The Sea Dollar
October 8, 2009 at 4:27 pm #8042
Good point, Ocean!October 8, 2009 at 4:45 pm #8044
I’ve yet to understand who so many people think Gold is serious commodity. It’s intrinsically worthless for anything except electronic contacts.
But I had another thought, what if I tweaked existing economic policies slightly? Try to follow me here;
1) We don’t peg ourselves to an entire currency, but to the total amount of said currencies held by the government.
– This means if XnSLand holds US$500,000, and has X$1,000,000 in circulation X$1 = US$0.50
– Should the amount of foreign currency held by XnSLand increase, the value of our currency would rise.
– This would create a currency that, along with other deflationary measures, could be inflation free(Most of the time anyway).
2) But for such a system to work, banking would have to be very different in the sense that they would HAVE to accept foreign currency as payment.
– So if I borrow X$100 from the the Central bank at an interest rate of 2%pa when the current X$ to US$ rate was 1:1, I’d have to pay the bank US$102 the following year if I weren’t able to find the extra X$2.
– This is important because in a economy where the government isn’t constantly printing new money, it becomes almost impossible for people to meet their debt obligations.
– Also, the nice little advantage to this is that the more loans are made, the more foreign currency the government holds, the greater the value of the X$
3) And what you end up with is a currency that is intrinsically hedged against inflation! This in turn creates demand, and then drives the value up further! Hence you have a perpetual cycle of deflation creating deflation.
4) All one would have to do to maintain this is simply make it against the constitution for the ruling party/monarch to print more money than is being generated by interest/investments.
There. Now I’d be most appreciative if someone could shoot some holes in this idea… It feels like I arrived at this too easily…October 8, 2009 at 4:49 pm #8045
We will have to buy these metals and then mint coin
Yes, we will need to purchase the commodity that makes up the initial seastead funds. But we will need that money anyway…the seastead will need to purchase goods from outside for quite a while. Where do you think that money will come from? Besides the cost of the seastead construction there will be recurring costs for food (what can’t be grown on the seastead), replacement PV panels and batteries, hard drives, etc. So instead of buying those things with dollars we buy them with gold.
Also, I don’t expect to mint coin. E-money to me is just as you said…purely an electronic currency. Everyone gets a debit card, and all exchanges are done electronically. No need to carry around gold coins, or even paper money that is a representation of gold. But everyone has an account with a certain amount of gold in it, and you can remove that gold at any time if you want to go somewhere else or purchase something from off-site.
That is one of the problems when you say “gold standard”. Everyone assumes you will carry around little chips of gold in a purse. I don’t expect anyone to actually carry around gold on a seastead, and I don’t expect any vendors to accept lumps of gold as payment for goods and services. How many people carry around testing equipment to ensure that the gold is pure? No, everyone on the seastead will simply exchange ownership of quantities of gold that sit in a secure facility deep in the seastead.
And if the currency was based on beer it would be a tough call. If you base it on tastes-like-piss American Bud or Coors then there will be a glut of savings since nobody wants to drink it. You base it on a nice dark stout and I will go broke very quickly!!October 8, 2009 at 5:04 pm #8046
Everything is “intrinsically worthless”. The only thing that gives something “worth” is that other people want it. The only reason anyone on the planet wants to have bags of U.S. dollars is because they can find other people who want them…and will exchange physical goods for them. Gold is the same thing. But precious metals will ALWAYS be in demand.
If you base your currency on the currency of an existing nation, and that nation collapses, your currency is worthless. If you base it on a precious metal the only thing that could ruin you is if the entire world collapses. And even then you could still find people who want it. There will always be rich people who want pretty things, even during the apocalypse.
shoot some holes in this idea
Give me a minute….October 8, 2009 at 5:04 pm #8047
Now if you brew your own, are you an enterpreneur or a counterfeiter? 😉
Taking our cue from the Eskimos, we boat people have over 30 words for “leak.”October 8, 2009 at 5:05 pm #8048
Actually, screw it, let’s just use cigarettes.
Taking our cue from the Eskimos, we boat people have over 30 words for “leak.”October 8, 2009 at 7:47 pm #8050
Actually there are many things that are intrinsically valuable. Gold is not one of them. To put it very simply, if you were stuck on an island, which would you prefer? A bag of gold or a bag of potatoes?
Things that are essential to life have intrinsic value. Gold’s value is almost entirely cultural and as such, it’s a very bad thing to peg a currency to. Especially if we consider the next recession may very well be a KNO3(Fertilizer) shortage. I’m confident enough that I’m literally betting several million dollars on it.
But back to my idea. We need to first clarify that I’m only using the US$ as an example. Realistically, it’d involve several currencies from nations with healthy environments and economies. In fact, the US$ and the RMB are the 2 currencies I’m the most wary of. Since one suffers from rampant inflation and the other is set to implode in the next 25-30 years.
