You have to pick something to have US dollar be backed by, what do you pick?
You have to pick something to have US dollar be backed by, what do you pick?
My best (stupid) guess is weapons. US gov has a ton of weapons. Already sells tons of weapons. Now the prices will always remain stable. Other countries would love to know that 30 million usd would always be able to buy an f15. Other countries declaring war will increase the value of the USD, as buying weapons from us government will decrease amount of money in circulation.
You're viewing a single thread.
If you want a non-fiat currency, you want the backing thing to:
-
Not be easily produced/obtained, and to have a fairly predictable cost of production/obtaining.
-
Be fairly-rare, so that it can be value-dense, to reduce storage and transportation costs.
-
Not degrade.
-
Be hard to counterfeit.
-
It would be nice if it were divisible.
-
Not have much by way of critical non-backing uses, so that its use here doesn't distort that.
Probably gold. It ticks pretty much all the boxes; there's a reason that it was used in the past.
The big problem for me was something Ben Bernanke said: the process of taking gold out of a hole in the ground (a mine) just to put it into a different hole in the ground (a vault) is a pretty terrible waste of resources. And you need to continue mining it in order to stave off deflation, which means you have to keep doing that forever; and eventually that's just not going to work anymore. Mining gold is only going to become more expensive as time goes on.
Not to mention, our economy is too big and moves too quickly for gold to be a moderating force to inflation anymore. The numbers are just too big and moving too fast; we need a more nimble lever, and right now interest rates are a pretty good one.
All of that to say, there's a reason every country has come off of the gold standard since the mid- to late-20th century.
All of that to say, there's a reason every country has come off of the gold standard since the mid- to late-20th century.
Because controlled inflation is necessary for an economy to function and nothing but a fiat currency has the desired characteristics.
Gold is still the best option if you insist on having the currency backed.
Sure taking gold out of a hole to put it in a different hole is a waste of resources but there's kind of a driving force towards that because if the currency is actually useful then people aren't going to use it as currency and if it's easy to produce they're going to counterfeit it
Same with cryptocurrencies, they're hard to produce and functionless, so a huge waste of resources, and frankly same with (high frequency) trading of stocks, as you don't own them when the dividends are paid yet you put huge resources into them because other people want them because of their inherent value
But doing something just for the sake of finances...it doesn't add anything to the world. The original question was "what do you pick?" and I don't like the idea of picking an energy-intensive activity that doesn't help the world in any way.
I mean we would use gold in electronics a lot more if it wasn't considered valuable. So it's not perfect because it actually has a wonderful use outside of being valuable.
Rather unlucky society picked gold and silver to he valuable with how useful they.
It could actually be a benefit if it does slowly degrade. Let's support work, not hoarding.
That's what inflation is and why governments target a low but positive level of inflation with monetary policies. The fact that your dollar slowly loses value pushes you to reinvest it. Very few rich people are just sitting on piles of cash.
If they didn't also aggressively suppress increases to minimum wage and tax recapture benefits, I might agree, but in the long run inflation does more to devalue labor than it does to mitigate hoarding.
-