discover that only special dealers would accept weird Nova Scotian tidal power tokens and then only at a discount to their face energy value. On the other hand the local Stop’n’go tokens would be accepted by everyone and regularly exhangeable for BP tokens from the nearby town or Duke Energy ones….
Energy tokens are easily printable in small amounts and easily understandable. e.g. 1 KwH would be about a (US) dime. 1 fl oz of gasoline is of similar magnitude. Energy tokens are easily exchangeable from one type to another. Swapping a 1000 KwH of electricity for 20 gallons of gasoline (note I have NOT checked the exchange rate, this is an example) is dead easy and in fact you can have some guy with a gasoline powered generator do it very precisely for you.
Remote transfer
We know how to move energy. We know how to trade ownership in energy. All we need is a way to trust the exchange of physical token to virtual one. This is actually a place where the blockchain becomes useful because it allows everyone to confirm that X tokens have been deposited at store S and store S has transferred the value to user U. At some point later when store S receives a withdrawal request it can also log that transaction in the blockchain. Note that
Works when the power is out
Indeed can be used to get the power back on because you can easily swap 20 gallon tokens for 20 gallons of gasoline right now. etc.
How to set up your cash system
See disclaimer at top of post. Talk to a practising tax lawyer. Pay them for their time. This will help you avoid steps that will bring the wrath of the government down on you. However in general, despite the disclaimer, this is how I would work (and these steps are not particularly ordered).
Start small and local. Use barter and IOUs as the basis of your system. “IOU 5 gallons of diesel” is unlikely to be considered a legal currency. Nor is “IOU 5 lbs of zucchini”. Or even the handing around of actual zucchini (or the traditional cigarettes and bottles of booze).
Code words. Squids, zuchinis, etc. have innocuous meanings that can mean they will be ignored when the authorities read your emails/text messages. Use archaic counting: score, dozen, gross. Use Roman numerals. “I want LIV dozen squids and a score zuchini” is less obviously cash that 648.20 $currencyname and so on.
The key is to keep local commerce working when the national/international stuff is not. So work on blockchains and electronic transfers later. For now having a trusted person at the other end (a la Hawala) will suffice.
If you need to make coins then washers that are engraved would work well. A modern CNC engraving tool could easily engrave the serial number of the coin if you wanted to do that along with a pattern that would be hard for a foger to replicate if he doesn’t have the pattern.
When you get to electronic banking, transfers etc. avoid all the things that have allowed crypto currencies to be insecure, most of which turn out to be stupid software bugs. Even large banks can write insecure code for this kind of thing so try not to need to write software of any sort. Or to have online portals etc. If you have to have an online thing open source the s/w and get someone to review it
Know your customer/trading partner. This reduces the chance of informants and criminals.
Other options
I like the idea of energy. But I’m sure there are other things. Even perhaps cryptobased things that I haven’t thought of. Also I’m sure there are things I’m missing. Don’t be shy. Comment away
According To Hoyt 
There is a company in Utah that is making “paper” currency with real gold content. See goldback.com. The process seals the gold in a polymer package that looks like paper money. Denominations are based on ounces of gold and fractions of an ounce – smallest bill is 1/1000 of an oz. Not endorsing as I don’t know much…
Interesting. Only issue I see is that physical bills wear, which means your sealed gold content can leak, or be cut or torn.
That is, in fact, a fatal flaw.
Historically, when gold coins were used as a means of exchange, they were usually traded by weight and not by number. Fine gold wears out and the coins lose weight; alloyed gold cannot be trusted to be worth any particular value. A merchant’s own scales could always tell him how much actual gold was in the coins he accepted in payment, so everyone preferred pure gold coins to debased ones.
When the gold is incorporated into a piece of paper, you are dealing with a very small quantity of gold in a relatively large mass of base material. You have to take it on trust that the note was made honestly and that none of the gold has leached out due to wear and tear. The first of those things might happen; the second never will. The actual value of such a note is indeterminable, which makes them effectively valueless.
Isaac Newton, among his other accomplishments, invented milling to prevent people from clipping the edges of coins.
But that doesn’t prevent the coins from wearing out. So they were still traded by weight.
I agree with your criticism of the paper money. I do like that they’re trying to solve the “small change” problem, but this isn’t going to work.
These days “flips” (as they are known to coin collectors) are cheap enough that any gold coin could be kept in one to keep it from wearing. At least then you wouldn’t literally lose money while it’s in your pocket.
Paging Mackey Chandler! 😀
I was thinking the exact same thing. Does a sapphire coating actually exist?
I tend to think our progressive “elites” and other “fellow-travelers” will come down like the wrath of God (whom they reject) on anything they sense bringing liberty to us smelly hoi-polloi…
“Honk-honk,” said the goose.
I’d have to say that anything that enrages the progressive-elite and other fellow travelers is a damn good thing. The possibility of their passing away from apoplexy permits me to feel a pinch of perverse pleasure.
c4c
Gold.
Goldbacks. local currency in Utah, New Hampshire and Nevada. 1/1000th of an ounce of 24 carat gold leaf incorporated in a plastic bill. Real, physical gold in hand exchangeable for goods.$20 million of these bills now in circulation.
Well, THAT’S a clever idea!
/cue second coming of FDR’s gold ban in 5… 4… 3…
Tom Simon has already addressed this, above: BLUF: it’s impossible to independently confirm the bullion weight every time. (Was it tampered with? Or worn away somehow? Or both?) Therefore, the actual value being indeterminate, it’s functionally worthless.
