New currency?

[JoeP]

Bad idea, only works in Science Fiction.

The moment something like this exists someone goes out and builds 200 nuclear reactors (or other form of energy producing system) and stores the power they create. That would instantly crash the market as the value of stored energy would plummet. Not to mention if a fusion reactor was ever created it would instantly destroy the worlds economy, the cost of energy would be so low as to be nearly worthless.

Measurements of wealth need to be intangible otherwise their easily manipulable. The current system use's the market rules of supply vs demand and new wealth is only created through investments. Otherwise wealth is just constantly changing hands and going in circles.

This is a very good point.

I can see similar problems with gold/silver standards. Suppose some vast resource is eventually found, or a cheap way to transmute other metals into gold/silver is found. The value would drop through the floor.

Money is an abstract concept. Fiat is the best solution if all the abuse could somehow be eliminated. But the constant devaluation and the ability of government to indiscriminately print in order to siphon off wealth (basically another form of tax) is out of control. It is going to fail at some point.

Maybe we can base value on some kind of index of stuff. Energy, food, precious metals -- a sort of broad cross section of things the world needs and consumes on a daily basis. That way if only one or a few items goes through the floor (e.g. energy, silver, corn), the overall effect on the value of a dollar is minimal. This would also limit the capability of hoarders to manipulate prices as there are too many things needed to corner the market on to have effect.

[hanelyp]

The moment something like this exists someone goes out and builds 200 nuclear reactors (or other form of energy producing system) and stores the power they create.

How would you store the energy? Absent a tech breakthrough, utilities work mostly by generation on demand.

That would instantly crash the market as the value of stored energy would plummet. Not to mention if a fusion reactor was ever created it would instantly destroy the worlds economy, the cost of energy would be so low as to be nearly worthless.

How is investment to produce vast quantities of a commodity the economy can use going to crash the economy, even if that commodity is the currency of the realm? How do you expect to profit by investing in such infrastructure if the value produced crashes? The optimistic "too cheap to meter" that used to be quoted for fusion power is hardly "nearly useless". It only meant that flat rate service would dominate. Much like how consumer network service is billed in some cases.

Measurements of wealth need to be intangible otherwise their easily manipulable. The current system use's the market rules of supply vs demand and new wealth is only created through investments. Otherwise wealth is just constantly changing hands and going in circles.

On the contrary, tying currency to a tangible commodity makes arbitrary manipulation more difficult. Fiat currency supply can be inflated without bound without the restriction of producing a commodity to back the value.

[kcdodd]

I haven't yet sat down to figure out many of the consequences. But I don't see any problem in what has been mentioned so far. However, I think the obvious is that such an economy would work, and be analyzed, in different ways than the current one. Maybe better, maybe worse. Not sure yet.

However, collapse because of energy glut is not one of them. The thing you are missing is that if energy doesn't cost anything, then nothing costs anything. Labor would cost nothing because food production, transportation, etc are essentially free at that point. Infinite energy supply is utopia.

What I have been trying to understand is how human labor gets valued in such an economy. People don't consume energy in exactly the way machines do. We use it to power our heating, lights, cars, etc. You could think of a worker as consuming energy then similar to a machine from a business standpoint, but that "energy" stays in the economy until it is actually used up. There still seems to be some analysis left to do on this.

Inflation with energy based currency would act differently though. It seems to me that no matter how much you make, it will always be worth the same if everything else is held constant. That would be because it would still require X joules of energy to produce Y amount of goods, no matter how much energy you had stored up. Only our efficiency in using it would affect "cost". If we are more efficient, then energy is more valuable because we can do more with each joule. Opposite of normal inflation which destroys the value of the currency. Advancement would tend to deflate the currency (if advancement = more efficient).

[JoeP]

hanelyp, I'm not so sure about the points you raised.

The example may be bad in that storing electrical power was used as example in hording the basis of currency. But his central point is a good one.

Hording and then selling to manipulate markets would be a lot easier in energy since it is easier to do when compared to, say, hording gold. Gold is rare enough and difficult to mine (currently), which makes it difficult to fully control.

An entity could, build lots of power plants and switch them online or offline enough to manipulate prices quite. Think about the way we see OPEC control oil prices at their whim by switching off or on large numbers of well pumps today.

