Why isn't our economy based on energy rather than gold?

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No, I meant a currency that is backed by energy, more exactly the ability for a nation to do work or manufacture goods, just like modern currencies are backed by gold.

Beside energy, just like gold, is limited, as explained by the First law of thermodynamics. It won't disapear, it will just change into other energy (for example chemical energy in food will be transformed in kinetic energy when you kick a soccer ball after eating food). Gold is matter, so it's not just ''Energy economy vs. Gold economy'' it's more like ''Energy economy vs. Matter economy''...

In this case, a 1 KWh bill would be backed by 1KWh of energy. But how do you know that they'd trade 1 KWh of energy for the bill? Because they said so.

Money would still have to be based on trust, it would just have a backing that it doesn't need.

I don't know about other currencies, but U.S. currency hasn't been backed by gold for awhile.

Energy and matter are much more closely related than we think they are.

The economy is based on goods and services, not gold. As long as people are willing to accept currency in exchange for goods and services (and thus expect to be able to exchange the currency back for goods or services) it works. In fact, dollars aren't exchangeable for gold anymore since 1971.

I believe the Swiss Franc was backed in silver until fairly recently, but they have gone to a fiat system as well.

I would love to see the US go back to issuing silver certificates, but we are so far in debt that such a system simply can't happen any more.

I think I remember talking with my uncle about this a long time ago.

Energy takes energy to distribute...so they found the most convenient (and least-energy expended) method to spread the energy.

Eh, think this was touched on earlier.

One big thing about currencies is that we do not consume them. We consume a lot of energy. And the price of energy is really erratic.

The thing with dollars is we have no use for them other than for buying things. They have no inherent value. A unit of energy, I have hundreds of uses for.

The thing is is that the modern world is already priced in terms of energy, yet the medium used for that expression is money. When oil goes up, foods, metals and other commodities go up and that's because oil is needed to produce and distribute those goods. So our basic commodities are already priced in terms of energy, though expressed in the form of dollars.

True, but disagree in depth. Our economy is based on energy, and energy influences the cost of goods, the cost of goods is not based solely on energy. Energy has a degree of volatility that we don't see in the cost of goods or services, or even gas and electricity. They are connected though.

If you don't mind me asking swbluto, you mentioned you're shorting gold, what other investment plays do you have, or do you have in mind?

This is true there are more factors at play in determining the cost of things besides energy, but the bulk of the cost is directly and indirectly related to oil costs (Mostly in the form of energy and chemical uses.) which is an excellent proxy for energy costs. As far as the "smoothness" of the (apparent) price of goods, that's largely because of consumer preferences and likely because of options and buying resources at specific times of the year instead of everyday. But, I'd say consumer preference mostly dominates pricing behavior. Note, the price of goods isn't the only variable, companies also change the quantity of the good. For example, when ice cream manufacturing costs increased significantly due to oil, in order to maintain the same psychologically acceptable price in consumers' minds, manufacturers reduced the size of the carton from 2 quarts to 1.5 quarts. Oh, well, it's all in the good of fighting America's obesity. lol



Nothing else, my singular focus is a bit aspie in that way. Predicting long stock movements is a wee bit difficult and my market outlook is a bit pessimistic in the long term so I don't really like going long, but predicting bubbles and knowing when to short is a bit easier since there's a "stock history" you can see. But, I have determined that if I want to keep up with "real inflation", it'd be best to invest in the commodities that underly the price of everyday goods, so that is one "long" position I'd advocate. I'd suggest dollar cost averaging, too, to reduce the risks from volatility.

And, deflation really isn't a real source of worry in the united states. With currency increasing by 5% annually and the total energy supply nearly guaranteed to decline or plateau over the next decade, inflation is pretty much guaranteed. The only way inflation was able to keep in check at around 2-3% historically with currency growing by 5% in the past was because there was a growing energy supply and, thus, a growing economy. This is a bit simplified, but the more goods that are produced in a given year ("economic growth"), the more the currency supply can increase without increasing the average price of a good since the average price is roughly proportional to (total currency supply/total goods).

And... this if my first investment, so I am totally expecting to fail spectacularly. But, in return, I'm rest assured I'll learn a valuable lesson. And if I don't fail, then I won't complain.

Thanks for all that swbluto! Much appreciated.

I've been investing since I was sixteen and have similar pessimism but different conclusions.

Kudos for your first investment being not only a short, but shorting gold! Braver than I am.

Good luck. My personal opinion, it could be a bit before this gold bubble pops.

Good luck!

No inflation is not guarunteed, cpi is only rising because of inflation in foriegn countries, government meddling, low interest rates, and quantitive easing.

But when the all the bad debts in all sectors get exposed for what they are, prices will plummet, and no one will lend, and no one will borrow and their will be deflation at least for a time.

Also when it comes to a currency backed by energy, I think this is pretty much what carbon credits are.