Quite true. However it’s impossible to do so with any medium of exchange, with 100% assurance.
Franky a goldback is just as, actually more durable and functional as an exchange medium than a greenback dollar.
No, because the only value the goldback has is the gold it is alleged to contain, which is impossible to test for.
Greenbacks are backed by the lead standard. You can use them to pay your taxes, so the nice men from Washington will not fill you full of lead. This is the basis for all fiat currency.
Actually it’s quite easy to test for and relatively hard to counterfeit.
What’s the test? How do you determine the exact mass and purity of a tiny quantity of gold embedded in paper, short of a fire assay which destroys the note?
It’s not embedded in paper, it’s gold leaf encased in plastic. Fire essay destroys the note but not the gold. Random fire essay, say 1 in 500 notes, suggests the non-essayed are good or bad. No one can’t measure the exact mass of anything, but with an atomic mass of 196.995 U, I suspect even leaf wrapped in plastic, weight and S.P. testing should give one reasonable confidence. An XRF analyzer can assure you of the purity of the gold leaf therein with no damage to the goldback.
But hey, I’m just passing the info along. I appreciate your views but personally, I am still putting some cash into goldbacks.
So, an XRF analyzer that runs $20,000 and up? Yeah, I can see every corner store investing in one of those.
Hey Tom, I’m not selling goldbacks, I’m simply passing along information. You said there’s no way to non destructively assay them. I noted one such.
Me, I’m looking into any non government controlled medium of exchange I can find.
Frankly, right now I think silver rounds are the best bet but I’m moving a little cash into goldbacks simply to keep a closer eye on them.
Need for non-tech dependent currency growing even greater; Putin is now threatening to use nukes “because of aggressive statements by Western powers”. He is essentially signalling that if Ukraine does not surrender, he will use nukes.
https://nypost.com/2022/02/27/putin-puts-russias-nuclear-forces-on-high-alert-as-tensions-rise-with-west/
Apparently Putin doesn’t fear retaliation from Europe or the USA if he uses nukes; indeed it must be considered that he considers senile Joe and the feckless anti-American cabal surrounding him as incapable or unwilling to use nukes, even if we are nuked.
A French spokes-flunky yesterday reminded Putin that France and the UK have nukes, too. Maybe that will sink in, maybe not. Maybe one of Putin’s thugs and minions will get nervous enough to shoot the SOB.
I’m not worried about Putin nuking anything. I suspect that it’s an empty threat as he assumes (rightly) that everyone in the west is going to blink.
Should Vlad actually nuke anything, the wrath of the world will descend on him and Russia will have a whole lot of leadership vacancies.
And if the U.S. is targeted, Biden and his Administration must reply in kind; or they will be removed from office before and without any election, and likely without any impeachment beforehand. If they’re still alive after hostilities with Russia are over, then they’ll probably get a trial and conviction.
If he is serious about using that threat to get a surrender, it is a sign of desperation.
Agreed, and it will likely be read as such by the entire world. Even if the outside world doesn’t take him down in the aftermath, the wolves would start circling within Russia.
I’d rather not sacrifice Kyiv for that result, mind you.
Putin is in a win or die situation right now. If he doesn’t win there’ll be a coup against him in Russia. Nuking somewhere else may not bother him too much because if he gets nuked back he dies but he was going to do that anyway if he didn’t nuke somewhere
Apparently so.
Even the threat has costs.
But those are a problem for future Putin, not now Putin, so he may not care.
However, the same calculus will impel every one of his toadies to abandon him. They can throw him to the wolves and live, or they can get nuked along with him and perish.
Now THAT is how you get a coup. Have some credible world leader such as the POTUS (oh wait… maybe not him) state that if nuking occurs the entire regime leadership (named in statement) will be targeted for death in any way up to and including retaliatory nukes. Also all their assets outside Russia: yachts, Monaco real estate, London real estate, swiss bank accounts, football teams… will be confiscated and used to pay for care for the victims
Team HarrisBiden is more concerned that people keep social distancing and wearing masks in case of a nuclear war:
https://www.ready.gov/nuclear-explosion (via Insty)
Where’s Sarah’s shocked face?
I think it’s in the shop for a 20,000-mile tuneup. 😛
She’s put a lot of wear on it lately…
I think our dear hostess puts that much mileage on the shocked face in a week of posting at instapundit. The world has gotten so weird and strange that it’s hard to find things that aren’t shocking.
Talking of Russia and the banks. As part of his preparations for this, Putin built up a huge mountain of (foreign) currency reserves. It seems like Putin might be about to suffer the same fate as the Canadian truckers, only on an international basis – https://www.wsj.com/livecoverage/russia-ukraine-latest-news-2022-02-26/card/sanctions-on-russia-s-central-bank-deal-direct-blow-to-country-s-financial-strength-AGe2bBTKmYW2bzqRnNWI
In the words of South Park:
‘Aaaaand… it’s gone.’
Except the gold, which only spends if you have the physical capacity to ship it securely, and I wouldn’t count too heavily even on that.
Thank you WordPress for putting this in a place I did not expect….
I glanced at an article talking about this earlier. It also mentioned that the Central Bank of Russia has suddenly felt the need to issue a statement assuring Russian citizens that they don’t need to worry about a run on the bank.
Or in other words, citizens in Russia should probably be worried about a potential run on the bank.
