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What would happen to an economy if physical precious metals were legal tender currency?

Imagine money that had intrinsic value. How would this affect banking, government spending, saving, and consumer spending?

Better or worse than fiat money?

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  • Mar 15 2013: it happened before in rome. a lot of people think that having money linked to metals is good because it means money has intrinsic value, but that also mean that money is in limited supply. people with enough wealth could hoard their money, and we'd have a shortage of money because no-one would be able to get anyone to sell their metals and so no-one would get paid. can you imagine at the end of the month your boss saying they couldn't pay you because they couldn't get any gold, silver or anything at all to pay you with because the only people who had any weren't selling? gentle inflation is good because it means there's no benefit to hoarding, which means there's enough money moving around the economy.

    to combat the huge banking scam, how about setting an upper limit on income (we have minimum wage, so make a maximum too, say $10m a year)? that way there'd be no benefit to gouging customers because the bankers couldn't possibly make any more money anyway.
    • Mar 15 2013: That's weird.. I honestly had that same idea about setting an upper limit to income. And $10m/year was my number too.

      Here was my thought, have a flat tax rate for everyone and any income over $10 mill gets taxed 100%. This would help control concentration of wealth.

      Obviously some greedy bastards would leave this country so that they could be even richer.
      • Mar 16 2013: why flat tax? flat tax sounds good at first inspection but it's not that simple. say i make $100,000 a year at my company and i employ 5 people at my company at $20,000 a year. we each pay 10% tax so i make $90k and they make $18k, sounds fair right? nope. all i do is re-employ people at $18k a year instead of 20, so i'm left with $110k a year, we all pay 10% tax on that meaning i make (close enough to) the $100k - i effectively get my employees to pay all of my tax for me. this is why the rich try to push for flat taxes, because they know that taxes on a curve means they can't pull this trick to get away with not paying tax.
        • Mar 17 2013: I'm not sure I understand your reasoning on why flat tax is bad. If you hired people at 18k then they would make 16200 and may decide it be in their interest to work for a competitor.

          The flat tax wasnt really the main point of my idea anyways. I just thought it would put everybody on an equal level. Also no more deductions or subsidies.
      • Mar 18 2013: that would seem logical, but remember if one person can do that then anyone can - the competitor would be at a disadvantage if he didn't also reduce salaries to get his employees to effectively pay all his tax for him.

        a tax curve does put everybody on an equal level! you pay for what you use, and usually people with more money are employers, and have a much larger dependency on public services such as roads to ensure their goods keep moving and their customers can keep coming. completely agree that all deductions and subsidies should be ended, though there should be kickstarter funds given to advance business, to keep our quality of life improving.

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