Friday, August 07, 2009

A Random-ish Thought

If the federal government had acted on my proposal back 15-20 years ago, we wouldn't be in much of the mess in which we find ourselves.

As you probably know, China is proposing a new base currency, or a new monetary standard to replace the broken or breaking system we've been using for decades - currencies that aren't really backed by anything other than government promises. Ah but promises of what? Certainly not gold any more - you can't go get gold for your dollars from the government, and I don't see many silver certificates out there any more (although I wouldn't mind finding a few).

Why the current angst about the dollar as the world's reserve currency? Well, it goes beyond the Wizard of Oz situation of a man behind the curtain - at this point, when we look at where that man behind the curtain is doing things, we find that there's no there there. It's all based on everyone trusting everyone else to never ask for anything real. And that's fine for a while - clearly it's worked for quite some time now, but the checkbooks are coming home to roost, and there's nothing left to pay the piper, as it were (to mix a metaphor or two).

So what was my proposal? Simply to once again back the dollar with something of real value. Rather than a return to the gold standard, I proposed that we go on the kWh standard.

Whatever the then-prevailing cost of a kilowatt-hour of energy would be the basis for saying that the dollar was worth (for example) 35 kWh. When technology made processes more efficient, that would mean that it took fewer dollars to power things. Dollars would go farther, be worth more, wealth could be directly created by technological advance.

Further, we couldn't reasonably have allowed ourselves to remain dependent upon foreign sources of energy to run our economy - that would have meant buying energy to pay our debts. Instead, we would have developed our own resources (which are huge an largely untapped) as well as making significant forays into nuclear power, almost certainly finding ways to produce electricity more safely than we can today, given the total lack of focus on that industry lo these many years.

Given a currency backed by something "tangible" and real, it would become that much more difficult for the government to take the Doritos approach to the dollar, "Spend all you want, we'll print more." There would have to be a real something there.

And to think, I had the solution years ago.