‘First rule in politics: never believe anything until it’s officially denied.’ –The Hon. Jim Hacker in Yes, Minister
AIUI Russians are already queuing up to withdraw money so that hasn’t exactly worked – https://www.bbc.com/news/business-60543994
A gallon of gasoline contains about 37 KWH of chemical energy BUT — if you use that gasoline in an internal combustion engine turning a generator, you will only get about 6 KWH of electricity. Infernal Combustion Engines are horribly inefficient.
Electric cars charged from coal, oil and gas-fired power plants do actually save some energy, as the power plants are more than twice as efficient (or half as inefficient) at converting fuel energy into electricity, typically 30% to 40%. Nuclear power plants are around 30% efficient at converting fission heat into electricity.
At the present time, we have no practical way to convert electricity into fuel.
———————————
Nietzsche: “That which does not kill us makes us stronger.”
Early Man: “That which does not kill us is lunch.”
Power plants being an example of bigger actually IS better.
Also using a superior thermal cycle and not allowing most of the energy to escape unused. And even worse, deliberately removing heat from the engine and dissipating it into the environment.
———————————
It’s dark here. You are likely to be eaten by a Grue.
Don’t worry about turning the electricity into fuel. Just store the electricity in batteries.
Which are also inefficient, expensive to build, and do not scale well because of the scarcity of materials.
And all known varieties discharge over time. You can’t keep a constant store of energy in them.
The classic SF “high-energy capacitors”. All you need is a room-temperature superconductor and a perfect insulator. Easy-peasy! 😉
Unfortunately, we have a society largely run by people who don’t know the difference between batteries and Shipstones.
Less SF every day: Skeleton has started using graphene.
So where’s your perfect insulator?
You don’t necessarily need a superconductor, but you need a perfect insulator with a high dielectric constant. Otherwise you get what we’ve got today — a capacitor the size of your fist holds about an amp-second. 3,600 of them hold an amp-hour. Very impractical.
“If the power goes out you can’t buy a candle in a cashless society.”
Especially troubling because our elites are moving towards a cashless society while simultaneously moving away from sources of power that actually work.
For the elites that’s a feature, not a bug.
This!
Well, right up until it applies to them, as well.
It never applies to them. Even when it’s applied to them every time in the past — this time it will be different!
Hence this article suggesting ways to not follow what our elites say we should do
In my little piece of the world, I have been preparing to use little homemade cylinders of brass and lead as well as small metal rectangles filled with those cylinders. This medium of exchange has the advantage of being available in a variety of denominations and is easily divisible for small amounts of exchange: trading for a laying hen or some such. (in as much as it could literally come back to bite me, so can the banking cartel)
I also try to stockpile those things I could never, ever produce myself: High Speed Steel lathe and mill tools and inserts, drill bits, screws, nuts and bolts etc. Around here wood grows so damn fast that keeping it beat back is a full time job, so fuel is not a problem. Also, water literally falls from the sky like a gift from heaven about every other day, so that’s covered too.
Propane cylinders also seem like a useful option, as do AA and AAA batteries. especially if they are rechargeable.
funny how the same people that want to mine asteroids think that gold is a good standard for currency.
It was funny to read this article and realize how hard the author was working to rediscover what has been known about real money for millennia. To read a much better description, find the works of Ludwig von Mises. His “Theory of money and credit” is excellent but quite a slog; I think it was his Ph.D. thesis. There is also “Human Action” which is broader and also easier to read.
As for gold and asteroids, it isn’t necessary to have a constant supply of money. What IS necessary is that the supply is not easily increased and increases are fairly slow. If asteroid mining turns up vast quantities of gold AND mining that is cheap and easy, gold will no longer work. Then again, gold is not the only option; it is merely the one most widely used in human history to date. As Neil Smith has pointed out, other materials can serve; it’s the basic properties of money (see von Mises) that matter.
An example of a time when the gold supply changed too quickly and caused trouble is the Spanish conquest of South America, with American gold being looted by the conquistadors and brought to Spain. It set up a bunch of inflation that might well have been a big factor in the decline of the Spanish empire.
so basing your monetary system on the availability of any particular metal is prone to inflation and deflation as well? color me surprised.
It’s not basing it on a particular metal that’s the problem. That’s a potential problem no matter what you choose to base it on. The problem is when the amount of the item available suddenly changes dramatically in comparison to the size of the economy.
Since the size of the economy has been changing dramatically and continuously for the last two or three hundred years, no commodity is suitable as a basis for a currency. This is why fiat money was adopted in the first place.
^^ THIS ^^
I have a great deal of sympathy with sound money arguments and agree that sound money is the way to go. Alas, and please don’t throw things at me, I didn’t do it, the concept of sound money is dead and gone. The problem with sound money and the more libertarian libertarian positions generally is that we’d need a new kind of humans and a significantly simpler economy. The greenie world would tend to be a good one for sound money, do you want to live in that?
For anyone watching, tomorrow is likely to be another wild one in the markets as the Russian financial system has just collapsed. I have no idea how things will go but it’ll be volatile as hell. The question is will this be ‘98 when the Fed blew a bubble or 2008 when a bubble burst. I fear it’ll be the later, but it’s gonna be a wild ride. At the moment, look out below but don’t be surprised to see it swing as high as it’s swung low,
I’m skeptical of ‘physics energy’ based sound money from the other end.
Are we talking energy, or power, or what?
Energy is perishable, storage is always at least a little bit lossy.
Power is perishable, you are converting some store of energy at some rate, until you run out. Power now does not mean access to stores of energy used in the future.
Even Fission storage seems a bit funky.
