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Can anyone here defend the use of metal backed currency in this day and age?

I've read several comments on these boards that suggest something akin to the following:
"If only the US would get rid of it's 'paper' (I assume people mean fiat) currency and go back to gold/silver, everything would be better."
What I have yet to see is any defense of this position. Why? Would someone mind helping me to understand why a backed currency is intrinsically better than a fiat one?


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  • May 6 2012: Backed currencies show the actual value of a nation's productive capacity. I wonder why a backed currency can't be created that reflect's a nation's total technological, agricultural, material, geographical, academic, and cultural contributions to the globe as a whole. Couldn't we agree on simpler signifiers of growth based on streamlined subcategories of these market values?
    • May 6 2012: That's an interesting idea, I'm just not sure how it could be created. First, any supernational agency that was tasked with determining all of these categories would have such a huge influence of world trade, I'm not sure that would be much better. Second, I'm not sure we can really agree on those signifiers- what economists value as indicators differs between schools of thought and changes over time (one of the best examples is the shift from GNP to GDP). Third, I don't know how it would actually solve for the issue like those who defend metal backed currencies deem necessary. The nice part of having a nation's currency backed by gold is that, if nothing else, you can turn one amount of that currency into some amount of gold- a commodity that can then be taken anywhere in the world and maintains some value. I'm just not sure how one could actually convert this "advancement backed" currency you propose.

      But a very interesting and unique solution!
      • May 6 2012: Yeah, creating a system like that would be a logistical nightmare...we do have the UN though, and we do have a certain ephemeral international standard of materials value...I guess the biggest problem would be the same thing we're seeing in the whole European Debt crisis...certain countries, value poor, may not wish to get on with the program and allow themselves to be "severely downgraded".
        I suppose too the problem might manifest in an unwillingness to accept aid for additional development; like say if a country were land poor (save for resort-worthy real estate) but culture rich. Also, the nature of supply and demand would probably have to be retooled; emphasizing more the production of necessary goods over that of unnecessary ones. And to top it off, it probably would still benefit big business over main street businesses. Unless the international community encouraged trade collectives (run through the Cloud, maybe?).
        Now all of this is sounding too much like communism. Sorry.

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