You’d be better off pegging your economy to iridium than gold.October 8, 2009 at 8:31 pm #8052
You’re making $2/pint,…Its also a community service,…
Better use Cuban cigars.October 8, 2009 at 9:22 pm #8055
A bag of gold or a bag of potatoes
But the potatoes don’t have an intrinsic value. They are only valuable because there is demand. I need the potatoes, so they are valuable to me. If there were thousands of potatoes growing wild, more than I could ever eat, but the natives on the island thought my gold watch was beautiful and would trade me a cow for it…well suddenly my watch has more value than the potatoes.
Just because something is essential to life doesn’t give it value. I live in the northeast US, and water to me is so cheap is has basically no value. If my buddy showed up with a 55-gallon drum of water and offered to trade for it, I would tell him to get lost. But imagine I had that same 55-gallon drum in some drought-stricken village in Africa. It’s the same water…but I bet I could get a LOT more for it. The water suddenly has value because now there is a demand for it.
Will there will always be a demand for the precious metals? Unless the entire world collapses into a zombie apocalypse, yes…there will always be a demand for gold and silver and the like. Nations may come and go, but the precious metals will always be in demand by somebody.
You peg your currency on another nations currency at your own peril…and you become dependent on their stability and fiscal policies which is NOT what I want on my seastead. I’m trying to get AWAY from them.
it’d involve several currencies from nations with healthy environments and economies
I mentioned my hesitation at using baskets of currencies in the other post. If I want to cash out my seabucks, can I get it in any currency I want? Or a mix? How does that work? And how do you determine which nations have “healthy environments and economies”? The U.S. was one of those only a decade or so ago, and nobody thought the Euro would do well. You are worried about having too many variables…what could have more variation than the economies of these nations?
Iridium is too hard to work with…can you even make ingots out of it? I don’t even know what it’s trading for right now. I’m not stuck on using actual gold as the standard…I mentioned using platinum in another post. But platinum is only US$300 more per troy ounce than gold, so it’s not like you would get a big storage savings from using platinum. And gold is more easily traded than platinum…so I don’t think the weight savings balance out. Same goes for rhodium. But platinum is becoming more and more easily traded on the open market…there are more places offering struck platinum bullion every day…so I could be convinced to move to a platinum standard instead. Something like iridium….which is flammable if I remember correctly…just doesn’t offer any advantage.October 8, 2009 at 9:25 pm #8056
Better use Cuban cigars.
Meh, I’ve had my share of cubans and I’ve never been too impressed. Give me a dark maduro Connecticut wrapper anyday of the week!!October 8, 2009 at 9:29 pm #8057
You have several million dollars to invest?
Can I work for you in XnSLand?
– NickOctober 9, 2009 at 7:13 am #8070
I invest several million dollars on behalf of my clients. But yes, you could work in XnSLand if i ever gets in the water… I’ve been tossing the idea of export industries around with the wife and one of the other members. In line with this thread, one of the ways of maintaining a strong currency is to produce exports. To that end we’ll be needing the following industries:
I’m intending to set up a 400km south of Sri Lanka though… Might be abit far for you.
@Smith: Lets not get into the philosophical debate about true intrinsic value, my point is simply that everyone can agree that potatoes are edible and everyone wants to eat to live. Whereas not everyone can agree that gold is pretty. Hence, the value of food and things i call essential commodities, is biologically based. Whereas the value of precious metals is largely cultural. You make an excellent point on the variability of everyone else’s economic policy though… Wonder if that can be managed.October 9, 2009 at 12:46 pm #8073
Better use Cuban cigars.
Meh, I’ve had my share of cubans and I’ve never been too impressed. Give me a dark maduro Connecticut wrapper anyday of the week!!
My favorites are Honduran, Nicaraguan, Costa Rican… generally on the strong and spicy side.
I recall reading somewhere that back before the embargo, if you go a good ways back, certain non-Cubans were considered the cream of the crop.October 9, 2009 at 2:32 pm #8074
true intrinsic value
This is a thread about economics, not metaphysics or philosophy. I will agree that “potatoes are edible and everyone wants to eat to live” but that doesn’t mean you can use them as a backing for your currency. I will also agree that you can find some people in the world who do not want gold. I doubt they will have anything we will need, so I don’t concern myself with them.
The point to all this is to find some commodity that is easy to store for very long periods of time, can be easily handled and worked with, is easily tested for purity, is valuable enough so that we don’t have to store massive quantities of it, and has a good chance of being in demand by a large percent of the civilized world for a long time to come. Gold or platinum fit all these criteria, so I believe either one would make a good backing for any currency. I can’t think of any biological or organic system that fits any of these criteria.
There will always be people who want precious metals. We can buy potatoes from them to trade with the people who don’t.October 9, 2009 at 5:49 pm #8082
In that case can I suggest we drop gold for platinum or Iridium? They’ve got a much higher intrinsic value because they’re used in electronics and the aerospace industry. And for that matter, far more stable. Gold is seriously over-inflated lately.
That and I’m not suggesting we store potatoes, but the currencies of nations who peg themselves to essential commodities.
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