The utility of all the ways to approach energy seems like it does not match to the sort of backing that a sound money would need.
Even if it could exist, the environmentalists might ruin it anyway.
I believe you are correct, and while I have my doubts about the permanently-inflationary system our central banks have foisted on us, I am not an economist so I’m just talking out my reasonably-well-informed-amateur ass.
I’ve always thought of sound money as an element of prepping. When SHTF and central government and central banks go kablooie for an indefinite period, people might stop taking greenbacks, and it would be nice to have a universally recognized negotiable asset to use instead.
I suppose I am an economist, I have an MSc in it from the LSE. My experience is that degrees In Economics more or less disqualify you from intelligent discussions on economics. Academic economics is very long on dogma and very short on truth content.
Gold has some very good qualities as a store of value, your prepping notion, and people have treated it as precious for as long as we have any records. No guarantee they’ll keep doing so though, it’s not magic.
In a real survival situation potatoes and clean water would be more valuable and people would be willing to exchange just about anything for them, In that case a good shotgun with plenty of ammunition might be the most valuable thing around.
Still, It’s good to hold a certain amount of physical gold, just in case. Paper gold is for speculation and, maybe, hedging bonds.
The Russians and Chinese have a sh-t ton of gold, let’s see how well that works for them.
Draven, it’s very obvious if you understand that all commerce is exchange, with supply and demand at all times. Money is merely something that, by social convention, is generally accepted in exchange for other things. Without money all you have is barter. I can exchange lines of code for bags of grain, and that will let me eat — but if the wheat rots I’m in trouble. And such a scheme only works if each of us has what the other wants right now. With money, you can sell X and later buy Y, not necessarily to/from the same person and not necessarily at the same time.
Things can work as money if they are reasonably portable, non-perishable, and the supply does not change rapidly and at the whim of politicians. But yes, if the supply changes at a different pace than the demand, there’s either inflation or deflation (the latter sometimes called “shortage of money” which is a political lie to attempt to justify debasing the currency). Neither is a problem if the pace is slow. Historically, productivity usually goes up faster than the money supply, resulting in slow steady deflation. In some cases, steady rapid deflation, as has been the case throughout history for semiconductors. Note that it isn’t a problem; it’s when these things occur artificially due to government meddling that you get problems.
Paper money is bad because it fails the critical requirement of a supply not changing at the pleasure of the politicians.
the supply of gold can change drastically at the whims of politicians, too.
as can the other proposed basis for exchange, energy…
Condensed 10,000+ years of gold mining by native Americans into a couple of decades of looting by the Europeans.
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A good portion, while looted, did not make it to Europe, and currently lies in the Caribbean and in the Atlantic off the eastern US coast.
The majority of American silver (of which there was much much more than there was gold) ended up in China.
There is actually a coin from the late 19th century called the “Trade Dollar”. It looked much like the period Morgan silver dollar but was .999 pure( and states so on its face), the Chinese didn’t like the .95 pure sterling we used at the time… They were later treated as $5 silver coins for a bit and finally demonetized, one of the few coins to suffer that fate (even Gold double eagles weren’t demonetized, you just weren’t allowed to have them for other than nuimismatic purposes after 1932). Of course the trade dollars are 1oz of .999 silver so worth that at least, and if in good condition (85 or better?) coin collectors like them.
IIRC from at least the 1500s up until perhaps the mid 1800s China was a major net exporter of stuff to the world and a net recipient of silver as a result. One of the drivers (or possibly root causes) of the opium wars was merchants looking to supply China with stuff that they wanted to buy with all the silver they had accumulated
Yep. And they would ONLY take silver, because what did barbarians have to offer the sublime Middle Kingdom, anyway?
(Officially, at least)
Another of the drivers was Chinese merchants wanting to use opium as a medium of exchange, because each province issued its own coinage, and in any case silver was far too bulky for large-scale transactions. You could carry a cartload of silver and expect to be robbed en route (or if not, grifted by moneychangers at your destination), or you could tuck an unobtrusive paper packet of opium in your sleeve and slide through unnoticed.
I was trying to make the point readily comprehensible for others. Von Mises is not the worlds easiest read, nor for that matter is Adam Smith. This is a problem because people don’t think about what money is
Wealth of Nations would be vastly improved with a few equations rather than everything written out as text. It’s also very helpful to know that “corn” means “grain”, not “maize”; I was quite baffled until I figured that out.
The problem is that economics is 50% common sense and 50% bull and most of the bull starts with equations. I would recommend Thomas Sowell’s Basic Economics for an excellent modern treatment of economics with minimal math. The Reader has waded though The Wealth of Nations several times and understands the difficulty of separating concepts from the context of the era when Smith wrote it.
Economics in One Lesson by Henry Hazlitt. Sowel’s would be my second choice.
Equations can be useful, diagrams significantly more so. It’s a real pity that the profession didn’t take Marshall’s advice to “burn the mathematics.” It’s led to nothing but mischief.
I agree that Hazlitt is a better economics primer choice. I regard Basic Economics as the 20th century equivalent of the Wealth of Nations while being far more accessible to a modern reader.
Hazlitt is the only economics book I made my children read. they have less than no interest in the subject but I made them read it and still quiz them now and again.
My suspicion is gold would drop less in value given asteroid mining, than would the platinum group metals [PGMs] (platinum, palladium, rhodium, ruthenium, osmium and iridium). [By the way have you noticed that platinum is on freaking *sale* now, compared to gold? Has been for many years.]
