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Thread: What do I think of the World Bank President's call for discussion of a new gold standard?

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    Default What do I think of the World Bank President's call for discussion of a new gold standard?


    World Bank chief surprises with gold proposal

    The world's largest economies should consider gold as an indicator to help set foreign exchange rates, the head of the World Bank said on Monday in a proposal that threw open the acrimonious currency debate just before a summit of G20 nations.

    Writing in the Financial Times, World Bank President Robert Zoellick called for a new monetary system to replace the floating rates adopted in 1971 known as Bretton Woods II.

    AntiSpin: On January 3, 2006 I started a site called The Fourth Currency where I asserted:
    A return to the Bretton Woods international gold standard created in 1944 is inevitable

    Thirty-seven years ago the world’s economies started on the circular track back to Bretton Woods. We will sooner or later be back where we started, with international transactions guided by a fixed gold price.
    So there's your answer. It was inevitable to me in 2006. Still is. America's free ride is almost over. Thank the leaders of both parties who built the FIRE Economy on the foundation of the Dollar Cartel since 1971.

    With any luck, the currency wars end peacefully.

    The coins pictured, by the way, are three I inherited from my father who bought them in 1972 for the price shown on the original protective covers, $79. That was the year after the U.S. defaulted on its foreign gold debts, and the year that the chairman of the Bank for International Settlements (BIS) proclaimed that gold without demand from central banks as a monetary asset was free to fall from its then fixed price of $35 to its true market value as an industrial commodity, "around $7.50 per ounce."

    Today each of the coins in the picture sells for $1,730, and gold trades for 188 times the price forecast by the BIS. Look here for my original arguments for buying gold in 2001.

    When to sell it? When vested interests step aside and allow the nation and global economy to heal from decades of debt-financed economic growth. Don't hold your breath.

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    I wholly agree!

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    Quote Originally Posted by EJ View Post

    World Bank chief surprises with gold proposal

    [B]
    When to sell it? When vested interests step aside and allow the nation and global economy to heal from decades of debt-financed economic growth. Don't hold your breath.
    Thanks to iTulip I got myself a modest car worth of Gold/Silver and sleep much better at night.
    Even when my other savings are in a supposedly partial gold-backed currency (Euro) and woodland/real estate.
    But how is to tell when vested interests step aside. What will be the canarie to listen to ?

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    Zoellick also wrote on the SDR.

    There has been a lot of talk of the SDR, representing a basket of currencies, as a replacement of the US dollar for international trade. Zoellick brings up the point that China's currency should also be a part of the basket - the same week, mind you, that the G20 meets amidst a lot of doubt regarding Bernanke's debt monetization announcement the week prior. To me, it smacks of appeasement to China.

    But here's the rub. Yes, in an increasingly multipolar world, cooperation and power sharing is the only option aside from resolution through conflict. But how can an SDR possibly succeed when four of the five underlying proposed currencies: the Yen, the Dollar, the pound, and the Euro, are suspect? These debt-based currencies are basically tied to nations, that on paper, are effectively insolvent.

    And what does the rest of the world say to potentially indirectly financing, thru inflation, the budgets of the SDR member countries? Russia, Brazil, Saudi Arabia, etc...?

    My view is the emergence of gold by default, and in a chaotic way, hopefully not through war.

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    Quote Originally Posted by gnk View Post
    But how can an SDR possibly succeed when four of the five underlying proposed currencies: the Yen, the Dollar, the pound, and the Euro, are suspect? These debt-based currencies are basically tied to nations, that on paper, are effectively insolvent.
    Excellent question. If confidence in the Dollar fails, then these other currencies fail as well. They are too entwined both in the financial world and in the way ordinary people think of them.

    The strengths of the SDR-like proposals are two. The financial elite no doubt support such, and the alternative, the failure of our debt-based currencies, is difficult for people to understand, other than by expecting a return to traditional gold or silver backed currencies.

    If we go down the path of dramatic change, then likely we will have to travel that path someways before we can collectively imagine where it might lead.
    Most folks are good; a few aren't.

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    Quote Originally Posted by gnk
    But how can an SDR possibly succeed when four of the five underlying proposed currencies: the Yen, the Dollar, the pound, and the Euro, are suspect? These debt-based currencies are basically tied to nations, that on paper, are effectively insolvent.
    I've noted before (via reading Dr. Michael Hudson) that the World Bank and IMF are not truly international entities - they are effectively controlled by the US and UK as these 2 nations have veto power over either institutions' activities.

    Similarly I've pointed out that an SDR with gold as a component is fundamentally different than gold as a reserve currency/stable store of value.

    IMO the Zoellick commentary is more about the SDR than about gold as a reserve currency/stable store of value.

    For the US and UK - accepting gold as part of the SDR is an excellent way to forestall the ongoing worldwide revulsion towards the dollar and pound, without actually giving up fiat.

    The canary in my mind? When the US/UK lose their veto powers in the World Bank and IMF.