Even better...lets look at the real backend.

Oil, gas and coal as the fuel will still be the kingpins. Whomever controls those, controls the prices. These fuels have the best price point over everything.

energy=currency
& oil/gas/coal = energy
therefore, oil/gas/coal=currency

These fuels will be abundant for the next century or two.

Legislators will probably try to fix it by taxing the heck out of coal, oil, gas, and fission. Probably make things worse.

[ladajo]

Hording and then selling to manipulate markets would be a lot easier in energy since it is easier to do when compared to, say, hording gold. Gold is rare enough and difficult to mine (currently), which makes it difficult to fully control.

Tell that to Russia.

[CharlesKramer]

The idea that money IS energy is old -- dating back at least to the Technocrats of the 1930s.

In effect, a nation's wealth can be measured in terms of energy per capita. This reflects in a very literal sense the more a person purchases (whether food or automobiles) the more energy it took. Food calories have a precise equivalent in fossil fuel calories (including natural gas and petroleum as feedstocks to make fertilizer and insecticide, and all the costs of transport and refrigeration and food processing) but so does everything else. Taking metals out of the ground and turning them into ipods (or into anything) has a direct equivalent in energy.

In a sense, the current banking crisis reflects the short-fall in energy per capita. Banks loan out the same dollar many times -- which would be a fraud unless when the loan is due the country's wealth has expanded to match.

Our current monetary system is premised on perpetual expansion -- which unforunately the earth cannot sustain (as Professor emeritus Albert A. Bartlett has been explaining for decades). Impliciity a steady-state economy (one not premised on perpetual growth) would require a different monetary system.

The technocrats wanted to make that equivalency -- between $1 and the energy it represents -- to be made explicit. Among other things it would theoretically encourage energy conservation.

For more information -- see below or Google

Technocracy "energy unit" monetary

- Charles

==========================
http://dspace.mit.edu/bitstream/handle/ ... 057784.pdf.

"Since energy is the one commodity present in all processes and
since there is no substitute for it, using energy as the physical
measure of environmental and social impacts, of material, capital,
and manpower requirements, and of reserve quantities reduces the
need to compare or add 'apples and oranges. "'3

Moreover, the energy unit is potentially much more stable than the dollar, for the energy involved in work is an unambiguous and unchanging measure of what has been accomplished.

[hanelyp]

As I said early in this thread, not all forms of energy have equal economic value. Currency backed by "energy", without reference to the form, would be highly highly nebulous value. In addition, while all economic products require an investment of energy, alternate methods may require different amounts of energy for the same product. This all makes the energy invested in production a poor measure of proper price.

But that usable energy has value is undeniable.

[kcdodd]

The price of the product is really based on how much the person making said product consumes in their life (ie their salary). Plus the actual resources used to make the product. The more we consume per capita, the more products cost to make above their basic resource value, with all other factors held constant. My question is, is there really any basic resource value, since resources are also produced by people.

[Teahive]

The price of the product is really based on how much the person making said product consumes in their life (ie their salary). Plus the actual resources used to make the product. The more we consume per capita, the more products cost to make above their basic resource value, with all other factors held constant.

The more we consume per capita, the more we must have produced per capita.

[CharlesKramer]

As I said early in this thread, not all forms of energy have equal economic value

A BTU is a BTU and a joule is a joule.

Energy per capita is a very useful metric -- the only really meaningful one:

-- to evaluate a culture's prosperity

-- to analyze the prospects of a growth culture (which depends on ever more energy) v. a steady-state sustainable culture (which is inevitable whether we plan for it, or disastrously do not)

CBK

[kcdodd]

The idea that money IS energy is old -- dating back at least to the Technocrats of the 1930s...

Good read. Made me think though that instead of calling it the energy theory of value, it should at most be called energy theory of cost. As was mentioned numerously, value cannot be placed on the object based on its cost. However, if I value something at X, and I then buy it at X, then it then did cost me X. But it probably did not cost the previous person X. Obviously the current cost is not really tracking the content of the object itself, which seems to be what Technocrats wanted to do. But is in some way a net history of the object and everyone that possessed it up to that point. So, I don't think the goal should be assigning value to objects based on their potential energy content, or even the energy that went into making it per se.

