http://www.ft.com/cms/s/0/906b7668-557a-11e0-a2b1-00144feab49a.html#axzz1HVYVYhR8
Shops in Salt Lake City will soon be able to accept gold Buffalo and Eagle coins (no foreign minted Napoleons or Krugerrands allowed), after a bill to make gold and silver legal tender passed Utah’s House and Senate.
The state does not trust the US Federal Reserve. However, visitors need not weigh down their pockets just yet.
The bill, which is under review by the governor, ends state taxes on the transfer of gold – they currently treat it as an asset and not as money – but until the federal government does the same, its green paper will have the edge.
This proto-gold standard in the American west is a rebuke and challenge to the Fed, and a reminder that easy monetary policy since 2007 has won the central bank many more enemies than friends.
Originally posted by PalynkaWhat weight of gold would be enough for a days shopping?
The state does not trust the US Federal Reserve. However, visitors need not weigh down their pockets just yet.
How much could one buy with a typical gold coin?
Will you be able to do all your gold transactions via credit card?
Originally posted by twhiteheadI don't think any of that is a problem at current gold prices.
What weight of gold would be enough for a days shopping?
How much could one buy with a typical gold coin?
Will you be able to do all your gold transactions via credit card?
Would be interesting to see if people set their wages in gold weights and then see their wages fluctuate a lot in dollars. It's great for wage earners if gold goes up, but it might be less so for firms (especially those who sell outside of Utah). On the other hand, if it falls then people will have wage decreases in dollars and firms won't mind.
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Originally posted by PalynkaMy concern was that the coins would be so small as to get lost rather easily, or so valuable as to force you to buy goods in large quantities (and to exacting amounts, or loose change).
I don't think any of that is a problem at current gold prices.
A similar problem to the second occurred in Zimbabwe when they switched to US dollars and nobody had change. But then it was better than dealing with piles of notes worth practically nothing.
On a related note:
At the time Zambia was getting to the point where coins were going out of fashion (due to their low value), there were strong rumors that some of the coins were being collected up and melted down for their copper content. A case of the symbolic value being lower than the material value.
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Originally posted by twhiteheadI see. But if they are too small, you can always add another metal that surrounds gold or something similar. I think would be a bigger practical problem if gold was worth little and you had to carry great amounts. Then again, its high value is one reason why gold was used in the first place.
My concern was that the coins would be so small as to get lost rather easily, or so valuable as to force you to buy goods in large quantities (and to exacting amounts, or loose change).
A similar problem to the second occurred in Zimbabwe when they switched to US dollars and nobody had change. But then it was better than dealing with piles of notes worth practically nothing.
Originally posted by twhiteheadZimbabwe switched to US dollars? When did that happen?
My concern was that the coins would be so small as to get lost rather easily, or so valuable as to force you to buy goods in large quantities (and to exacting amounts, or loose change).
A similar problem to the second occurred in Zimbabwe when they switched to US dollars and nobody had change. But then it was better than dealing with piles of notes worth practically nothing.
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Originally posted by rwingettAfter a little research I see that they didn't switch to US dollars specifically, they simply abandoned their own currency (according to Wikipedia, on 12 April 2009 ) and now use South African Rand, Botswana Pula, Pound Sterling and the United States Dollar.
Zimbabwe switched to US dollars? When did that happen?
But even with Rands they would have had a problem with a shortage of change.
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Originally posted by twhiteheadReally it depends how your economy works. In a western industrial economy having nothing smaller in value than 1 pound sterling or US dollar or whatever would be a pain. In other economies liquidity isn't automatically such a big problem, the society is structured so that petty financial transactions aren't really needed.
My concern was that the coins would be so small as to get lost rather easily, or so valuable as to force you to buy goods in large quantities (and to exacting amounts, or loose change).
A similar problem to the second occurred in Zimbabwe when they switched to US dollars and nobody had change. But then it was better than dealing with piles of notes worth ...[text shortened]... down for their copper content. A case of the symbolic value being lower than the material value.
Suppose Cameron really turned the clock back and put the U.K. currency to the state it was in when Offa adopted the system in use by the Franks. Each penny is a 20th of a troy ounce of silver, in current prices this is US$1.84 to a penny (spot price = $36.94 /oz). Since you can divide that into farthings you get a smallest possible denomination value of 0.46c per coin, or about 30 new pence. That's under what a pint of milk costs in the U.K. so I don't think that small change is a problem as there are few things worth buying for less than that. In Offa's day a penny had the equivalent purchasing power of about £20 now, it was used primarily for buying livestock, clothing, tools etc., and not for buying food or lower value things which the majority produced themselves anyway.
There's multiple difficulties. You can only run a currency in that way for any amount of time if lending of money doesn't happen on a large scale, as it's the basic cause of inflation. But with your currency tied to a commodity it's "price" shouldn't change, so things get out of kilter. Forbidding lending for profit isn't going to work in the modern world unless society changes a lot.
As coins wear they lose intrinsic (metal) value, so you constantly have to replenish the supply as people hold on to shiny new ones and spend the battered old ones so the currency in circulation gets degraded. Worse if massive new deposits of the metal your currency is based on are discovered you can find yourself with a currency whose value has halved overnight. So you can't do it if you want your economy to be at all dynamic or allow trade with the outside world.
One way or another you'll end up with political pressure to keep prices stable and be forced to make your coins differ in value to the international market price of silver, in which case you may as well make them out of a base metal and use a fiat currency like everyone else...
The only time it's going to be close to worth it is when your currency has just collapsed (like in Zimbabwe), but there you can just use a hard currency. It'll work if your economy is very small or medieval, but that applies to almost no one.
On the related note: coin clipping was the old offence. But yes melting down of coins when their face value falls below the price of the material they are made of is a problem, but as most money is data (deposit accounts and so on) changes in the quantity of physical money don't really change the value of the currency.