Although all of these went with the iron into Earth’s core while our planet was red hot and liquid (instead of cool green hills), which is why we figure there will be lots of those things in nickel-iron asteroids, gold was somewhat more likely to stay in the crust because it has an affinity for quartz. So a larger fraction of the gold did *not* sink to the earth’s center, and thus, compared to the PGMs it *looks* commoner in the earth’s crust than it actually is overall.
I’ve seen a goldbug say he wanted to ban asteroid mining to protect is, ahem, precious metal.
I consider burning the goldbug’s fetish to the ground forever to be one of the nice secondary bonuses of asteroid mining.
IOUs may work with people who are long time friends or family, but in general the lack of enforceability will torpedo them…I have a number of IOUs that I will never collect…Speaking as a lawyer, I think anything local could work if it’s small scale and local, but avoid any token that can be said to resemble US currency, however ludicrous the resemblance…Uncle Sam is a jealous fellow, and has prosecuted people quite unfairly for infringing his monopoly.
Hence my suggestion to be very careful before printing things
c4c
The likely solution if things break down is to use real US (could also be another well known sovereign like Canada) gold and silver coins, which would trade based on their precious metal content…No problems with the government, readily available, and easily valued…There is a lively trade in both gold and pre-1964 silver coins on Ebay and other markets…
Looks like South African silver kugerrands are running about $30 a piece; which makes them a possible substitute for $20 bills. Gold kugerrands are running about $2000 a piece; not so convenient, unless you’re buying large machinery or real estate.
You just described the monetary system in a story I’ve had percolating for a while — for which I thank you, because I hadn’t managed to come up with anything satisfactory. 🙂 I’ll still have to think it through some more (figuring out the numbers is going to be…interesting…since I’m an English major and mostly can’t math), but an energy-based currency in this science-fictiony world I’ve been dreaming up makes PERFECT sense.
I’ll share this link of additional commentary.
https://wordsandnumbers.libsyn.com/episode-262-david-friedman-on-the-gold-standard
I appreciate Mr. Turner’s thoughtful essay, especially in noting the downsides of BitCoin which tries to create money based on a fixed (or very slowly growing) standard, but has other difficulties.
On a somewhat related note, I sent this letter off to the CEO of my banking institution today. Deletions where appropriate.
(CEO name)
(company address)
(CEO name here),
I have been banking with (bank name deleted) for more than 30 years, and I have been pleased with the services you offer, and the compassionate way your bank treated me when I was unemployed for nearly a year back in the 90’s.
I am writing to you now because we find ourselves in unprecedented times. My $6,000 in my savings account earned me all of a nickel in interest last month. This, while inflation is officially at 5.2%, and, in reality, much higher since the official inflation figures don’t contain such “volatile” expenses as food and gasoline. If I were to pull my money out of your bank and stuff it under my mattress, I would not miss the pocket change in interest that it earns me in a year.
That means that, aside from implicit safety, there is no upside to my keeping my money in your bank. What has gone on in Canada however means there is a serious potential downside to the safety of leaving my money in your bank. As I’m sure you’re aware, the Canadian Prime Minister declared a state of emergency and “asked” the banks to freeze all the assets of thousands of citizens that had either participated in or supported the trucker’s protest in that country. And the banks, from all reports, complied meekly, if not enthusiastically, with nary a whimper of protest. Now he’s asked them to unfreeze the accounts, and there is a significant run on Canadian banks for customers to get their money out before it’s seized again.
If President Biden were to declare such a situation and ask or order your bank to freeze the assets of anyone who organized or supported the January 6th event, or a new Republican president were to order the same for anyone who contributed to Black Lives Matter or any organization that he deemed supportive of those who took to the streets over the George Floyd matter, would Wells Fargo comply like the Canadian banks without taking the issue to court before taking such an action?
What the Prime Minister has done has irreparably damaged the banking industry in Canada. For your own industry’s sake, I ask you to come out now publicly and state categorically that this will not happen in the United States. That at the very least, any such mass freezing of assets without individual, legitimate court orders will not happen until the matter has been litigated to the highest court in the land. Even if that is what you would do, if you do not state it publicly now, it will be too late once the attempt is announced.
I well know that most people would not consider such drastic action as taking their money from institutions such as yours, but if 10% of your customers decided to do that, how would that affect your bottom line? That number is not farfetched, as you can well see by the number of people in this country who have refused the COVID vaccines despite having to leave their jobs to do so. Ten percent may seem a small number to take such drastic action, but can you afford to lose 10% of the assets invested in your bank, and the panic that would follow such a step?
If you firmly believe such actions as have occurred in Canada will not and cannot happen here, you owe it to your customers to publicly say so in the firmest terms to prevent any future government from contemplating such an action. As a leading institution in your industry, I think it will redound to you and your company’s benefit to take the leadership on this issue.
Sincerely,
(my signature)
(my name and address)
Anecdotal evidence suggests that many Canadians are withdrawing cash and/or moving money off shore banks.
“Vladimir Poutine” didn’t think that one through, did he?
The minuscule interest is why we do not keep very much money in a standard bank/credit union. We earned a whole $1 last year in interest. Where we do have our cash assets, probably isn’t less safe from governmental seizure, but it is earning a better return, year to year (8 – 10% AFTER pulling earnings to make up for monthly shortfalls). Not quite to the point of required distributions. All accounts can be used without penalty.
You failed to delete the bank name once.
