I have wondered if we could inject some stability into the currency if we would mint large denomination circulating coins. Say $500 gold coins, $10, $25, $50 silver and perhaps even $5 copper.
The face value and commodity content would need to be set at the commodity price on a certain date so if on that date gold was $2000 an ounce the $500 coin would need to be a quarter or fifth ounce (depending on purity)
This would be akin to the gold and silver certificates that you used to be able to exchange for gold and silver at your local bank. It would establish a competing currency to the paper dollar and therefore cause market pressure to make diddling with the currency less attractive.
If we are going to re-peg the dollar to metals, I prefer we do it the way it was. Silver quarters and dimes, copper pennies and nickel nickles. But to do that the dollar needs to gain a whole lot of value first.
A basket of commodities sounds like an OK method as long as there are ONLY metals in that basket...say copper, nickel, silver, gold, lead, and zinc. Maybe platinum, palladium and other platinum group metals.
Which of course is the solution.
* The only money system that will remain stable for more than a few decades is one that is selected, or continually re-selected by the Free Market.
* To have a free market in money, you need *competing* forms of money.
* So we need to allow fiat currencies, salinas-style Libertad silver money, digital calls on audited Gold or Silver, anything else the Free Market can dream up. Allow any system of money agreeable to both buyer and seller. DISALLOW any form of government intervention whatsoever in the allowed forms of money.
* The only form of money that Government has a say in is what taxes get paid in and what their contractors, employees and dependants get paid in. Government can’t dictate to 3rd parties what money they may use - and specifically they can’t declare any piece of paper (such as a Federal Reserve Note) good for settling debt between 3rd parties.
* audit the private company known as the ‘Federal Reserve’. Allow anybody who wants to to compete with the Federal Reserve - which shouldn’t be hard as they do frack-all.
If you had a currency made out of precious metals and denoted in some at-the-time realistic dollar value, and side by side with that a fiat currency also denominated in dollars, you’d run into problems immediately, because
1. Gresham’s law. The value of two currencies would soon float apart, and the lesser value currency would be traded while the greater value currency would be ‘hoarded.’
(By the way, when I say “value” I mean percieved or subjective value, since there is no other kind.)
Generally, it would be the metallic currency that would increase in value and thus be hoarded. FDR had to confiscate gold in the 30’s because of this. (As an amusing side note, FDR and his band of thieves didn’t get it all—surprise, surprise! But they adopted the fiction that they did get it all, and that became the basis for the estimate of the amount of gold in the U.S.)
2. Now, why would somebody hoard a “$100” gold piece and spend a “$100” bill? Because he could! Legal tender laws would throw in jail anyone who demanded the gold piece and refused the bill, so guess which currency the holder of these two pieces would foist off on the seller, and which one he’d hold onto, anticipating a future seller who would be willing to flout the legal tender law.
Maybe that future seller would accept the $100 gold piece in lieu of ten $100 bills, making him a criminal in the eyes of the kleptocracy.
Now, all of the above assumes that the value of the paper currency would plunge due to conterfeiting by the government. But that’s kind of a safe bet, wouldn’t you agree, since it’s the whole reason they set up fiat money in the first place.