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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: Our country use to have silver certificates and be on a gold standard.


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      Mar 17 2013: until our war debt got bigger than our gold reserves..that's when we shifted to silver certificates and then we needed to have a bigger money supply than we had silver to back it so we went fiat. The whole problem is that our economy is premised on a non viable growth rate that requires a non sustaianable expansion of our mney supply that can never attain balance or stability.
      • Mar 18 2013: The real resource movements the currency enables are more real than the currency (but less volatile - eg wheat price goes from $7.50 per ton to $10 while physical supply/demand ratio stays pretty constant) .

        But there's a problem because we don't have any very sound ideas of what we can get away with (In terms of Climate change, Fertiliser and other input costs, Oil stocks and costs of conversion to useful fuel, Food production capacity, long term capacity to monitor used fuel dumps) in crude physical terms.

        The markets are supposed to value the risks on these things and generally do a good job, but one could say they are not working so well because of the speculative element. How would non - market intervention based on production planning and consumer portion control affect the international value of a Country's currency (Assuming the currency was based on the value of its own wheat stock) ?

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