    The other canary? When world trade denominated in dollars falls 30% from 2009 levels.

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    gold is regaining respectability. it is no longer "a barbaric relic." the ft has long hated gold, yet it now puts zoellick on its front page to say it's time to start thinking about gold: as a currency, or as part of a currency, or as a component of a basket of which a currency is a derivative, or something. we are still relatively early in the process of gold's growing desirability and fiat's loss of respectability. in american baseball terms, i would guess this is just the 3rd or 4th inning.

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    Quote Originally Posted by EJ View Post
    We will sooner or later be back where we started, with international transactions guided by a fixed gold price.[/B]
    Int'l transactions tied to a fixed gold price, or int'l transactions tied to a market determined floating price? (determined by the market's assessment of int'l liquidity?)


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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    Fisher says hydrocarbon market part of the solution to be part of the basket?
    Says he has not figured it out , but…

    http://www.cnbc.com/id/15840232/?vid...8166520&play=1

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    Quote Originally Posted by bill View Post
    Fisher says hydrocarbon market part of the solution to be part of the basket?
    Says he has not figured it out , but…

    http://www.cnbc.com/id/15840232/?vid...8166520&play=1
    This was exactly what came to my mind when I saw this post. I was going to post the link but bill beat me to it.

    For a long time, my own view has been that if you could invent a way to put 1,000 barrels of crude oil in your pocket (as you can do with a kilo bar), and save it there indefinitely, then redeem it for its energy value any time you like... If that were possible, I contend that gold would immediately lose almost all its value.

    I think the argument that "For thousands of years, gold has been real money and it's what the world has always reverted to after fiat currencies collapse" is seriously flawed. Yes, what has been true for thousands of years is a very compelling argument, and that point should not be ignored. But the truth is that the world is a very different place now than it was for most of recorded history. Post-industrial planet Earth depends on energy for everything it does. At the end of the day, the world doesn't need shiny metal in order to keep modern society functioning. It needs energy. If someone could figure out a way to overcome the storage and practical problems (oil being flammable and volatile not being the least of them), I contend that energy makes a far more sensible store of value than shiny metal that happens to be rare. The only redeeming value of gold is that it is scarce, looks good on Mr. T. (a matter of taste, clearly), and has but only a few industrial and electronics applications. Energy is also scarce, and is something modern society desperately needs to function. And to see it on Mr. T. might be quite entertaining. :-)

    EJ: Please comment with your thoughts on the viability of an energy-backed currency or other scheme to rely on oil or another energy proxy to back monetary transactions. Various people have talked about a crude oil-backed currency. Detractors argue that the value of oil depends on physical location and that because cost of transportation is way higher than PMs of equal dollar value, too many insidious arbitrage scenarios would be created by an energy-backed currency. I don't buy it. I personally abhor the idea of a world currency. But if I were trying to design one, I would simply decree that one GlobalBuck = 1/100th of 1 barrel of WTI crude, delivered at Cushing, OK. The point being that if you pick a specific grade and delivery point, you avoid the arb problems. Yes, different grades of crude elsewhere would be worth different numbers of GlobalBucks, but if the "standard" were a single delivery point, that should solve the problem. I chose WTIC and Cushing only because it's already the standard grade and delivery point where most financial trading already occurs.

    I suppose the problem would be that shady, irresponsible borrowers (the United States Treasury comes to mind) would borrow huge amounts of GlobalBucks without having any credible plan for how to get the oil and deliver it were they ever called upon to do so. But it still seems to me that just as a "Gold Convertible" currency (1940s thru 1971) was "almost as good" as a true gold standard, an "Oil Convertible" currency would similarly be almost as good as a truly commodity-backed currency, which I don't think we'll ever see. The people issuing paper notes in GlobalBucks (competition should be allowed) would have to evidence reasonable reserves to allow anyone who chooses to convert the ability to do so. The U.S. has the SPR and could use that as collateral to justify printing and issuing GlobalBucks. Other countries wishing to issue banknotes denominated in GlobalBucks would have to provide similar collateral.

    Like Fisher, I don't have this completely "figured out yet". Not even close. But on a gut level I am convinced that energy-backed money makes a lot more sense in the modern world than PM-backed money. EJ, I would greatly appreciate your thoughts on this.

    xPat
    Last edited by xPat; 11-10-10 at 03:46 AM.

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    Quote Originally Posted by xPat View Post
    Like Fisher, I don't have this completely "figured out yet". Not even close. But on a gut level I am convinced that energy-backed money makes a lot more sense in the modern world than PM-backed money. EJ, I would greatly appreciate your thoughts on this.
    I may be quite confused, but I see no sign here of any PM or energy backed money.

    I see rather signs of debt backed moneys of various nations and regions, that are exchanged and valued relative to each other using somehow prices of such goods as gold or oil to help determine the exchange ratio.