What I would envision is simply an "energy" backed currency, and that's all. All the current cost of a product would tell you is some fraction of the total energy spent or stored by all the people who brought it to that point. Not just the energy used to run the mines and machinery, but also the energy spent on the lighting above the dining room table of the workers, and the sandwich shop where the worker eats, and the teacher of the server at the sandwich shop, etc.

[hanelyp]

A BTU is a BTU

Is a BTU at 50C worth the same as a BTU at 1500C? I expect the engineer trying to generate electricity or mechanical work would say no.

[CharlesKramer]

A BTU is a BTU

Is a BTU at 50C worth the same as a BTU at 1500C? I expect the engineer trying to generate electricity or mechanical work would say no.

The point is cash is *already* crudely equivalent to money.

Everything of value comes out of the ground, or from human or animal work. The closest equivalency of value is energy itself. Agriculture, metal extraction, and so on all depend very directly on the availability and expense of energy. More energy per capita means a more prosperous society -- and the reverse is inevitably also true.

Among other things this explains America's wealth -- which since the 1850s has been an expression of petroleum, coal and natural gas. Bring back $20/barrel oil and cheap Pennsylvania anthracite and the 60% iron ore of the Mesabi range and Gary Indiana would be a steel town again.

Similarly, England was prosperous for a few decades not because (or despite) Margie Thatcher but because of North Sea oil. And now that North Sea oil is in decline, notice the change in British fortunes?

This reality is often hidden by discussions about free market v. regulation, the dangers and benefits from unions, Democrat v. Republican, and so on, and it's mostly so much hooey -- a form of misdirection, and cognitive dissonance to hide from the scary reality that unless something else (say fusion) comes along, the amazing experiment of industrial society will end as fossil fuels dwindle.

America's "power" is a euphemism for power in the most literal sense. The Soviets arguably beat Nazi Germany, but the USA helped (and had a dominant role in the alliance) because it lay oil pipelines (literally flexible pipe) across the channel and kept them filed.

This is a point that is often missed -- witness the discussions (ridiculous, IMO) (and not here) arguing that money is really gold. Even more ridiculous is the notion American wealth can be sustained by a nation of programmers, hair dresses and other service providers. Those are all fine activities, but ultimately if value is not coming out of the ground it is not being created.

Another discussion this is pertinent to is fracking (hydraulic drilling, especially for natural gas). Does it represent a potential disaster to the USA water supply? Maybe. But it also may herald the re-industrialization of the USA (as fracking proponents claim). I'm not taking a side in the debate -- my point is the debate exists, few are aware of it. Because energy = money = prosperity the pressures to permit fracking are enormous.

With current technology no amount of wind/solar/geothermal etc. can substitute for natural gas /oil/coal, especially when you consider:

-- natural gas is an industrial feedstock arguably too valuable to burn

-- the energy return for energy invested. Natural gas is literally a gift of energy -- presto out of the ground nearly ready to use without having to do a lot of expensive work like exploit slight temperature variations in a tidal pool or the vagaries of wind. Anyway, with current technology there aren't enough raw materials (for example, silicon and silver) to build solar panels even if the will existed).

Maybe life would be better without fracking -- a more humane world back to singing around the piano instead of in isolation with iPod headsets -- but without fracking (or cheap fusion, or something) energy per capita will continue the decline it recently started, and life will change.

The technocrat view is (I believe) that monetary valuations have historically been arbitrary and manipulated -- and are too crudely correlated with the real materic, which is the energy equivalent of a dollar.

Making the equivalency between a currency unit and a quantity of oil (or a basket of energy sources) undoubtedly has imperfections, but it is a logical (and only real) way to try to reflect the reality of what currency is, and to encourage conservation and efficiency.

Ahem... I sorta went with it, didn't I?

[paperburn1]

So I guess the real problem is how do we tie a unit of energy to a labor amount. one dollar represents a unfixed unit of work so we need to make a same type conversion scale that does that but also compensated for "free found" energy and the fact that we convert/generate and use on demand energy and do not store energy.
Am i understanding this right?

[hanelyp]

Free markets generally have no problem finding value equivalence between commodities. What can turn a given commodity into currency is preference in making trades in that commodity.