[RipSawyer]

This will seem kind of strange, but money is the same thing as credit.

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This may seem kind of strange, but REAL money is not quite the same as credit. A paper dollar with nothing behind it is another matter.

[Iris7]

It is true that government credit relies on trust (as does credit in general) and that it is much easier to trust a government that cannot create money for any or no reason. It is quite easy for a government that creates money whenever it wants to queer the deal, that is, the promise that a dollar today has the same value a dollar will have tomorrow and that if the future dollar has a different value from the value today the changes will be predictable. That is, that a dollar is a "store of value", as they say.

Right now the dollar IS backed by gold in practice. Anyone wishing to exchange a dollar as value for gold is free to do so. Unfortunately for the private individual the value relationship between dollar and gold is not fixed. Making it fixed is, unfortunately for the individual, impossible without great effort, skill, and luck.

I would prefer an officially gold backed dollar in which a dollar can be exchanged at will for a fixed mass of gold. Gold is not perfect however. Gold production currently is at a very high rate for technical reasons.

A dollar based on a fixed quantity and quality of crude oil would work as well as one based on a fixed quantity of gold at least on a year over year time scale. Technology change is the wild card. Commodities in general will not work. John Law tried the time discounted value of real estate with disastrous results. The tremendous flow of silver through Spain from Potosi et al. in the 17th Century caused very destabilizing inflation in Europe. Destroyed Spain as a great power as well.


Commodity baskets have not been found workable either.