    The strengths and weaknesses of an actual precious metal backed currency are being discussed by way of obfuscating what is really happening, which is the further entrenchment of debt backed currency (all money is lent into existence.) They are presently about changing the "Reserve Currency" (the common denominator of such exchange ratios and most commonly referenced currency in major international trade contracts) from the U.S. Dollar to some internationally agreed fabrication.

    Whether the price of gold, oil or cows milk is part of calculating that fabrication matters not in the slightest to me.

    What matters to me is removing the exorbitant privilege that the financial elite have by means of controlling the big banks which lend into existence, at their discretion, all our money, with its associated claim on future earnings and property to repay that debt.
    Most folks are good; a few aren't.

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    Quote Originally Posted by ThePythonicCow View Post
    I may be quite confused, but I see no sign here of any PM or energy backed money.

    I see rather signs of debt backed moneys of various nations and regions, that are exchanged and valued relative to each other using somehow prices of such goods as gold or oil to help determine the exchange ratio.

    The strengths and weaknesses of an actual precious metal backed currency are being discussed by way of obfuscating what is really happening, which is the further entrenchment of debt backed currency (all money is lent into existence.) They are presently about changing the "Reserve Currency" (the common denominator of such exchange ratios and most commonly referenced currency in major international trade contracts) from the U.S. Dollar to some internationally agreed fabrication.

    Whether the price of gold, oil or cows milk is part of calculating that fabrication matters not in the slightest to me.


    What matters to me is removing the exorbitant privilege that the financial elite have by means of controlling the big banks which lend into existence, at their discretion, all our money, with its associated claim on future earnings and property to repay that debt.
    'Cow,

    You're certainly entitled to your opinions, but based on my reading of your values I don't think you're appreciating the relevance of a commodity standard yet.

    First, I agree that nobody is talking about backing currency with anything real, and that's sad to be sure. But face it: when power is as deeply entrenched as it is now with the monetary elite, you can't take it back with anything short of a very bloody revolution. That might happen some day but it will be a real mess. Meanwhile, I think it worthwhile to consider what might actually be realistic under the present power regime.

    The U.S. hasn't had a true gold standard since (I think) 1944. From then until Aug. 15, 1971, it had a pseudo-gold standard, i.e. a promise of convertibility in lieu of true backing of the dollar by actual metal. When you look at the history of the gold-convertibility "standard", it worked reasonably well to keep excessive money printing under control. The government knew that if it went too far in inflating the currency (as it eventually did), the counterparties would assert their conversion right (as they eventually did), and it would be a real mess. The real trouble started after 1971, when we went pure fiat.

    I'd love a truly commodity backed currency, but I don't think it realistic. The people you and I both despise have too much power to allow it to happen. On the other hand, they face a real mess with the USD not being a suitable reserve currency and needing a replacement. Bottom line, I think a convertibility standard based on energy is the best outcome one could realistically hope for. A currency truly backed by anything is beyond the reach of realistic expectations in the present global political environment, sadly. IMHO, for that to change would require a full-fledged revolution, and I don't think that's possible given the disparity in ability to project force between the people and the government that no longer serves them.

    xPat

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    That's a good reply, xPat.

    Quote Originally Posted by xPat View Post
    I'd love a truly commodity backed currency, but I don't think it realistic.
    The way things stand at present, I agree. It doesn't seem realistic to me either.

    But it is still important to keep in mind what matters, even if there is no evident path from here to there at present. (See below however for a hint of such a path.)

    Quote Originally Posted by xPat View Post
    The people you and I both despise have too much power to allow it to happen.
    Their power shall weaken. In particular, a better understanding of their dastardly ways can help weaken their power.

    Quote Originally Posted by xPat View Post
    On the other hand, they face a real mess with the USD not being a suitable reserve currency and needing a replacement. Bottom line, I think a convertibility standard based on energy is the best one could realistically hope for.
    Yes, a better reserve currency is needed, and an energy based one seems like an improvement (though it is still an issue that I don't worry about.)

    Quote Originally Posted by xPat View Post
    A currency truly backed by anything is beyond the reach of realistic expectations in the present global political environment, sadly. IMHO, for that to change would require a full-fledged revolution, and I don't think that's possible given the disparity in ability to project force between the people and the government that no longer serves them.
    If the exorbitant funding of the various and numerous U.S. military, intelligence and enforcement agencies were to decline dramatically, then they would suddenly look far less formidable.

    If the exchange rate of the Dollar were to fall dramatically, then the above exorbitant funding would (in real terms) decline dramatically.

    The above dramatic events do not seem impossible to me.
    Most folks are good; a few aren't.

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    A few posts back, I wrote:
    Whether the price of gold, oil or cows milk is part of calculating that fabrication matters not in the slightest to me.
    xPat replied with a sensible rebuttal, to which I replied:
    Yes, a better reserve currency is needed, and an energy based one seems like an improvement (though it is still an issue that I don't worry about.)
    After thinking about this some more, I don't like what I wrote. It misses the point I should have been making.

    In our current monetary system, all money is lent into existence. Most individuals, corporations and governments, including all who have "borrowed the most to spend the most", are in debt, typically deeply in debt, to the banks. Far too much power over our lives and institutions has accrued to the financial elite who control the money center banks.

