monetary abstractions


Big Eyed Bug
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Obviously the currency we are forced to use now represents a lurid combination of dent and nothing.

However, in the past much of the world's currency represented real amounts of precious metals, even if the currency itself was made of paper (or digital for that matter). It was then needed to contrive some sort of way to relate a quantity of currency to a quantity of metal.

This could be done by law, like the Coinage Act of 1792. It could probably be done via bureaucratic methods without necessarily involving congress (in violation of the Constitution as I read it). Or, it could come about naturally through market forces.

While I would strongly prefer a defined exchange rate between paper currency and precious metals to what we currently have, I frankly don't think that it is good or necessary to obscure a measured quantity of metal with unrelated names.

For instance, if we set firmly that 1 oz of pure silver is equal to 1 dollar and always will be, then there is no need for the name "dollar". Since 1 oz is the known measurement, any other name seems to create confuse rather than clarify what that money actually is.

I don't see a problem with saying a steak dinner costs 1/2 Ag rather than go through the process of: dinner costs $20, 1 oz Ag = $40, therefore dinner = 0.5 oz Ag. It is a pointless exercise in my opinion. And, frankly, I think such schemes may have been intended to decouple the relationship between value and physical metal in the minds of the populace so that money could be further removed from physical quantities and thus inflated greatly, all without notice or complaint from the people.

An ounce by any other name would weigh as much.

Is there something I'm missing here?

Just my 0.000588408355398647 oz Ag.
No, your not missing anything. That's essentially what the Free Competition in Currency Act (FCCA) would effect. Instead of a classic gold standard with convertability to paper at a set value, the FCCA would in effect allow commerce to determine the proper price/value for convertability between metals and any paper currency. Merchants would be free to price their products in ounces of metal or denominations of currency.

However, I would expect that should the FCCA be enacted, the immediate impact would be a massive appreciation of metals as people convert paper to PMs for wealth preservation (no capital gains taxes will see to that). PMs likely would not actually be traded in retail commerce until paper currencies stabilized in value (ie. no more money printing) due to Gresham's law. I could see metals playing a big role in major purchases like real estate though.

We would see the benefits of a gold standard without setting an artifical peg. Central banks would have a powerful constraint on the creation of money as irresponsible action would drive more wealth away from paper currencies and paper assets (hurting the banks).
Hmm. Interesting conversation, dontdeB and PMBug. Not pegging the dollar to anything. I will have to read that proposed legislation (or a summary), sounds a little like Freegold or Freesilver.
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