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This is goldbuggery, version 2.0. Only you have managed to think up a system which is even stupider and more dangerous than goldbuggery, because energy technology is even more unpredictable than advances in mining are.

Currency is a political agreement - a shared social contract which we all agree to use to measure how much of a claim we each have to the common output of human effort.

It needs no specified backing because it is backed by the totality of the formal economy.
Specifying a specific type of output as the backing of the unit of account proves you do not understand what currency is. It also invites massive manipulations - hoarding, cornering, speculation, and a dozen other ills in that specific sector of the economy. As long as this is happening in the noble metals market, that can be tolerated- Vexing as heck to the few people who have actual uses for gold and silver (Electronics. Jewelers) but not that important to the greater economy. Having it happen in the energy sector would be unspeakably bad.

The key problems with our current financial system are: it is too big, to well compensated and too politically powerful. Money has no intrinsic value - that is why we use it to measure the value of other things. Having huge amounts of the best minds of our generation go into finance is a complete and utter waste of those minds.

Secondly: Money creation has been outsourced to the private sector. (via fractional reserves) This is insane. The creation of money means the creation of claims on the output of the economy ex nihil  - From nothing. Money must be created as the economy grows to avoid permanent deflation, but handing this function over to private actors is just bonkers. For all intents and purposes, banks might as well have a license to counterfeit - the effect on the economy is the same.

So what should be done?

Simple. We should destroy the finance sector. People need bank accounts and debit cards, and firms do need to raise capital. The world does not need Goldman for any of that, however. Make the post office do it. I am not joking. Draw up the most boring banking system we can possibly put together, and then make the post office run it. The masters of the universe can fuck off and go put their degrees to actual use.

by Thomas on Sat Sep 7th, 2013 at 05:15:02 AM EST

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