The Price of Tea in China?

Alright, time to address another one of those questions raised by my theory of energy-as-currency.

How do you transfer energy between landmasses?


This is an excellent point raised by my friend Michael. Sharp guy; he put it to me like this:


"OK, so let's say that Fiji controls X amount of US debt, be it private or public. How do you transfer energy-as -wealth to Fiji from the US?"

He then made some brilliantly snarky comments about stringing Christmas lights across the ocean. I responded at the time by going to the grocery for supplies, but I didn't forget and I'm now better prepared to respond than I was when I had a couple beers in me.

Currency. Purchase and shipment of goods and services using a global energy currency means that currency is freely, universally exchangeable for other goods and services anywhere, anytime. As a result, it isn't necessary to transmit power or ship chemically stored energy, unless of course what they want to spend the currency on is fuel, in which case you load up a ship with coal, oil, uranium or what-have-you and send it out the door.


The core of what Michael was getting at is the argument over what is called specie. In short, it is the requirement of the issuer of a given note (think paper money) to redeem it in a given quantity of a given commodity. Traditionally this entails fixed weights of gold or silver. However, we've already established that any commodity can be described in terms of the amount of energy required to extract, process and transport it; this is the crux of my argument for backing currency with the measurement of energy, the joule, rather than a particular material substance. We remove the middle man, getting straight to the energy-value itself, and then it doesn't matter what the commodity you want to deal in is, you have a hard and fast means of comparing values; it doesn't matter if you're comparing coal to uranium, oil to gas, camels to apples or steel beams to wicker baskets. You're free to either ship goods, provide services or simply apply currency credits because you always know what the energy-currency worth of it all is.


The more important issue raised is how do you determine what you're willing to expend for investments? As an example: it takes X amount of energy to build a ten story building in downtown Chicago. Every single person involved in this project is trying to earn a profit, and so wants to be paid more than the work done and resources they consume are absolutely worth in terms of energy-as-currency. So the party paying for this building needs to determine exactly what they're willing to spend on the front end, in excess of what amounts to the whole-sale on the project. The more they have to invest up-front, the longer it will take for them to recoup their investment and turn a profit over the long term, by way of lease fees.


How does this differ from the current system? It doesn't. Surprised? Don't be; we're not trying to change the theory of economics. We're trying to change the theory of wealth. Its subtle, but bear with me.


The current theory of wealth is that something has value because it is rare. Gold is the perfect example. Gold is very difficult to come by.


Gold is also next to useless.


With the exception of some very specialized, advanced applications in electronics, you can't do much that's useful with gold. Its too soft and too heavy for anything but ornamentation. In the more openly superstitious past it was credited with supernatural value, but the simple fact is that the very qualities that make it great as a currency also make it useless for pretty much everything else. So why does gold still command such economic power? So much that certain people still want to go back to using it as the backing of currency? Habit, mostly.


That said, let's examine the basic argument for the gold standard. The idea of having something behind currency is appealing. If nothing else it gives you a sense of having something stable and valuable, something tangible. On the other hand, if gold is essentially worthless, why would it be any better than fiat currency? Well frankly it isn't. In real terms, gold is only valuable because we've decided it is, much like we've decided that talking about sex in taboo. "Why? Because."

On the other hand, if you replace gold as a hard currency standard with energy (again, not a specific medium, but energy itself as measured in joules) you're not just putting a hard value under it, you're underpinning the entire economy on something that is not just generally useful, but universally required. No matter what your enterprise, you will expend energy and consume resources that can be described in terms of the energy needed for their production.

So where am I going with this?

The point, again, is that we're shifting the focus of wealth, of available resources away from scarcity to production. Since energy is the key requisite for all production and service, having more of it available drives down costs; at the same time greater energy production increases your wealth, allowing you to have more of it available for use. In short, its like printing money, except that the money is actually backed by real value and so printing more of it doesn't devalue the stuff already in circulation. What real value you ask?

Energy! The stuff we use for everything else; heating, cooling, making goods, driving, fueling those cars we drive, EVERYTHING. For example: You give someone a currency credit for, say, one million joules of energy. That's the equivalent of the contents of a glass apple juice.

Real value.