    The collective power of our civilization is woefully out of balance, excessively centralized in the hands of a few. Near absolute power has corrupted nearly absolutely.

    Refinements to this current monetary system (such as an improved Reserve currency) extend the life of that system, and distract from the necessary task of replacing that system. Such refinements are therefore counterproductive.

    We should not do something that is counterproductive, just because we don't see a productive alternative.

    We must break the hammerlock on our civilizations monetary system that is held by the financial elite who control the major banks.
    Most folks are good; a few aren't.

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    Quote Originally Posted by xPat
    an "Oil Convertible" currency would similarly be almost as good
    I doubt we will see a GlobalBuck that is marked "good for one barrel of West Texas Intermediate Crude (WTIC)." Rather we will see a GlobalBuck that is good for some amount of national and regional currencies, at floating ratios computed by some gnomes in Basel, Switzerland, with the claim that those floating ratios reflect in part the prices of a barrel of WTIC in those currencies.
    Most folks are good; a few aren't.

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    xPat,
    It's an interesting idea, but a few issues -- maybe you can clarify for me:

    1 ) One of the reasons gold is useful as a currency (IMO) is that it doesn't have may uses (and that it is reasonably rare). Thus, we can usually have a fair estimate of how much gold is available in the world.
    2 ) Energy -- especially oil, waxes and wanes with the seasons. And it is *used*. Gone forever. I just have a hard time seeing how -- as we approach peak cheap oil/energy this would be accepted (or could even be tracked effectively). And in this day and age, terrorists would *love* such a target (today, France's currency reserves went up in a ball of fire....)
    3 ) The major powers will *never* hand over their printing presses to the Middle East. The oil producing nations will never accept a "worldation" of their oil/energy resources.

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    Quote Originally Posted by xPat View Post
    For a long time, my own view has been that if you could invent a way to put 1,000 barrels of crude oil in your pocket (as you can do with a kilo bar), and save it there indefinitely, then redeem it for its energy value any time you like... If that were possible, I contend that gold would immediately lose almost all its value.
    Could not disagree more. There are several aspects of an oil backed currency that make the whole idea totally unworkable.

    1. The oil represents the potential for use; but if ever used, the value completely disappears.

    On the other hand, Gold, never disappears. We constantly see reports of Gold that has been stashed away more than a thousand years ago, but the moment it is dug out of the ground, its value is immediately recognised.

    2. What happens to the value of the oil when, (note the use of the word "when"), another energy source is discovered?

    There is every possibility that someone will open the door to a new form of energy technology that costs much less to create and use. Once that moment arrives, your oil value drops to that of the new form of energy.


    3. Accidental loss? What are you going to say to your creditors when the oil store catches fire and you suffer a total loss? You will never receive the full value via insurance.

    Golds' real strength is the simple fact of its immutability; you cannot degrade the value by use, replacement, (has not occurred for thousands of years), nor accident. The one thing you can utterly rely upon is that Gold retains all it physical properties and cannot be replaced. That is the great strength of holding Gold.

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    Quote Originally Posted by Chris Coles View Post
    1. The oil represents the potential for use; but if ever used, the value completely disappears.
    Yes, that's exactly the point. Gold provides a theoretical standard measure against something whose supply remains approximately constant. Oil provides a standard measure against something that, once depleted, spells the end of modern civilization.

    I would be tempted to contend that this is the whole point, because once energy is gone, economic growth is gone. Tempted, that is, if not for your other point:

    Quote Originally Posted by Chris Coles
    2. What happens to the value of the oil when, (note the use of the word "when"), another energy source is discovered?
    Indeed, that argument wins out over mine. But I contend that if you could somehow have a proxy for the amount of usable energy left on the planet, it would make a sensible store of value, and the function of the currency depleting along with the power to fuel economic growth also depleting would be perfect. It would mean that the money supply equals the energy supply equals the remaining future of economic growth.

    Each time new sources of energy were discovered, that would increase the money supply which makes sense because the fuel to drive more economic growth would have been brought into existence. But if you use up the money supply (oil) without finding a replacement, the result is indefinite contraction commensurate with decay of the energy needed to fuel economic growth.

    I'm not smart enough to propose a currency system that achieves a money supply equal to the aggregate of all energy sources still available to mankind that can effectively be exploited to fuel economic growth, but I do contend that if that were possible, it would be the best system. In an ideal scenario, money would be destroyed as energy is consumed, and money would be created as new energy sources are harnessed and made available to society as fuel for economic growth.

    xPat

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    Quote Originally Posted by xPat View Post
    Yes, that's exactly the point. Gold provides a theoretical standard measure against something whose supply remains approximately constant. Oil provides a standard measure against something that, once depleted, spells the end of modern civilization.

