Return the US dollar to a metal's standard

[ScooterGuy]

but NOT gold.

The United State’s dollar is a ‘fiat’ currency, as the USA went off the ‘gold standard’ in the middle 1970’s. The dollar is worth only what the financial managers of the global economy say it is worth, in relation to other fiat currencies.

Gold is far too useful an industrial/technical metal to be wasted on simply supporting a currencies’ base. In addition, gold can be mined from the earth at many locations, and thereby increasing a nation’s supply. It is anonymous, easily transportable, and also easily stolen.

Plutonium-239 (a fissile metal), on the other hand, is a totally synthetic metal, derived from operation of a nuclear power plant, under unusual and very specific conditions. It has NO industrial uses – only a few scientific uses – and only one very specific military use. It is EXTREMELY toxic when handled and is radioactive, as well. Theft—plus handling and transportation after theft—would be very difficult, and detection easy.

If stored in small, non-critical mass amounts, it has a very long shelf-life (a half-life of tens of thousands of years)

Plutonium-239 = $4,000/gram (as of May, 2008) – the metal Pu-239 would therefore be worth ~ $4,000,000 per kilogram.

Therefore: performing a ‘mark-up’ strategy for diplomatic purposes, one kilogram of Pu-239 could be deemed to be worth ~ $6,000,000 per kilogram, as the base for a $US Dollar.

Peg the existing $USD currency to one kilogram of Pu-239, at 0.000000166+ kilograms to the dollar. If stored so as to be weighed and measured with high accuracy, it could be verified at any time by an International body that the said amount was, in fact, present.

A nation which attempts to use Pu-239 in a nuclear or thermonuclear weapon would be attacking it’s own financial base – since the critical mass for nuclear detonation of Pu-239 is ~ 10 kilograms for the fissile metal alone = a national loss of $60,000,000 for each detonation (making it’s currency that much more worthless).

OK, folks, now pick it apart -- but, if you say 'It Won't Work,' then also say what will.

 

[FinallyRetired]

OK, folks, now pick it apart -- but, if you say 'It Won't Work,' then also say what will.

Ah... sounds good to me... but do I have to wear lead shorts when I carry it in my pocket?

 

[kumquat]

Ah... sounds good to me... but do I have to wear lead shorts when I carry it in my pocket?

Just change your name to Karen Silkwood.

 

[FUEGO]

Maybe one of our resident nukes could chime in.

 

[Neongreen]

The problem I see with this is quite simple - it's toxic and highly radioactive. So what happens if someone wants to exchange dollars for the metal?

Also, the great thing with gold is there *are* commercial uses for it, so there is strong demand. In theory, no matter what happens, gold will have value. If a financial apocolypse dawns, what are a few pieces of toxic and radioactive metal going to do for you?

 

[samclem]

It's not an especially dangerous radioactive source if it is not inhaled as a dust or otherwise introduced to the body unless a lot is put together in one place (approaching criticality)--many other radioactive substances are more hazardous. No, I wouldn't volunteer to carry a lump around in my pocket for a few months, but somebody who wanted to smuggle some from place to place could do it.

The biggest problem IS that it is entirely synthetic, and that it is used to make atomic weapons. Wouldn't such a standard encourage countries without nuclear power programs to start them? Wouldn't it encourage countries with peaceful nuke programs to deliberately produce more Pu-239? We don't want more Pu-239 around.

Why not helium as the new standard? It would be difficult to smuggle (cryogenic containers, etc) and it is entirely safe. It can't be easi;y produced synthetically. Here's the best part: The US produces most of the world's helium. Here's the bad news: Texas is especialy rich in it--they'd probably secede. Wait--maybe that's good after all . . . .
On second thought, helium is a by-product of natural gas production, so there's probably gobs of it in the middle east. Maybe we should avoid enriching that part of the world for yet another 60 years.

I have a hard time understanding the gold standard. Yes, I've heard the argument that it encourages a stable currency value, but it is only because people believe gold has some inherent value beyond its industrial uses. Why should people believe this? If they suddenly (or slowly) stop believing it, then your stash decreases in value.

