This should be my last post on the topic for a while, BTW; as I’m out of the realm of facts and figures and into the realm of philosophy.
To put it bluntly, I believe any kind of attempt to base money on a “hard” commodity is a little bit immoral. First of all (as the argument I had with Elmo here shows), it’s price fixing. If a $100 coin is 1 oz of gold (for example); the government has essentially decreed that is the price of gold. If that’s not the market price of gold, you run into problems. If the “market” price of gold is, say $200/oz, no-one is going to spend those coins at face value, instead either hoarding them or melting them down (a problem seen today with coins whose intrinsic value exceeds their face value, incidentally). If, instead, the price of gold is $50/oz, we’re essentially in the same situation we are today, where the money isn’t “worth” it’s face value; and the government is making a profit of $50/coin… A basket of commodities has a worse problem, by the way – look up the history of bimetallism in the USA and other places; it’s not pretty and rarely ends well. In either case, the government is perpetuating a fantasy, that they can define the price of gold. This is a bigger problem than it used to be (pre-electronics age) since gold now has uses outside of decoration and money. There is a real market in gold to be used in industrial amounts (as there is for silver, platinum, etc). Gold was desirable for use as money because it’s impossible (effectively) to counterfeit, but there’s not much you need gold for prior to the electronics age other than money or money replacements (jewelry, decorations, and other forms of conspicuous consumption).
My second (and much larger problem) is that a “hard” currency results in an economy that is a zero-sum game; by necessity. In the pre-industrial era where “value” was created by tangible things, this (more or less) works out, in that value = wealth = stuff. To produce value, you have to make, take, or fake stuff (land, minerals, trade goods, etc); this gets you wealth. But as the industrial era gets moving, and especially now in the Information Age, value isn’t (necessarily) rooted in physical stuff. People create large amounts of value without associated physical objects. Take any of the Silicon Valley success stories, for example. At the smaller scale, look at the entire frigging RPG or computer gaming industry. For a microcosmic level, take a look at every blogger who makes beer money from AdSense. Every one, creating real value without an increase in hard “stuff”. How do we measure becoming richer via intangible value with a limited amount of tangible resources?
So – my two problems with “hard” money boil down to hard money requiring the government to set the price of a commodity (by declaring that their money, consisting of an amount of stuff X has a value of Y), and that it unduly limits the economy of ideas.
The floor is open