    I would be tempted to contend that this is the whole point, because once energy is gone, economic growth is gone. Tempted, that is, if not for your other point:



    Indeed, that argument wins out over mine. But I contend that if you could somehow have a proxy for the amount of usable energy left on the planet, it would make a sensible store of value, and the function of the currency depleting along with the power to fuel economic growth also depleting would be perfect. It would mean that the money supply equals the energy supply equals the remaining future of economic growth.

    Each time new sources of energy were discovered, that would increase the money supply which makes sense because the fuel to drive more economic growth would have been brought into existence. But if you use up the money supply (oil) without finding a replacement, the result is indefinite contraction commensurate with decay of the energy needed to fuel economic growth.

    I'm not smart enough to propose a currency system that achieves a money supply equal to the aggregate of all energy sources still available to mankind that can effectively be exploited to fuel economic growth, but I do contend that if that were possible, it would be the best system. In an ideal scenario, money would be destroyed as energy is consumed, and money would be created as new energy sources are harnessed and made available to society as fuel for economic growth.

    xPat
    How would it be the best system? You would always have an unstable money supply and/or savings... Oil may be the play for the next 10-50 years due to peak oil, but when it gets expensive enough, we will come up with something else, that is for sure... Lest we forget oil has only been around and in use for about 120 years....

    1) Oil is always consumed and is getting harder to find, so once you cant find any more of it, it's supply will constantly decline until it is decommissioned as a source of energy- ie. shrinking.
    2) Usable energy - New forms of energy/technology can quickly destroy your oil savings. What happens when nuclear energy goes more main stream or becomes an order of magnitude safer due to technological advance, or goes into cars and oil becomes yesterdays news (a form of financial alchemy, leaving you with useless savings). You would have to constantly shift out of one asset to another for savings not necessarily profits. Money should be stable, immutable. Once you start looking at something you need to adjust into/out of lest it goes to zero or becomes obsolete, it is just an asset but not necessarily money.

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    Default Re: What do I think of the World Bank President's call for discussion of a new gold standard?

    Quote Originally Posted by xPat View Post
    Yes, that's exactly the point. Gold provides a theoretical standard measure against something whose supply remains approximately constant. Oil provides a standard measure against something that, once depleted, spells the end of modern civilization.

    I would be tempted to contend that this is the whole point, because once energy is gone, economic growth is gone. Tempted, that is, if not for your other point:



    Indeed, that argument wins out over mine. But I contend that if you could somehow have a proxy for the amount of usable energy left on the planet, it would make a sensible store of value, and the function of the currency depleting along with the power to fuel economic growth also depleting would be perfect. It would mean that the money supply equals the energy supply equals the remaining future of economic growth.

    Each time new sources of energy were discovered, that would increase the money supply which makes sense because the fuel to drive more economic growth would have been brought into existence. But if you use up the money supply (oil) without finding a replacement, the result is indefinite contraction commensurate with decay of the energy needed to fuel economic growth.

    I'm not smart enough to propose a currency system that achieves a money supply equal to the aggregate of all energy sources still available to mankind that can effectively be exploited to fuel economic growth, but I do contend that if that were possible, it would be the best system. In an ideal scenario, money would be destroyed as energy is consumed, and money would be created as new energy sources are harnessed and made available to society as fuel for economic growth.

    xPat
    Carbon Currency.
    Energy efficiency and low carbon energy wins.

    http://www.canadafreepress.com/index.php/article/19380
    Global currency replacing all paper currencies, limiting manufacturing, food production and people movement

    Carbon Currency: A New Beginning for Technocracy?

    By Patrick Wood Tuesday, January 26, 2010
    Introduction
    Critics who think that the U.S. dollar will be replaced by some new global currency are perhaps thinking too small.
    On the world horizon looms a new global currency that could replace all paper currencies and the economic system upon which they are based.
    The new currency, simply called Carbon Currency, is designed to support a revolutionary new economic system based on energy (production, and consumption), instead of price. Our current price-based economic system and its related currencies that have supported capitalism, socialism, fascism and communism, is being herded to the slaughterhouse in order to make way for a new carbon-based world.

    It is plainly evident that the world is laboring under a dying system of price-based economics as evidenced by the rapid decline of paper currencies. The era of fiat (irredeemable paper currency) was introduced in 1971 when President Richard Nixon decoupled the U.S. dollar from gold. Because the dollar-turned-fiat was the world’s primary reserve asset, all other currencies eventually followed suit, leaving us today with a global sea of paper that is increasingly undesired, unstable, unusable.
    The deathly economic state of today’s world is a direct reflection of the sum of its sick and dying currencies, but this could soon change.
    Forces are already at work to position a new Carbon Currency as the ultimate solution to global calls for poverty reduction, population control, environmental control, global warming, energy allocation and blanket distribution of economic wealth.
    Unfortunately for individual people living in this new system, it will also require authoritarian and centralized control over all aspects of life, from cradle to grave.
    What is Carbon Currency and how does it work? In a nutshell, Carbon Currency will be based on the regular allocation of available energy to the people of the world. If not used within a period of time, the Currency will expire (like monthly minutes on your cell phone plan) so that the same people can receive a new allocation based on new energy production quotas for the next period.
    Because the energy supply chain is already dominated by the global elite, setting energy production quotas will limit the amount of Carbon Currency in circulation at any one time. It will also naturally limit manufacturing, food production and people movement.
    Local currencies could remain in play for a time, but they would eventually wither and be fully replaced by the Carbon Currency, much the same way that the Euro displaced individual European currencies over a period of time.
    Sounds very modern in concept, doesn’t it? In fact, these ideas date back to the 1930’s when hundreds of thousands of U.S. citizens were embracing a new political ideology called Technocracy and the promise it held for a better life. Even now-classic literature was heavily influenced by Technocracy: George Orwell’s 1984, H.G. Well’s The Shape of Things to Come and Huxley’s “scientific dictatorship” in Brave New World.
    This paper investigates the rebirth of Technocracy and its potential to recast the New World Order into something truly “new” and also totally unexpected by the vast majority of modern critics.
    Background