Whoops! Thanks. Just pretend you didn’t see it. All names are fictitious. Any resemblance to real institutions is coincidental. 🙂
that particular not-named real institution is one I had to do business with (you have no control over who buys your mortgage) and I hated them almost as much as I loathe GE Capital. (GE Capital would routinely lose my insurer’s bills. They did this with two different insurance companies, so I know it was them losing the bills, not the insurers failing to bill them.)
We actually ended up with that institution similarly. Back in the 80’s or maybe even the 70’s, there was a big housing bubble in Arizona. The Fed encouraged small banks to take on these bad loans, promising them they could carry the excess debt for 7 years. Then 3 years later, the Fed reneged, causing many small banks, ours included, to be taken over by the giant banks. Still miss my original bank, but the unnamed institution has treated us well FWIW. .
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Why we do not allow the mortgage holder, or vehicle loans, to deal with insurance. They get an uploaded verification of insurance, when we get the loan or *change it. We deal with payment, etc. Mortgage (etc) doesn’t approve? Guess we aren’t using them. Little harder when we started out, what credit rating? But now it is more “Wow they really, really, like you!” When our credit ratings are ran.
* Insurance sends proof too. But we’ve had a lot of experience of the mortgage company claiming they “didn’t get it”. When I can send pictures of the uploaded document with our account login (email, printed, or chat) the conversation isn’t quite “nice try buttercup”, but it is just as frostily polite. Haven’t had a problem with current institutions.
The reason the bank insists on dealing with both insurance and taxes is because that way they *know* they have been paid. Rather than relying on someone like us who most likely doesn’t want to be bothered with yet another fiddly paperwork thing, and might be too disorganized to deal with it. (Not you or I but many of their customers.) From their standpoint, it’s fewer headaches. Provided, of course, their people are competent instead of ending up wearing an ice cream cone on the forehead whenever they get ice cream.
PS I’m actually “Free and Clear” so I have to take care of insurance and taxes myself. In fact, legally I could even just not bother with insurance (and be “naked” in insurance parlance) but choose to do so.
I know their justification. We don’t care. We decline. If not allowed to decline, we walk.
We do not have a property tax reserve either. It gets paid in full when due (minus the 3% for paying in full).
Well stated. Spouse and I had same thoughts a couple of weeks ago and began to slowly pull all cash out of the system. Stopped minor trading to leave that in cash and available. Leaving enough for day to day. We have been debt free for some years and do not use credit so that is not at issue.
I chose not to discuss with my banker simply because is none of their business. Some of our thoughts on this were driven by the banks public stand on other issues such that I concluded they in fact would not defend my assets against a thieving government.
Far better in these times to have tradable goods that are also consumables that can therefore be rotated as they age.
Stay safe, going to get salty.
There is a great story along these lines. What starts as an innocent way for a poor guy to pay for his lunch transformed the world; a monetary fable! Enjoy https://www.amazon.com/Spondulix-Romance-Hoboken-Paul-Filippo-ebook/dp/B00J90EZUI
Missed one redaction, Frank. Happens to be my bank, too, BTY. I did have one tussle with them, way back in a time when we were right on the edge, and they were processing all withdrawals before any deposits (said deposits being direct payroll deposits from another large bank, so not possible to bounce). Whole bunch of “overdrafts” that it took a while to force them to reverse.
For many years now, I have kept only enough funds there to 1) make payments that I really have to put through the banking system; and, 2) avoid being tenned and twentied with “maintenance fees.” I don’t count those funds, or our few investments, as assets in my second* set of books.
Enough currency on hand to pay where folding cash is still easily used.
Silver (more “breakable” than gold, besides less subject to wear).
Base metals in manufactured form – copper, lead, certain alloys. (Okay, the supply of that tends to decrease rapidly at times. Too much fun.)
* Yes, I keep two sets of books. NOTICE TO INFERNAL REVENUE SERVICE – BOTH ARE PERFECTLY LEGITIMATE. First set is the “everything stays (mostly) normal,” the second set is the “no electric boogaloo” accounts.
In our case it was Chase Bank that came in and took over regional small bank. This was after the 2008 housing mortgage bubble burst. Started with Willamette Savings, taken over by Washington Mutual, then Chase in 2010. Our accounts were fine, auto deposits. But they were hitting our college student with banking fees. His auto deposits, part time, couldn’t be enough. Got fees reversed, could have switched to “student account”, but called BS. Switched everything to the Credit Union, which we already had. We consolidated all into one bank. Accounts we closed at Red Canoe with a very polite thank you note for all the years of service. But Chase got a lot more terse polite note.
“If you need to make coins then washers that are engraved would work well.”
Washers also have the advantage of being easily portable by running a string through the middle of a row of them. In the periods when China (and likely other Asian nations) had coinage, the coins typically had a square hole in the center of them, and were sometimes carried in just this fashion.
Indeed. And since I live in Japan where the current 5Y and 50Y coins have holes in them ….
I bow to your superior knowledge of money strings.
😉
Two items possibly worth bringing up for pondering, both relating to MMORPGs.
First, MMORPGs generally have a default currency. This retains value because you can use it for transactions involving NPCs, or the game system itself. Given that, it also retains a certain amount of value to players as they always know that there’s a use for it. The challenge for game developers is that player actions cause currency to be added into general circulation, through things like quest rewards (where part of the reward is cash) or items sold to NPC merchants (who usually pay in cash). This adds money to the game, which causes a certain amount of inflation for transactions between players. So game developers need to balance this out by coming up with costs that will chip away at the amount of cash in circulation. Further complicating matters are RMTs (Real Money Traders), who run characters within the game whose sole purpose is to generate as much in-game currency as possible, and then sell it to players through transactions conducted outside the game world using real-world money. Because these characters spend more time than usual in actions that create currency, they add more inflation than would otherwise exist within the game world, and the developers need to find ways to properly predict and counter-balance this.