 

[kumquat]

If a financial apocolypse dawns, what are a few pieces of toxic and radioactive metal going to do for you?

Ah, but what wouldn't ten kilos get you?

 

[ScooterGuy]

Clarifications to Pu-239

1. As I understand it, the idea of pegging a currency to a metal was to have an agreed-upon standard which defines the 'worth' of the paper currency. Until the 1970's, gold was declared to be worth $35/oz. (troy, I believe). However, as of 1932 or 1933, it was declared illegal for Americans to own gold, save for numismatic (coin-collecting) purposes.

2. Given the above, a holder of a US dollar was never able to go to a national bank and demand the metal's worth of the paper script. I don't know how other countries did it.

3. In my vision, only industrialized nations or powers, capable of creating--or buying--nuclear power reactors would have the means to generate more Pu-239. This includes the capabilities of extracting and refining that specific isotope of the metal from spent fuel rods. Again, in my limited knowledge, a power reactor must be configured more like the Hanford, Washington pile, rather than the much more common light-water reactors of, say, French manufacture. Such a nation would have to be, at a minimum, organized to the level of modern-day Iran or North Korea. Al-Quaeda would be unable to create it's own wealth, and would have to continue its current policy and practice of land-based piracy to acquire the Pu-239-based dollars.

4. Again, as I understand it, the assembly of a fissle weapon from extracted Pu-239, after purification and enrichment, is a exacting and difficult task. Otherwise, one gets the much more common 'fizzle' blast, typical of the first North Korean detonation.

5. The key to having a material serve as the basis for how much currency is in circulation is the control of inflation and deflation (much more common to fiat currencies). Runaway- or hyper-inflation, in the Zimbawe manner, is always a risk. My examination of the periodic table of the elements revealede that, no matter how rare a material was, there was an industrial demand. Only Pu-239 appeared to have only the one military, non-industrial use.

6. I cannot agree that helium could be a currency standard, when I could buy a bottle OTC to inflate party baloons. It used to be true that the USA had a sole monopoly on helium production (witness that the Hindenberg had to be filled with inflamable hydrogen, because of embargo of helium to Nazi Germany). This is no longer the case, as the resurgent Russia now exports helium world wide, as a result of deep drilling for the oil they also export. The other problem with helium is that, despite its being chemically inert, it IS a gas, and is lighter than air, and therefore floats it away at the slightest chance. Personal experience tells me that it will permeate the tightest membrane or seal. Keeping the liquified gas around allows large quantities to evaporate, just to keep the rest liquid. Poof, there goes your currency base.

 

[FUEGO]

6. I cannot agree that helium could be a currency standard, when I could buy a bottle OTC to inflate party baloons. It used to be true that the USA had a sole monopoly on helium production (witness that the Hindenberg had to be filled with inflamable hydrogen, because of embargo of helium to Nazi Germany). This is no longer the case, as the resurgent Russia now exports helium world wide, as a result of deep drilling for the oil they also export. The other problem with helium is that, despite its being chemically inert, it IS a gas, and is lighter than air, and therefore floats it away at the slightest chance. Personal experience tells me that it will permeate the tightest membrane or seal. Keeping the liquified gas around allows large quantities to evaporate, just to keep the rest liquid. Poof, there goes your currency base.

Well, every 24000 years half of your plutonium goes poof!

 

[ziggy29]

So instead of firing up the printing presses, the Treasury could crank up the reactors?

 

[Texas Proud]

So instead of firing up the printing presses, the Treasury could crank up the reactors?

Good one....

But... pegging your money to any physical item is useless... it just does not work..

As you mentioned, they can say it is pegged at $6 mill per KG, or they can say $12 mill per KG, or $100,000 mill per KG... because it is not sold on the open market the exchange rate is whatever we say it is...

The value of a dollar is whatever we think it is... so if the economy tanked or the exchange rate went haywire, then the dollar is 'worth less', but it is still pegged to a metal that means nothing...


I one time asked an economic professor about what to say to someone who wanted the gold system (way back when)... his comment was 'if he really believes in the gold system nothing will change his mind'... so, if you REALLY believe, have at it...