    Philosophically, Technocracy found it roots in the scientific autocracy of Henri de Saint-Simon (1760-1825) and in the positivism of Auguste Comte (1798- 1857), the father of the social sciences. Positivism elevated science and the scientific method above metaphysical revelation. Technocrats embraced positivism because they believed that social progress was possible only through science and technology. [Schunk, Learning Theories: An Educational Perspective, 5th, 315]
    The social movement of Technocracy, with its energy-based accounting system, can be traced back to the 1930’s when an obscure group of engineers and scientists offered it as a solution to the Great Depression.
    The principal scientist behind Technocracy was M. King Hubbert, a young geoscientist who would later (in 1948-1956) invent the now-famous Peak Oil Theory, also known as the Hubbert Peak Theory. Hubbert stated that the discovery of new energy reserves and their production would be outstripped by usage, thereby eventually causing economic and social havoc. Many modern followers of Peak Oil Theory believe that the 2007-2009 global recession was exacerbated in part by record oil prices that reflected validity of the theory.
    Hubbert received all of his higher education at the University of Chicago, graduating with a PhD in 1937, and later taught geophysics at Columbia University. He was highly acclaimed throughout his career, receiving many honors such as the Rockefeller Public Service Award in 1977.
    In 1933, Hubbert and Howard Scott formed an organization called Technocracy, Inc. Technocracy is derived from the Greek words “techne” meaning skill and “kratos”, meaning rule. Thus, it is government by skilled engineers, scientists and technicians as opposed to elected officials. It was opposed to all other forms of government, including communism, socialism and fascism, all of which function with a price-based economy.
    As founders of the organization and political movement called Technocracy, Inc., Hubbert and Scott also co-authored Technocracy Study Course in 1934. This book serves as the “bible” of Technocracy and is the root document to which most all modern technocratic thinking can be traced.
    Technocracy postulated that only scientists and engineers were capable of running a complex, technology-based society. Because technology, they reasoned, changed the social nature of societies, previous methods of government and economy were made obsolete. They disdained politicians and bureaucrats, who they viewed as incompetent. By utilizing the scientific method and scientific management techniques, Technocrats hoped to squeeze the massive inefficiencies out of running a society, thereby providing more benefits for all members of society while consuming less resources.
    The other integral part of Technocracy was to implement an economic system based on energy allocation rather than price. They proposed to replace traditional money with Energy Credits.
    Their keen focus on the efficient use of energy is likely the first hint of a sustained ecological/environmental movement in the United States. Technocracy Study Course stated, for instance,
    Although it (the earth) is not an isolated system the changes in the configuration of matter on the earth, such as the erosion of soil, the making of mountains, the burning of coal and oil, and the mining of metals are all typical and characteristic examples of irreversible processes, involving in each case an increase of entropy. (Technocracy Study Course, Hubbert & Scott, p. 49)
    Modern emphasis on curtailing carbon fuel consumption that causes global warming and CO2 emissions is essentially a product of early Technocratic thinking.
    As scientists, Hubbert and Scott tried to explain (or justify) their arguments in terms of physics and the law of thermodynamics, which is the study of energy conversion between heat and mechanical work.
    Entropy is a concept within thermodynamics that represents the amount of energy in a system that is no longer available for doing mechanical work. Entropy thus increases as matter and energy in the system degrade toward the ultimate state of inert uniformity.
    In layman’s terms, entropy means once you use it, you lose it for good. Furthermore, the end state of entropy is “inert uniformity” where nothing takes place. Thus, if man uses up all the available energy and/or destroys the ecology, it cannot be repeated or restored ever again.
    The Technocrat’s avoidance of social entropy is to increase the efficiency of society by the careful allocation of available energy and measuring subsequent output in order to find a state of “equilibrium,” or balance. Hubbert’s focus on entropy is evidenced by Technocracy, Inc.’s logo, the well-known Yin Yang symbol that depicts balance.
    To facilitate this equilibrium between man and nature, Technocracy proposed that citizens would receive Energy Certificates in order to operate the economy:

