From: rja@redwood26.cray.com (Russ Anderson)
Subject: Re: Currency systems
Originator: rja@redwood26
Keywords: n
Organization: The 1991 World Champion Minnesota Twins!
Distribution: na
Date: 28 Sep 92 10:52:10 CDT


In article <1651@hsvaic.boeing.com>, eder@hsvaic.boeing.com (Dani Eder) writes:
> rja@redwood26.cray.com (Russ Anderson) writes:
> >In article <136979@lll-winken.LLNL.GOV>, michael@rosebud.llnl.gov (Mike Slominski) writes:
> >> 
> >> Standardizing money on something of practical value is the only real
> >> way to insure the stability of a currency.
> 
> >Milton Friedman disagrees.  He has proposed a that the money supply 
> >be increased only at the rate of GNP growth to ensure stable prices.
> 
> >> The idea of a "gold standard" is NOT childish nonsense but gold is
> >> probably not the best commodity to standardize to - the real (not
> >> dollar) value of gold does vary a little too much.  The best scheme
> >> I've come across bases money on a "bucket of commodities," all of
> >> which have practical value.  If one of the commodities loses its
> >> practical value, another is substituted.  As it stands, it's not
> >> inconceivable that people could lose faith in the little green pieces
> >> of paper in my wallet.  And though I may lose a little on my American
> >> eagles (U.S. gold coins), they're a lot trustier than little green
> >> pieces of paper.
> 
> >If you use the largest "bucket of commodities" (the entire economy), then
> >your solution is what we have now: a currency with a value based on what
> >people will exchange for it.
> 
> What is desired is a standard of value whose measure can be fixed
> with certainty.

That's why there are futures markets.  It allows you to "lock in"
at a future price to avoid uncertainty.

>                 The dollar used to simply be a unit of measure of
> silver, approx 0.78 ounce silver in the form of a coin of 90% purity
> (the other 10% was alloying metal to make the coin more durable,
> .  The specific mass of silver in the coin was determined by historical
> accident, it was the average content of the spanish silver dollars in
> circulation at the time of the Coinage Act of 1793.  Today, since
> we are currently divorced from any precious metal coinage, we are
> free to pick a round number to set the standard of value.  I
> propose 1 oz troy as the standard.  A metric standard might also
> be appropriate, with 20 or 25 grams of silver approximating the old
> silver dolar.  To make it clear that the coins represent specific
> masses of precious metal, we can be radical and eliminate the dollar
> altogether as the primary unit, and have the coinage read "10 grams
> silver", or "1/2 ounce silver".  This would make it obvious if
> someone was attempting to debase the coinage.

If you want to use a silver as a store of value, buy silver.  You can
then conver to the "fiat" currency at the market rate.  So if the
government tries to inflate the "fiat" money supply, the value of
your silver should inflate (in nominal dollars), maintaining the 
silvers real value.

-- 
Russ Anderson    |  Disclaimer: Any statements are my own and do not reflect
------------------              upon my employer or anyone else.  (c) 1992
EX-Twins' Jack Morris, 10 innings pitched, 0 runs (World Series MVP!)