 

[quietman]

Best idea I've heard in a long time, but I dislike the idea of Helium (too volatile) or Plutonium (too dangerous) as standards. Besides both are somewhat rare and could lead to unfairly favorable treatment to countries with large reserves or production capacity. What we need is a more common material which is fairly distributed.

My suggestion would be dirt, or maybe manure.

People have been complaining that that's what their money is worth already. It's evenly and fairly well distributed throughout the world. Every country and every person can get easy access to some. It has valuable industrial uses, so will never be solely a store of value. Perfect.

 

[FUEGO]

My suggestion would be dirt, or maybe manure.

People have been complaining that that's what their money is worth already. It's evenly and fairly well distributed throughout the world. Every country and every person can get easy access to some. It has valuable industrial uses, so will never be solely a store of value. Perfect.

And then people could trade their dirt for other goods and services through a system of barter. And wouldn't it be convenient if certain highly reliable entities issued some sort of receipt or temporary indicator of value to represent the dirt? Like on little sheets of paper. That would greatly simplify trade. I think this may be the perfect system.

 

[MasterBlaster]

a holder of a US dollar was never able to go to a national bank and demand the metal's worth of the paper script. I don't know how other countries did it.

That's not quite true. back in the (Fort Knox) days of fixed price gold and silver certificates you could indeed (in theory) trade your silver or gold certificate for bullion after paying some transaction costs.

Now our currency is only based on assurances of our government. When we went off of the gold standard the currency received the words "In God we Trust" because there wasn't anything physical backing the currency.

 

[MasterBlaster]

The problems with a Gold (or other metal) standard

<Reposted from a July 2007 post>

here are some of the reasons why a gold standard was rejected...

1) the dollar is only as good as the government's credibility to stick with the standard. If a government can go on a gold standard, it can go off, and historically countries have done exactly that all the time. The fact that speculators know this means that any currency adhering to a gold standard (or, in more modern times, a fixed exchange rate) may be subject to a speculative attack.

2) some include the gold standard as one of the causes of the Great Depression - ...

< counting on a gold standard to enforce monetary and fiscal discipline in an environment in which speculators had great doubts about governments' ability to adhere to that discipline was a recipe for disaster. International capital flows became more erratic, not less, as doubts were raised about whether first the pound would be devalued and then the dollar. Britain gave in to the speculative attacks and abandoned gold in 1931, whereas the U.S. toughed it out by deliberately raising interest rates in 1931 at a time when the economy was already near free fall.
Because of this uncertainty, there was a big increase in demand for gold, the one safe asset in this setting, which meant the relative price of gold must rise. If everybody is trying to hoard more gold, you're going to have to pay more potatoes to get an ounce of gold. Since the U.S. insisted on holding the dollar price of gold fixed, this meant that the dollar price of potatoes had to fall. The longer a country stayed on the gold standard, the more overall deflation it experienced. Many of us are persuaded that this deflation greatly added to the economic difficulties of those countries that insisted on sticking with a fixed value of their currency in terms of gold.

A gold standard only works when everybody believes in the overall fiscal and monetary responsibility of the major world governments and the relative price of gold is fairly stable. And yet a lack of such faith was the precise reason the world returned to gold in the late 1920's and the reason many argue for a return to gold today. Saying you're on a gold standard does not suddenly make you credible. But it does set you up for some ferocious problems if people still doubt whether you've set your house in order. >

3) Some suggest that a gold standard retards the natural growth of an economy

 

[ziggy29]

Now our currency is only based on assurances of our government. When we went off of the gold standard the currency received the words "In God we Trust" because there wasn't anything physical backing the currency.

Heh. But actually, the first U.S. "money" to receive the "In God We Trust" inscription was the two-cent piece of 1864:

It wasn't on paper money until the 1950s, though, to distinguish us from those Godless Commies.

 

[MasterBlaster]

OK - I stand corrected. The "In God we Trust" motto predates going off of the gold standard.

Nonetheless, after we went off the gold standard there wasn't anything physical backing the currency. I am sure that detractors at that time feared the kind of thing we are now going through.