    “Energy Certificates are issued individually to every adult of the entire population… The record of one’s income and its rate of expenditure is kept by the Distribution Sequence, so that it is a simple matter at any time for the Distribution Sequence to ascertain the state of a given customer’s balance… When making purchases of either goods or services an individual surrenders the Energy Certificates properly identified and signed.
    “The significance of this, from the point of view of knowledge of what is going on in the social system, and of social control, can best be appreciated when one surveys the whole system in perspective. First, one single organization is manning and operating the whole social mechanism. The same organization not only produces but also distributes all goods and services.
    “With this information clearing continuously to a central headquarters we have a case exactly analogous to the control panel of a power plant, or the bridge of an ocean liner…” [Technocracy Study Course, Hubbert & Scott,p. 238-239]
    Two key differences between price-based money and Energy Certificates are that a) money is generic to the holder while Certificates are individually registered to each citizen and b) money persists while Certificates expire. The latter facet would greatly hinder, if not altogether prevent, the accumulation of wealth and property.
    Transition

    At the start of WWII, Technocracy’s popularity dwindled as economic prosperity returned, however both the organization and its philosophy survived.
    Today, there are two principal websites representing Technocracy in North America: Technocracy, Inc., located in Ferndale, Washington, is represented at www.technocracy.org. A sister organization in Vancouver, British Columbia is Technocracy Vancouver, can be found at www.technocracyvan.ca.
    While Technocracy’s original focus was exclusively on the North American continent, it is now growing rapidly in Europe and other industrialized nations.
    For instance, the Network of European Technocrats was formed in 2005 as “an autonomous research and social movement that aims to explore and develop both the theory and design of technocracy.” The NET website claims to have members around the world.
    Of course, a few minor league organizations and their websites cannot hope to create or implement a global energy policy, but it’s not because the ideas aren’t still alive and well.
    A more likely influence on modern thinking is due to Hubbert’s Peak Oil Theory introduced in 1954. It has figured prominently in the ecological/environmental movement. In fact, the entire global warming movement indirectly sits on top of the Hubbert Peak Theory.
    As the Canadian Association for the Club of Rome recently stated, “The issue of peak oil impinges directly on the climate change question.” (see John H. Walsh, “The Impending Twin Crisis – One Set of Solutions?, p.5.)
    The Modern Proposal

    Because of the connection between the environmental movement, global warming and the Technocratic concept of Energy Certificates, one would expect that a Carbon Currency would be suggested from that particular community, and in fact, this is the case.
    In 1995, Judith Hanna wrote in New Scientist, “Toward a single carbon currency”, “My proposal is to set a global quota for fossil fuel combustion every year, and to share it equally between all the adults in the world.”
    In 2004, the prestigious Harvard International Review published “A New Currency” and stated,
    “For those keen to slow global warming, the most effective actions are in the creation of strong national carbon currencies For scholars and policymakers, the key task is to mine history for guides that are more useful. Global warming is considered an environmental issue, but its best solutions are not to be found in the canon of environmental law. Carbon’s ubiquity in the world economy demands that cost be a consideration in any regime to limit emissions. Indeed, emissions trading has been anointed king because it is the most responsive to cost. And since trading emissions for carbon is more akin to trading currency than eliminating a pollutant, policymakers should be looking at trade and finance with an eye to how carbon markets should be governed. We must anticipate the policy challenges that will arise as this bottom-up system emerges, including the governance of seams between each of the nascent trading systems, liability rules for bogus permits, and judicial cooperation. [Emphasis added]
    HIR concludes that “after seven years of spinning wheels and wrong analogies, the international regime to control carbon is headed, albeit tentatively, down a productive path.”
    In 2006, UK Environment Secretary David Miliband spoke to the Audit Commission Annual Lecture and flatly stated,
    "Imagine a country where carbon becomes a new currency. We carry bankcards that store both pounds and carbon points. When we buy electricity, gas and fuel, we use our carbon points, as well as pounds. To help reduce carbon emissions, the Government would set limits on the amount of carbon that could be used." [Emphasis added]
    In 2007, New York Times published “When Carbon Is Currency” by Hannah Fairfield. She pointedly stated “To build a carbon market, its originators must create a currency of carbon credits that participants can trade.”
    PointCarbon, a leading global consultancy, is partnered with Bank of New York Mellon to assess rapidly growing carbon markets. In 2008 they published “Towards a Common Carbon Currency: Exploring the prospects for integrated global carbon markets.This report discusses both environmental and economic efficiency in a similar context as originally seen with Hubbert in 1933.
    Finally, on November 9 2009, the Telegraph (UK) presented an article “Everyone in Britain could be given a personal ‘carbon allowance.’”
    “… implementing individual carbon allowances for every person will be the most effective way of meeting the targets for cutting greenhouse gas emissions. It would involve people being issued with a unique number which they would hand over when purchasing products that contribute to their carbon footprint, such as fuel, airline tickets and electricity. Like with a bank account, a statement would be sent out each month to help people keep track of what they are using. If their "carbon account" hits zero, they would have to pay to get more credits”. [Emphasis added]
    As you can see, these references are hardly minor league in terms of either authorship or content. The undercurrent of early Technocratic thought has finally reached the shore where the waves are lapping at the beach.
    Technocracy’s Energy Card Prototype

