Getting paid in space

Hello Lucio,

Its been a while since Ive sent a message to you, I hope things are well.
Okay, the social chit-chat aside, lets have a look at this.

First, let me say that I am not by any means an expert in this subject but
some things do seem obvious to me (given that I could still be wrong).
If you are backing your money with a real thing, be it gold or unobtainium
you are limited to keeping your available money supply in line with the
supply of the real thing. To make things easy lets use gold and dollars.
Back when gold was money it was all coins, no notes, when notes were
introduced, they were really just a a promise by the bank to give you a
certain amount of metal in exchange for the note.

The mint stamps a 10 dollar gold coin, it masses (no point talking about
weight in space) 10 grams (I know that this is not what gold costs but lets
keep the maths simple). So a 10 dollar coin masses 10 grams and a 10 dollar
bill is a promissory note for 10 grams of gold. This means that if you have
1 trillion grams of gold you can have 1 trillion dollars and not one dollar
more, if the value of the gold goes up then the value of your dollar goes
up, you can buy more with it but you are still limited to just 1 trillion
dollars, just bigger dollars, they will buy more of other nations money
(unless they are also an expanding economy). So in one sense your argument
is valid but the only way to increase the number of dollars in your economy
is to buy/find/steal/pretend to have more gold or to change the numeric link
between the dollar and the mass of gold, this means that all the old money
(coin) is no longer worth its face value (something that has been done in
the past at times they just changed the alloy they made coins with, bad
times).

Now this means that the true value of your money is changing day by day or
hour by hour for that matter. In order to avoid going out of business you
have to take this into account when you are setting your prices, a pain but
not hard to do, you just have to accept that your money has an average
value, in fact this is really the case today. The problem comes when your
economy is dynamic and growing, in order to keep it from stalling you need
to be able to increase the number of dollars in your economy or to take an
exaggerated example (I know this is not realistic but it does okay to
explain my point). You are in an expanding economy but are not finding any
new gold, last week you buy lunch (pick your favourite meal) and it cost you
1 dollar, today you get the same meal but it cost you just 50 cents, next
week it is going to cost you 10 cents and the week after that it is down to
2 cents but is 4 times larger than the first meal, I hope you are hungry.
Each dollar is equal to 1 gram of gold but each gram of gold buys more, this
is going to be the case when ever you link your money to a real object.

Now, if you want to have an economy linked to an object/thing/tangible item
and want to avoid these problems then you need to be able to increase the
amount of the object as the size of your economy changes. With any kind of
metal you would have to have a large unused supply that you can tap when
needed and I can not see any government resisting the temptation to just
slip in more for political reasons rather than economic reasons, this would
cause problems for you real quick. The gold has a certain real value that is
linked to its material properties but its monetary value has nothing to do
with anything except its rarity, what you use to back your money is
unimportant as long as it is rare. So ideally you should use something that
is rare, can be measured, is hard/impossible to counterfeit and, this is the
biggy, can be increased as your economy grows. I suggest you use power, that
is energy. The wealth of a nation is linked to power consumption and as your
economy grows so does your need for power. The problem (for some) is that
this is not a real object, you cant hold it in your hand, so really you
have the kind of economy that we have today except it isnt exactly the
same, rather than the dollar having the value that the markets, banks and
governments says it has, they are restrained to a value tied to power usage,
the wealthier the nation the more power they use, the market, banks and
governments would still be able to change the value but they would be
limited in the degree they could. A compromise between a floating value and
fixed value.

Okay, what do you think?

Darren Brown

On 18/8/06 10:33 PM, "Lucio de Souza Coelho" wrote: