I remember a picture i saw of Indians-over in India Indians, after their last big quake. people hoard greenbacks there, as well as gold. People were standing in the street waving around totally useless franklins, trying for some clean water or edible food or anything useful One minute, money was valuable, the next, useless. it can go that quick. Gold has been an attempt to temper that phenomenon, but it falls way short, too. In "in between" times, not as drastic as an earthquake, but 'sorry " times, it's half way there.. During the big government gold grab when they made owning bullion illegal, many people held back, with good reason. Quite a few deals were made where on paper x amount of paper currency exchanged hands, but under the table, real jingle jangle shiny stuff accompanied the transactions.
In Europe during the war, II, as paper currencies started to falter, in this country or that, this was observable, and many a farmer exchanged some sausage and bread for what was just previously maybe large sums of notes, or coin, or collectables. It's the social stability part, and the phenomenon of artificially maintained cities-and urban populations- based on trading wealth mostly, as opposed to creating wealth, in contrast to the rural (outside the city proper) areas and into the agricultural agrarian areas were stuff is grown into real wealth and manufactured goods get produced into real wealth. As the populations fled the cities, there was a direct drop in the worth and 'exchangeability" of anything that WASN'T the true end user "stuff".
Me, I like the end user stuff. I think hoarding any sort of money is silly, I think it should be converted to durable goods in some fashion-land, stock, etc, because that's the 'wealth" you really want anyway, might as well get it when ya can.
I mean, look at all these people who just can't get past the point of thinking they "lost" money in some stock bubble, when it never existed except as wild hysterical theory, because they never took advantage of converting it. Only a tiny percentage was an actual representation of 'wealth". They pick some high bid-up point in a speculated stock-a point that in no way in one hundred years would the company actually be "worth" and then proceed to use that figure as if it's really 'wealth" in hand to complain about how much they "lost".
It's a disconnect. The sum total of the market and paper currency supply can never be cashed out and exchanged for true wealth, not at the "claimed" ratio of the pseudo traded wealth as opposed to reality based wealth. The professional skimmers and traders maintain constantly that by following their magic beans and convulted recipes and theories that this is possible-but that's only because none of them actually produce any of it, so of course they will skate on promoting reality to the suckers and rubes. It's a fabulous congame for them, and they don't even have to wear silly looking carnival hucksters suits as they do it.
It's the same with all paper currency, and the digitized versions we use now. I love scary gary norths label - "electronic promises of money". It's hilariously true if you think about it.
For a blend of the two that might work - and be fair and a lot more stable and still help bring about "economic growth" - in the specie versus fiat credit notes debate-, my idea is to have a top 100 commodities (throw gold in there, what the heck) backed sort of money. A blend of commodites represented by greenbacks for convenience purposes. Sort of a stock certificate that can't be inflated or artificially bid up, except by actual production, actual produced wealth. The paper is always based on the nations store of the top one hundred traded commodities that got produced and traded that year-what people value as 'wealth" now anyway, that's why they are the top 100 traded. The list could change as society and technology changes, that part is really not important as long as it's timely, say the list gets updated once a year by a combination of accounting, and inventory. All that is done already, the figures are avaialble to use. It's portable -we can use the same greenspans, makes no difference- measurable, it's really "there", the paper is really, really "backed' by something-a lot of valuable somethings- and a more-true and honest indicator of the nations actual true and available and useful "money" /wealth supply. it's not backed by some pompous manipulators insider trading actions in the currency- poof created markets, it's not backed by a single weird and scarce element, it's not backed by someone else's future maybe yes maybe no actually working and producing, nope, it would be backed by what society has already decided is valuable that year, by automatic default of interest and production. It would be self regulating as well, because people will always want exactly what they want, so instead of trying to artificially raise or lower the supply, it would just naturally grow nice and steady, and would be eminently adaptable to a changing world.
The suggestion to back money with a commodity other than gold was mooted during the depths of the Great Depression by two well respected economic thinkers, Irving Fisher, a professional economist, and Benjamin Graham, whom I know was an investor and believe studied economics. I haven't read all of Adam Smith's Wealth of Nations, but I have read a paper which discusses Real Bills theory, and the author argues that even though our money is not convertible, it is still backed.
http://www.csun.edu/~hceco008/rbd1197.doc
Your argument about the real value of stocks is very good - I agree completely. The price on any given day is only what the float is worth - if the people holding all the shares tried to dump them at the same time the price would go to zero or near it. So multiplying the total amount of shares outstanding times the sales price doesn't really tell you much. If your shares decline in value just sitting in your desk then you lost nothing real - it was imaginary wealth.