Second, the game Guild Wars (the first one, not the second one) has a maximum wallet size of 99 gold coins, It is impossible for a character to have more than 99 gold coins. But players decided that quite a few rare items were worth more than 99 gold coins. This caused an obvious problem – how do you pay for something that’s literally worth more money than you can have? The solution was to designate an item – “Glob of Plasma”, iirc – as a high-value currency. The item was dropped in the game, but was rare enough and desirable enough that each existing one held a degree of value. And so the players by consensus settled on this item as the currency of choice for transactions involving extremely valuable items.
Dang it, I can’t find it now. Some months ago, I watched some videos about a game (not Guild Wars, a space game) where the developers engineered a deliberate Great Depression to kill off a major inflationary spiral.
You don’t need science fiction. Read Goldman Sachs’ most recent note about how only “demand destruction” will cure the current price inflation. Demand destruction is depression/recession. You don’t need to manufacture it, it’s what you always get.
Someone above recommended Mises and he’s good on this but Hayek’s Theory of the Trade Cycle is a bit easier to follow. Every inflationary boom, which is what we’re in, is followed by a deflationary bust. Every. Single. One. You don’t need a book, the data are consistent with this notion.
Prepare accordingly. I was too damned early, again, but better early than late.
Agreed with what you just said, and practice it (and if you are not early, you are sure to be too late).
I was just replying to the comment about how games reflect economics (poorly, IMHO).
Probably Eve Online. They’re the MMORPG with the best record of running a real economy.
I did my law school thesis on gold farming. (In retrospect, an excuse to play WoW as “research” was not the best idea.) Blizzard “solved” their gold farming problem by introducing massive inflation after the first few expansions. On the plus side, the gold farmers simply couldn’t play fast enough to create the amounts of gold demanded by the market, so players didn’t have to compete with gold farmers while playing the game. On the minus side, the former farmers turned to hacking accounts and stealing gold.
But between 2004 and 2009 or so, Azeroth gold was actually a more valuable currency than a couple dozen real currencies at the time.
THAT’S IT! Oops, sorry for yelling. Not remembering has been bugging me off and on all day.
Will you take wirdz? Wirdz is all I have…
Mack Reynolds wrote about BTUs
Eric Frank Russell wrote about Obs (obligations).
Governments like money – which they issue and track and play with the value of. Barter is thus illegal and never happens.
What about the calorie? (in the interesting world we’re about to enter…)
Isn’t it? I suppose it will go on. It always does. But I’m praying a lot.
Can you approve my comment made under a different user name? I’d rather not use my real name on the web any more than I have to.
David Gerrold had Kaseys (kilocalories of work) as a currency. One problem of that would be, is digging a KC of ditch equivalent to doing a KC of brain surgery?
Seems the Russian Army is not having an easy time in Ukraine. In fact, a few thousand armed Ukrainian citizens are making life quite…interesting for them.
Our ‘Progressive’ ‘Leaders’ that are so keen to turn F-15s and nuclear weapons against the American people, should we prove troublesome, ought to take a good long hard look at what’s happening in Ukraine. Because that’s what they would face here, only amped up about a thousand times.
They’ve spent 50 years scolding us for owning guns. We’ve spent those years buying 600 million guns and giving those scolds the Finger. They don’t want to try pushing us around.
But of course, like everything else they don’t want to know, they can’t see what’s right in front of their faces.
———————————
The Democrats trust violent criminals and terrorists with guns more than they trust you.
Which is why – despite wishing a pox on both of their thoroughly corrupt houses – I’m hoping for an Ukraine that survives. They’ll have a citizenry that is properly armed – actually, somewhat better armed than our own, considering that they are handing out real assault weapons like candy to any commoners willing to use them.
Eggs. A currency based on eggs is technically viable, and scales with the population and economy. It has the plus that eggs cannot be profitably be monopolized and stored in a vault. (And coins with an egg-shaped hole in the middle look cool.)
TL;DR: Gold for large transactions, silver for small.
I think there are a couple of difficulties with the energy proposal.
1. “Gold” or “cattle” or “beaver pelts” is a fairly definite physical commodity, a fairly narrow class of physical things. But “energy” is not one thing. Mathematically, it’s an abstract quality of physical things; if you carry a rock to the top of a building, it acquires potential energy of position. Where markets are concerned, there’s not one fungible thing “energy” or one market where you buy energy. You buy gasoline, or charged nonreusable batteries, or a flow of electric power through wires, or for that matter sugar or olive oil (food contains chemical energy, after all). And their prices don’t necessary all vary synchronously. Even if there were a single market where you could pay for “1 megajoule” or “100 kilocalories” I don’t think you would usually be indifferent to whether you were getting batteries or gasoline or whole wheat flour.
And it’s not that straightforward to turn one “energy” into another. Yes, we turn fossil fuels into electricity, but doing so takes big expensive engines and generators. I don’t think we ordinarily turn electricity back into gasoline, let alone coal. We do turn some food into fuel, through distillation into ethanol, but again that’s not cost-free.
