Standardizing on energy?

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r's picture
r
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Standardizing on energy?

Does anyone here have any thoughts about the feasibility of energy as a currency? I first read about the idea in this forum but didn't take it seriously at the time.

 

This is not a new idea; B. Fuller proposed a world kilowatt hour dollar.

 

Energy could peg money to a standard not only by setting so many ergs to a dollar but to the total amount of energy available.  This would replace measuring the economy's health by how much energy is spent -- absurd today because we don't know actually how much there is to spend.  So, the less total energy available the less money is available thereby counter-acting inflation.

 

Looking back, when there was a gold standard the control and availability of silver and gold contributed to the cycle of depressions and recessions:

 

http://en.wikipedia.org/wiki/Long_Depression

 

"Because of the Panic of 1873, governments depegged their currencies, to save money. The demonetization of silver by European and North American governments in the early 1870s was certainly a contributing factor. The Coinage Act of 1873 in America was met with great opposition by farmers and miners, as silver was seen as more of a monetary benefit to rural areas than to banks in big cities. In addition, there were Americans who advocated the continuance of government-issued fiat money (United States Notes) to avoid deflation and promote exports. The western US states were outraged--Nevada, Colorado, and Idaho where huge silver producers with productive mines, and for a few years mining abated. The resumption of the US government buying silver was enacted in 1890 with theSherman Silver Purchase Act. [...]

Monetarists believe that the 1873 depression was caused by shortages of gold that undermined the gold standard, and that the 1848 California Gold Rush, 1886Witwatersrand Gold Rush in South Africa and the 1898-99 Klondike Gold Rush helped alleviate such crises."

 

This will never be considered a realistic idea until enough people see the need and it becomes part of the political conversation.  But it could someday be a local currency and that is how it is proposed on the Internet.

Ave Atque Vale.

Damnthematrix's picture
Damnthematrix
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Re: Standardizing on energy?

The problem with energy as a currency is that once you've used it up, it's, well, GONE!

r's picture
r
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Re: Standardizing on energy?

Hi DTM,

Thanks for responding.

Somewhere Dr. CM wrote it's not about running out ... it's about exponential use...etc. -- but I can't find the quote.  I agree that we will run out of oil and probably uranium someday -- but I don't agree we will run out of energy -- even if that energy is derived from waterfalls and oxen.  And in comparison how would the gold standard work in the future in an isolated county in West Virginia, for example?  That's the question I was trying to address... [sheesh]

Thomas Hedin's picture
Thomas Hedin
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Re: Standardizing on energy?

Damnthematrix:

The problem with energy as a currency is that once you've used it up, it's, well, GONE!

And the problem with our monetary system is that once you make a principle payment back to the bank the exact same thing happens!  It gets destroyed and removed from ciculation.

plato1965's picture
plato1965
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Re: Standardizing on energy?

 Tempted to make a nitpicking pedantic comment about conservation of energy being a fundamental law .. but I'll resist... don't want the thread degrading into entropy... :o)

 Anyhoo.. this seems semi-pertinent to the thread title...

 http://www.independent.co.uk/news/business/news/uk-treasury-lukewarm-on-plan-for-iceland-to-pay-debt-in-energy-1935130.html

 

 especially since it contains this little gem...

 "A massive energy transition investment wave can help prevent a collapse from peak oil, and this can also help save the financial system."

 

 and this...

 "Renewable energy facilities are the new and better gold,"

 

 

 

plato1965's picture
plato1965
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Posts: 615
Re: Standardizing on energy?

 

 Recently came across the work of Frederick Soddy, an english chemist who had some perceptive ideas about 2 of the 3 E's.. in the 1920's

 http://nesara.org/articles/soddy88.htm

  A few interesting quotes..

 "The threatened collapse of our Western civilization has nothing to do with the political issues between capitalism and communism, but is the consequence of its false money system."

  "The real evil is that we now have a concertina instead of a currency."

  "Money is not wealth, even to the individual, but the evidence that the owner of the money has not received the wealth to which he is entitled, and that he can demand it at his own convenience."

