In my previous post, I have explained readers about gold standard as one way to fix our economic situation since we can put constraint on banks and governments to inflate our money supply.
I have been thinking about this concept for a while. While gold has a lot of nice physical properties like its eternal durability and convenience to bring and store around, it lacks of practical usage made me hesitate to use it as the only medium for money. Because in my opinion, commodity money should ideally have tangible and practical uses like grains or real estate.
After a bit of brainstorming and deriving from thinking that US deal with Middle Eastern countries (including Saudi Arabia) to use US dollar for trading petroleum made me think that energy could probably be used as form of money. And it turned out that I am not alone for thinking in such direction.
I found this website which suggested that US dollar should be supported by electricity. I am quite agree with his opinion that digging gold from the ground and storing it inside vault is like digging ditch and filling it again.
However, I still have several objections to use electricity as money:
– Producing a lot of electronics have a lot of harmful environmental impact as they cannot be easily recycled and a lot of electronics are not even basic needs (stereo set, air-conditioner, game console, television etc).
– Electricity is not easy to store and transfer like gold. The writer speculated that it could be transferred by superconductor cables in the future. However, for such long distance, there could be a lot of energy loss and it is very unefficient unlike gold.
– Electricity production is still heavily relied on fossil fuel which is not renewable and could cause future inflation in energy price. Although the writer said he will take this into account when fixing the kWh to dollar rate, it is very difficult to see how it can be anticipated properly.
Probably the best way is to diversify your money to several key commodities. For me, it would be gold, energy and real estates.