Obviously we can't go back to the gold standard, there just isn't enough to actually cover all those T-bills. So what do we put in it's place? It has to be a universally valued commodity and it would be better still if this standard was one that could be adopted universally. While I'm not an economist, I have this sneaking suspicion that the situation would be further helped if said commodity, like the concept of wealth itself, didn't exist in a strictly finite supply. That supply should be finite at any give moment, but subject to increase with proper application of effort. So what fits the bill?
Energy.
No, I'm not talking about petro-dollars; hydrocarbons (oil, coal, etc.) are just a storage medium, the same as carbohydrates (sugar) or lipids (fat). I'm talking about the basic unit of measurement of energy; the joule.
All goods and services, as I've said before, can be described in the amount of energy required to produce/provide them to the market. From the amount of inherent energy to the cost of extraction and processing to transportation and possibly even advertising, everything can be described in terms of what it takes to make it happen and get to the consumer. Differences in processes will result in tremendous motivation to pursue the greatest possible efficiency in order to provide at a lower cost than competitors.
All nations have access to energy resources; some are richer than others, due to variables such as territory (sunlight exposure), climate (wind strength) or reserves of stored fossil fuels. Each has access to a continuing supply of new energy each day however, and that energy can be tapped just like gold, then used to engage in global commerce.
Advantages of an SGC.
By combining the benefits of an SGC with the stability of an energy backed hard-currency we remove uncertainty, establish universal value standards and eliminate the iniquities created by various exchange rates. Everyone has got the same money and even if their production varies, the basic unit remains the same.The point here being that productivity becomes the sole defining factor in creating wealth. An otherwise impoverished nation, resource poor, can still tap freely available energy to directly create wealth for itself. That wealth can then be used to build an infrastructure to support a more diverse economic system.
The obvious push back on such an initiative would be from persons who benefit from wealth based on scarcity. While anyone might have oil or gold on their land, the quantity will be limited by definition. Wind and sun, on the other hand, never run out; tapping energy freely from the environment would be tantamount to printing your own currency, with the exception that, being backed by real energy, it would have exactly the same worth in the system.
But doesn't scarcity define wealth? If the amount of energy available is effectively limitless and everyone can tap it, would the currency then be rendered valueless by abundance? A built-in inflationary loop?
Not necessarily. In the first place, the amount of energy is going to be constantly consumed, as well as generated. In the second, while energy cannot be created or destroyed, a certain amount of it will bleed out, due to inefficiencies in systemic use and storage. Finally, while even a small net gain would result in an inflationary progression, continual acquisition and storage of energy will reduce the cost of production and thus the cost at point of sale. How? Simple supply and demand; plentiful energy reduces the cost of production.
Now we draw it together: energy as the medium of wealth causes an abundance of energy to inflate the energy backed hard currency, while that same abundance also continually drives down the cost of production, thus reducing prices at the point of sale.
Holy crap. I think I just changed the world.
Let me get back to you.
Okay...one other thing to be mentioned: How do you store the energy entering the system? You can't rely on batteries, they bleed too fast. Chemical storage is out too, it wouldn't be effective to synthesize hydrocarbons. This is where currency enters the picture.
As energy is captured/produced and used to back additional currency, you have to put that currency directly into the hands of the producers. In short you have to make sure that every extra joule put into the system gets banked, where it in turn accrues interest and gets loaned out.
With large amounts of energy being captured and stored at all times, a continually growing supply of stored energy driving down costs and the power of compound interest acting as a force multiplier, an economic system based on an energy backed hard currency would become supercharged; a pool of almost freely available energy/wealth, underpinned by constant production, provided that production exceeds consumption as the general rule.
Using this model, we can easily imagine a society, on a global scale, where eventually anything becomes possible simply because the energy/wealth is available to be thrown at it. Inefficient, cumbersome beginnings aren't prohibitive and open the door to costly scientific and technological R & D.
This is more than a little frightening. Either I've finally gone stark raving bonkers...or I may have just created Gene Roddenberry's vision of the future.
Have to admit; I like the concept!
ReplyDeleteOne question. Where do you get the initial investment dollars for the infrastructure? Those wind generators, solar panels, etc, don't build and install themselves. It's the initial transition that's the bugger, as we are now seeing.
Further, how do you get the political will to do it? And where? The US has a large portion of the population who are deeply distrustful of anything resembling an international structure. And the Germans, who have long memories, will give up the Deutchmark over their dead bodies.
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ReplyDeleteYou start with exports. The people who stand to derive the most imediate benefit are the 3rd worlders. The G7 have the tech and capasity for manufacture and the 3rd world provides a ready market. Its a cheap buy that will immediately yield tangible results for their populations. Thus we convert political capital into monetary investment, which yield energy that becomes the basis of the new currency.
Once production has gotten under way, domestic marketing can be targetted inside the G7. The demand increases exponentially, ramping production and boosting productivity, thus spending. Its Henry Ford's basic principle, you pay people enough to buy the goods they make for you. Initial orders within the G7 will almost certainly be from the public sector, but PR and cost effectiveness will bring the private sector in hot. Once the average consumer starts producing power as well, the cycle of inflation-production takes hold.
...I need to add something to the initial statement.
As far as political will goes...I don't think its much of an issue. Currency isn't a sovereignty issue. You aren't surrendering control on anything and the arguement can be made, easily, that everyone else is following your lead. All you need to do is remind people that they'll be able to essentially make their own wealth. Sad to say but Gordon Gekko was right, greed is good.
By which I actually mean profit motive, of course.
As for the German's and their long memories, I'd say that the same applies. When the average Deutcher sees that the average Pol is able to increase his wealth by tapping energy and ading to the system, they'll follow the smell of money like anyone else.