 "It was indeed a revelation to the author, accustomed to think of the battle for liberty of thought in scientific matters as having been fought and won centuries ago at the time of Galileo and the Inquisition, to find that in economics, as distinct from physics, it has not yet been won at all... If economics were really a science, it would not need to protect itself from criticism by a conspiracy of silence."


 

 

 

 

 

EndGamePlayer's picture
EndGamePlayer
Status: Platinum Member (Offline)
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Posts: 546
Re: Standardizing on energy?

I agree with Plato - but will add - "energy currency" will not be a single "thing" but remain relative to food, water, shelter, luxury items, technology and entertainment. . . more or less.

plato1965's picture
plato1965
Status: Platinum Member (Offline)
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Posts: 615
Re: Standardizing on energy?

 Reading Soddy is like a revelation... it's as if he'd seen the Crash Course in the 1920's..

 

  http://billtotten.blogspot.com/2009/07/mr-soddys-ecological-economy.html

  http://billtotten.blogspot.com/2009/07/economic-thought-of-frederick-soddy.html

The main defect in the economic system was, for Soddy, the practice of fractional reserve banking whereby the private banking system was enabled to create money, thus appropriating what he called the Virtual Wealth of the community, which it then lent at interest. The concept of "virtual wealth" plays a key role in Soddy's analysis. Essentially it is the aggregate value of real wealth which individuals in the community voluntarily abstain from holding in order to hold money instead.

 

 Although debt can follow the law of compound interest, the real energy revenue from future sunshine, the real future income against which the debt is a lien, cannot grow at compound interest for long. When converted into debt, however, real wealth "discards its corruptible body to take on an incorruptible" (Money Versus Man, page 28). In so doing, it appears "to afford a means of dodging Nature" (page 24), of evading the second law of thermodynamics, the law of random, ravage, rust, and rot. The idea that people can live off the interest of their mutual indebtedness (Wealth, page 89) is just another perpetual motion scheme - a vulgar delusion on a grand scale. Soddy seems to be saying that what is obviously impossible for the community - for everyone to live on interest - should also be forbidden to individuals, as a principle of fairness. If it is not forbidden, or at least limited in some way, then at some point the growing liens of debt holders on the limited revenue will become greater than the future producers of that revenue will be willing or able to support, and conflict will result. The conflict takes the form of debt repudiation. Debt grows at compound interest and as a purely mathematical quantity encounters no limits to slow it down. Wealth grows for a while at compound interest, but, having a physical dimension, its growth sooner or later encounters limits. Debt can endure forever; wealth cannot, because its physical dimension is subject to the destructive force of entropy. Since wealth cannot continually grow as fast as debt, the one-to-one relation between the two will at some point be broken - that is, there must be some repudiation or cancellation of debt. The positive feedback of compound interest must be offset by counteracting forces of debt repudiation, such as inflation, bankruptcy, or confiscatory taxation, all of which breed violence. Conventional wisdom considers the latter processes pathological, but accepts compound interest as normal. Logic demands, however, that either we constrain compound interest in some way, or accept as normal and necessary one or more of the counteracting mechanisms of debt repudiation. {2} As Soddy put it,

You cannot permanently pit an absurd human convention, such as the spontaneous increment of debt [compound interest], against the natural law of the spontaneous decrement of wealth [entropy] [Cartesian Economics, page 30].

 

 If everyone tried to exchange his money holdings for real assets it could not be done, because all real assets are already owned by someone, and in the final analysis someone has to end up holding the money. So Virtual Wealth does not really exist as actual wealth over and above the value of real assets, which is why it is called Virtual. Yet people behave as if Virtual Wealth were real, because at an individual level money is easily exchangeable for physical assets. The phenomenon of Virtual Wealth must occur in a monetary economy, unless the money is itself a commodity that circulates at its commodity value.

 http://www.nationaleconomy.net/soddy.html

 “My main conclusion . . . was that it was entirely due to the fictitious money system which arose contemporaneously with the birth of the scientific civilization and that now was being purposefully and consciously used to frustrate it and to preserve the earlier civilizations founded on slavery.”

 

  " Speak the truth though the heavens fall " -   Frederick Soddy (1877-1956)

 

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