Fiat currency allows for no limits on either inflation or deflation, both of which are disastrous to economies. Fiat currency also doesn't actually *mean* anything, other than the government accepts it as payment for taxes (why the government would accept a worthless piece of paper as payment is beyond me). The gold standard is completely disconnected from the standard of living (how is gold going to help me unless I'm a dentist, jeweler, or electrical engineer?), and effectively ensures deflation. Also, the cost of mining it just to put it in an underground vault is effectively a tax on it's value. Our currency needs to be backed by something real, and something that correlates well to the standard of living and is free to inflate and deflate as necessary. That something should be energy, more specifically, electricity. It is highly connected to the standard of living. Everything, from purifying water to producing food to transportation to computing requires energy. What you pay for above the cost of raw materials when you buy something is actually the cost of the energy needed to convert them into the product, so prices denominated in an energy-backed currency are very useful measures of value. Everything can be accurately-priced in energy, even human labor and intellect, because the body and brain consume energy. It is also easily measurable and infinitely-divisible. This is how it can be implemented. The government sets a guaranteed conversion rate, say $0.20/kWh, and determines an allowable range for free-market electricity prices; currently the allowable range is $0.10/kWh - $.015/kWh. If the free-market price of electricity drops below $0.10/kWh, the government will increase spending and decrease taxes. This is accomplished through the central bank buying the government's bonds and decreasing reserve and capital requirements for merchant banks and credit unions. The government will also increase welfare, subsidies, government salaries, and investments in private and public projects. These changes last until the money supply is sufficiently inflated so the free-market price of electricity goes back in range. If the free-market price of electricity rises above $0.15/kWh, the government will decrease spending and increase taxes. This is accomplished by the central bank selling the government's bonds and increasing reserve and capital requirements for merchant banks and credit unions. The government will also decrease welfare, subsidies, government salaries, and investments in private and public projects. These changes last until the money supply is sufficiently deflated so the free-market price of electricity goes back in range. If the free-market price of electricity were to ever go above the guaranteed conversion price, the government will undertake even more severe austerity measures to deflate the currency, and once the free-market price of electricity goes back in range, the government will reimburse the difference between the free-market price of electricity during the crisis and the guaranteed conversion price. As a side note, the government will most likely have the central bankers fired if they allow things to get to that point. This type of currency allows the money supply to keep pace with economic progress. Since electricity is literally money, there is a great incentive to develop more efficient generation, transmission, and storage technologies, as well as design devices to be very efficient. The goal is to have the purchasing power of the currency slowly increase over time as technological progress goes on. Also, if the government subsidized solar panels (and the appropriate load-balancing equipment to allow the generated electricity to be fed back into the grid), the nation's supply of electricity will be massively increased, leading to an increase in the money supply, which leads to more economic expansion and prosperity.
I skimmed over this post. Problems: 1. different prices of energy production cost (hydro, coal, solar, wind, etc.) 2. ease of the hobbyist at home producing energy moola/ impossibility of government dictating price 3. rife black markets 4. politically untenable
1. Considering that the currency is now backed by electricity, the electricity generation method that has the highest energy returned on energy invested (ERoEI) will eventually win out. 2. That's the point. The goal is to be a nation with a large supply of electricity, which means a large money supply, which means a strong economy since almost every sector requires electricity along with money to function. The only issue would be ensuring everyone's produced and consumed electricity is bought and sold on the market. Also, the government doesn't have to and can't dictate the price of electricity directly, but it can determine the size of the money supply, and the amount of money available determines prices. 3. Black markets are a fact of life. 4. That's a problem with the politicians, not with this.
...you would have people at home selling coal power to the grid with janky hobbyist kits. coal is very cheap energy. it isn't possible.
on an industrial scale where companies have to abide by minimum environmental standards, coal is cheaper than any renewable energy other than maybe hydro. *natural gas can sometimes be cheaper than coal depending on the price at the moment but we have much more coal in the ground in the US than natural gas. strip out worker safety and environmental concerns and coal power would be even cheaper. nuclear is the cheapest of all but no new plants have been installed since the 70's. not a tree hugger but I would not want to live next door to a crude coal turbine operation. just sayin'.
Well, if we combine this electricity-backed currency with a land value tax, your taxes would become much lower! An electricity-backed currency would encourage efficiency in power use, and a land value tax would encourage people to develop vacant land to raise the income needed to pay the tax, and it would encourage the development of marginal areas because they would be tax havens, at least for a while. Also, very few people would have the resources to build a coal turbine plant in their house. Most people who aren't insane would use solar panels. Basically, all individuals and businesses can produce their own power using whatever methods they prefer, and they sell whatever excess there is to a power distribution company to distribute as needed throughout the day. Like if I produce 150 kWh/day of electricity, and I only use 30 kWh/day, those excess 120 kWh gets automatically sold to the power distribution company, who pays me a price that fluctuates with demand, and sells it to someone who needs it for a small profit. Personally, I really think the development of thorium reactors should be highly encouraged. They're very efficient, produce low-level nuclear waste, and the fuel is very easy to process. Also, thorium is quite abundant. And a Liquid Fluoride Thorium Reactor has an amazing ERoEI of 800 to 1600. http://energyfromthorium.com/2008/09/19/the-ultimately-efficient-reactor/
Why not a fresh water backed currency? Water is more vital for life at a basic level than electricity.