    In July 1937 an article by Howard Scott in Technocracy Magazine described an Energy Distribution Card in great detail. It declared that using such an instrument as a means of accounting is a part of Technocracy’s proposed change in the course of how our socioeconomic system can be organized.”
    Scott further wrote,
    “The certificate will be issued directly to the individual. It is nontransferable and nonnegotiable; therefore, it cannot be stolen, lost, loaned, borrowed, or given away. It is noncumulative; therefore, it cannot be saved, and it does not accrue or bear interest. It need not be spent but loses its validity after a designated time period.”
    This may have seemed like science fiction in 1937, but today it is wholly achievable. In 2010 Technocracy, Inc. offers an updated idea of what such an Energy Distribution Card might look like. Their website states,
    “It is now possible to use a plastic card similar to today’s credit card embedded with a microchip. This chip could contain all the information needed to create an energy distribution card as described in this booklet. Since the same information would be provided in whatever forms best suits the latest technology, however, the concept of an ‘Energy Distribution Card’ is what is explained here.”
    If you study the card above, you will also note that is serves as a universal identity card and contains a microchip. This reflects Technocracy’s philosophy that each person in society must be meticulously monitored and accounted for in order to track what they consume in terms of energy, and also what they contribute to the manufacturing process.
    Carbon Market Players

    The modern system of carbon credits was an invention of the Kyoto Protocol and started to gain momentum in 2002 with the establishment of the first domestic economy-wide trading scheme in the U.K. After becoming international law in 2005, the trading market is now predicted to reach $3 trillion by 2020 or earlier.
    Graciela Chichilnisky, director of the Columbia Consortium for Risk Management and a designer of the carbon credit text of the Kyoto Protocol, states that the carbon market “is therefore all about cash and trading – but it is also a way to a profitable and greener future.” (See Who Needs a Carbon Market?)
    Who are the “traders” that provide the open door to all this profit? Currently leading the pack are JPMorgan Chase, Goldman Sachs and Morgan Stanley.
    Bloomberg noted in Carbon Capitalists on December 4, 2009 that
    “The banks are preparing to do with carbon what they’ve done before: design and market derivatives contracts that will help client companies hedge their price risk over the long term. They’re also ready to sell carbon-related financial products to outside investors.”
    At JP Morgan, the woman who originally invented Credit Default Swaps, Blythe Masters, is now head of the department that will trade carbon credits for the bank.
    Considering the sheer force of global banking giants behind carbon trading, it’s no wonder analysts are already predicting that the carbon market will soon dwarf all other commodities trading.
    Conclusion

    Where there is smoke, there is fire. Where there is talk, there is action.
    If M. King Hubbert and other early architects of Technocracy were alive today, they would be very pleased to see the seeds of their ideas on energy allocation grow to bear fruit on such a large scale. In 1933, the technology didn’t exist to implement a system of Energy Certificates. However, with today’s ever-advancing computer technology, the entire world could easily be managed on a single computer.
    This article intended to show that
    • Carbon Currency is not a new idea, but has deep roots in Technocracy
    • Carbon Currency has grown from a continental proposal to a global proposal
    • It has been consistently discussed over a long period of time
    • The participants include many prominent global leaders, banks and think-tanks
    • The context of these discussions have been very consistent
    • Today’s goals for implementing Carbon Currency are virtually identical to Technocracy’s original Energy Certificates goals.

    Of course, a currency is merely a means to an end. Whoever controls the currency also controls the economy and the political structure that goes with it. Inquiry into what such a system might look like will be a future topic.
    Technocracy and energy-based accounting are not idle or theoretical issues. If the global elite intends for Carbon Currency to supplant national currencies, then the world economic and political systems will also be fundamentally changed forever.
    What Technocracy could not achieve during the Great Depression appears to have finally found traction in the Great Recession.
    Bibliography & Resources

    Scott & Hubbert, Technocracy Study Course, Technocracy, Inc., 1934
    Hanna, Toward a single carbon currency, New Scientist, 1995
    Victor & House, A New Currency, Harvard International Review, Summer 2004
    Hannah Fairfield, When Carbon Is Currency, New York Times, May 6, 2007
    M. King Hubbert & The Technocracy Technate Design – Historical blog
    Everyone in Britain could be given a personal ‘carbon allowance’, Telegraph (UK)
    Network of European Technocrats website for Europe
    Technocracy, Inc. – website for U.S.
    Technocracy Vancouver – website for Canada
    Association for the study of Peak Oil & Gas – website for Peak Oil
    Now I have to get back to my Graphene studying.
    http://en.wikipedia.org/wiki/Graphene

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