Gold & Silver as State Money? The New Model for Stable Currencies

Key Concepts

• Competing Currencies: The idea that multiple forms of currency can exist and be used for transactions.
• Legal Tender: A medium of payment recognized by a legal system to be valid for meeting a financial obligation.
• Gold and Silver Depository: A state-established facility to hold physical gold and silver.
• Troy Grain: A unit of weight commonly used for precious metals.
• Token Coinage: Coins of a nominal value greater than the value of the metal they contain.
• Bank Currency: Currency issued by commercial banks.
• Digitalization of Precious Metals: Using computer systems to represent and transfer ownership of physical gold and silver.

Proposed State-Level Gold and Silver Currency System

The core proposal is for individual states to establish and utilize gold and silver as legal tender for commercial transactions, taxation, and government spending. This leverages the constitutionally reserved power of states to coin money and regulate its value.

Mechanism and Functionality:

• State-Established Depositories: States would create physical depositories to house gold and silver.
• Statutory Legal Tender Status: Legislation would be enacted to designate the gold and silver within these depositories as legal tender for all transactions within the state, encompassing both private sector and public sector activities.
• Digital Unit of Account: A standardized unit, such as the troy grain, would be used. Crucially, this system would be computerized, allowing for transactions in extremely small denominations (e.g., a millionth or billionth of a grain).
• Overcoming Historical Limitations: This digital approach addresses the historical challenges of using physical gold and silver coins. Previously, the fixed sizes of coins created difficulties for transactions of intermediate values, leading to the development of token coinage and bank currency. The proposed computerized system can accommodate any transaction size imaginable.
• Virtual Ownership Transfer: Physical gold and silver would remain in the depository. Transactions would occur through accounting entries, where ownership of the metal is digitally transferred from one party to another. This means individuals would not need to physically handle the precious metals.

Benefits and Implications:

• Stable Basis for Taxation and Spending: States would gain a stable and predictable foundation for their revenue collection (taxation) and expenditure.
• Stable Private Economy Transactions: The private sector would benefit from a stable medium of exchange, fostering greater certainty and predictability in commercial activities.
• Integration with State Finance: The entire economic system within the state could be designed to operate on a gold and silver basis, seamlessly integrating private transactions with state taxation and expenditure.

Argument for Feasibility:

The argument hinges on the ability of modern computing technology to overcome the practical limitations of historical precious metal-based monetary systems. By digitizing ownership and enabling micro-transactions, gold and silver can function as a practical and stable currency for all economic needs.

Key Statement:

"For the first time in history we can have a gold and silver system that actually functions because in the past you had gold and silver coins and there were only certain sizes. What did you do in between that created difficulty? That led to things called token coinage. It led to things called bank currency. Right? because you only had coins of certain sizes and you had transactions of different values. The computers today can handle any transaction, any transaction you want to imagine."

Conclusion

The proposed model advocates for a state-driven revival of gold and silver as legal tender, facilitated by modern digital technology. This approach aims to create a stable and reliable monetary system for both public and private economic activities by overcoming the historical constraints of physical coinage through computerized accounting and micro-transaction capabilities.