2. If you want banks to store energy, there’s the problem of bulk. A thousand dollars will buy a tiny volume of gold, but a much bigger volume of petroleum. And if you wanted to store a thousand dollars worth of electrical energy, you’d need some really huge batteries (how much does it cost to charge the batteries in a single Tesla?). This also affects the use of energy as a portable medium of exchange; if you want to buy a week’s groceries, do you drive up a big tank of gasoline or ethanol and pump it into the store’s tanks?
3. To say that a commodity is monetary is to say that people value it as a source of liquidity: They want to hold it against the chance of needing to buy/trade for other things. That adds to the value of the commodity, which makes it more liquid, which creates positive feedback that ends with the commodity being valued primarily as money. But then a large part of it has to be held back from other uses and stored away as money. Do we really want most of our energy to be stored away in huge reserves that we avoid using to DO things? For that matter, do we want a positive feedback spiral raising the price of energy? (Never mind the $8 gallon of gas; how about the $800 gallon of gas?) That might be a Green’s dream, but it seems as if it would be hard on the rest of us, as it raised the price of running an industrial economy drastically. Industry depends on cheap energy, but I don’t see how monetized energy could be cheap.
(James Blish wrote about this in Cities in Flight, where first germanium and then anti-aging drugs were used as currency bases. Both made for some hard choices.)
The bias toward inflation has, as best we know based on history and archeology (clipped coins) has been built in to every monetary system humans have ever tried and the reasons are pretty basic. First, greed causes some humans to ‘cheat’ the system. Mismeasures, coin clipping and other creative ways to debase currency have been around since the dawn of money and exist today. Second, all currency is based on a shared human perception of value. Since this exists only in our collective heads, rapid lost of that perception (trust) will drive inflation. There is as far as I can tell, no loss of trust that would drive the opposite (deflation). Third, any system of governance based on some version of the consent of the governed will have a bias toward inflation because debtors always outnumber creditors. Finally, where governments control currency and have debt (pretty much the historical norm), the government itself will have a bias toward inflating the economy to make carrying its debt easier.
None of the ideas for a monetary system deal with these four points. Whether arbitrary, rule based, or commodity based, a monetary system devised by humans will have a bias toward inflation. The Reader suspects that attempts to create on are analogous to attempting to hold back the tide. The Writers in the audience should consider these points as they craft their worlds.
Seriously.
Yes, it’s a bit harder to take X purer coins and melt them down into Y less pure coins than it is to run a printing press, but it’s not *that* much harder. Governmental debasing of the currency to pay its debts is one of the archeologist’s tools for determining the health of an ancient economy.
Before the internet was a thing I knew a wag who wanted to cerate a medium of exchange based on porn. Pornbucks as he called it. Pont being that a large part of humanity would inherently find values in pictures printed on paper. Then along came the internet which completely devalued his monetary scheme.
Reminds me…
Supposedly if you try to connect to a particular prominent porn site from a Russian IP, you get a message stating that the site is blocking you.
Point of order:
“In Canada Truckistan, the government has declared an emergency which allows it to tell banks to freeze arbitrary bank accounts without any evidence presented to a court or similar (and to let banks do the same thing on their own if they feel like it, with no fear of court order reprisal). So you can put your money into the bank but you may not be able to get it out. Of course they justify this as “temporary””
Not exactly. Per Canadian government:
““As part of invoking the Emergencies Act, we are announcing the following immediate actions: First: we are broadening the scope of Canada’s anti-money laundering and terrorist financing rules so that they cover crowdfunding platforms and the payment service providers they use. These changes cover all forms of transactions, including digital assets such as cryptocurrencies.”
https://www.therecord.com/ts/news/canada/2022/02/14/full-text-of-chrystia-freelands-remarks-during-emergencies-act-announcement.html
The “anti-money laundering” and “terrorist financing” rules are still right where they were, allowing account seizure without due process. See Patriot Act, “Know Your Customer Act”, etc. for US versions.
Bottles of alcohol – portable, can be pint-sized or 1-liter or larger. Can be tested for purity. Relatively easy to make at home, if need be. In any emergency situation, useful both for drinking, and sanitizing.
Wedding rings – I’m going to be looking into scavenging this at estate sales, yard sales, and resale shops. Knowing the carats and being able to measure the weight, it’s a pretty standard calculation to get the price. Pro: widely available.
that is emergency, not currency
In the future, we’ll trade in Energon Cubes, as prophesied by “The Transformers” in 1984.
Call me old fashioned. Silver. More divisible than gold. If the silly founding fathers had stuck to one medium, even if it had been gold it would have been darn near impossible for tricky Dick to get away with the thievery.
I don’t know why one medium would have prevented Wilson and FDR and Nixon killing the gold standard any better than two. Article 1 Section 10 says that no state may make anything but gold and silver coin legal tender. Strangely, it does not impose that same prohibition on the Federal government, that seems like an odd oversight. Arguably it isn’t needed because Article 1 Section 8 does not authorize the issuing of legal tender by the Federal government at all.
Unfortunately, most of the Constitution has been treated as a dead letter pretty much from the moment the ink dried. I like to refer people to “View of the Constitution of the United States” by St. George Tucker, which describes all the ways contemporary politicians (both in Congress and in the courts) were trampling the Constitution — and he wrote that back in 1803. Things have only gotten worse since then, accelerating dramatically with TR and Wilson and more and more ever since.
With each passing day it looks more and more like alternate currency will be needed. while Russia invades Ukraine, our army is focused on ensuring that soldiers use the “correct pronouns”:
https://www.powerlineblog.com/archives/2022/03/we-are-not-a-serious-country-5.php