Fiat currency allows for no limits on either inflation or deflation, both of which are disastrous to economies. Fiat currency also doesn't actually *mean* anything, other than the government accepts it as payment for taxes (why the government would accept a worthless piece of paper as payment is beyond me).
The gold standard is completely disconnected from the standard of living (how is gold going to help me unless I'm a dentist, jeweler, or electrical engineer?), and effectively ensures deflation. Also, the cost of mining it just to put it in an underground vault is effectively a tax on it's value.
Our currency needs to be backed by something real, and something that correlates well to the standard of living and is free to inflate and deflate as necessary. That something should be energy, more specifically, electricity.
It is highly connected to the standard of living. Everything, from purifying water to producing food to transportation to computing requires energy. What you pay for above the cost of raw materials when you buy something is actually the cost of the energy needed to convert them into the product, so prices denominated in an energy-backed currency are very useful measures of value. Everything can be accurately-priced in energy, even human labor and intellect, because the body and brain consume energy. It is also easily measurable and infinitely-divisible.
This is how it can be implemented.
The government sets a guaranteed conversion rate, say $0.20/kWh, and determines an allowable range for free-market electricity prices; currently the allowable range is $0.10/kWh - $.015/kWh.
If the free-market price of electricity drops below $0.10/kWh, the government will increase spending and decrease taxes. This is accomplished through the central bank buying the government's bonds and decreasing reserve and capital requirements for merchant banks and credit unions. The government will also increase welfare, subsidies, government salaries, and investments in private and public projects. These changes last until the money supply is sufficiently inflated so the free-market price of electricity goes back in range.
If the free-market price of electricity rises above $0.15/kWh, the government will decrease spending and increase taxes. This is accomplished by the central bank selling the government's bonds and increasing reserve and capital requirements for merchant banks and credit unions. The government will also decrease welfare, subsidies, government salaries, and investments in private and public projects. These changes last until the money supply is sufficiently deflated so the free-market price of electricity goes back in range.
If the free-market price of electricity were to ever go above the guaranteed conversion price, the government will undertake even more severe austerity measures to deflate the currency, and once the free-market price of electricity goes back in range, the government will reimburse the difference between the free-market price of electricity during the crisis and the guaranteed conversion price.
As a side note, the government will most likely have the central bankers fired if they allow things to get to that point.
This type of currency allows the money supply to keep pace with economic progress. Since electricity is literally money, there is a great incentive to develop more efficient generation, transmission, and storage technologies, as well as design devices to be very efficient. The goal is to have the purchasing power of the currency slowly increase over time as technological progress goes on.
Also, if the government subsidized solar panels (and the appropriate load-balancing equipment to allow the generated electricity to be fed back into the grid), the nation's supply of electricity will be massively increased, leading to an increase in the money supply, which leads to more economic expansion and prosperity.
The gold standard is completely disconnected from the standard of living (how is gold going to help me unless I'm a dentist, jeweler, or electrical engineer?), and effectively ensures deflation. Also, the cost of mining it just to put it in an underground vault is effectively a tax on it's value.
Our currency needs to be backed by something real, and something that correlates well to the standard of living and is free to inflate and deflate as necessary. That something should be energy, more specifically, electricity.
It is highly connected to the standard of living. Everything, from purifying water to producing food to transportation to computing requires energy. What you pay for above the cost of raw materials when you buy something is actually the cost of the energy needed to convert them into the product, so prices denominated in an energy-backed currency are very useful measures of value. Everything can be accurately-priced in energy, even human labor and intellect, because the body and brain consume energy. It is also easily measurable and infinitely-divisible.
This is how it can be implemented.
The government sets a guaranteed conversion rate, say $0.20/kWh, and determines an allowable range for free-market electricity prices; currently the allowable range is $0.10/kWh - $.015/kWh.
If the free-market price of electricity drops below $0.10/kWh, the government will increase spending and decrease taxes. This is accomplished through the central bank buying the government's bonds and decreasing reserve and capital requirements for merchant banks and credit unions. The government will also increase welfare, subsidies, government salaries, and investments in private and public projects. These changes last until the money supply is sufficiently inflated so the free-market price of electricity goes back in range.
If the free-market price of electricity rises above $0.15/kWh, the government will decrease spending and increase taxes. This is accomplished by the central bank selling the government's bonds and increasing reserve and capital requirements for merchant banks and credit unions. The government will also decrease welfare, subsidies, government salaries, and investments in private and public projects. These changes last until the money supply is sufficiently deflated so the free-market price of electricity goes back in range.
If the free-market price of electricity were to ever go above the guaranteed conversion price, the government will undertake even more severe austerity measures to deflate the currency, and once the free-market price of electricity goes back in range, the government will reimburse the difference between the free-market price of electricity during the crisis and the guaranteed conversion price.
As a side note, the government will most likely have the central bankers fired if they allow things to get to that point.
This type of currency allows the money supply to keep pace with economic progress. Since electricity is literally money, there is a great incentive to develop more efficient generation, transmission, and storage technologies, as well as design devices to be very efficient. The goal is to have the purchasing power of the currency slowly increase over time as technological progress goes on.
Also, if the government subsidized solar panels (and the appropriate load-balancing equipment to allow the generated electricity to be fed back into the grid), the nation's supply of electricity will be massively increased, leading to an increase in the money supply, which leads to more economic expansion and prosperity.
