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New Universal Currency

Posted 01-21-2009 at 11:06 AM by Cableboy
A New universal currency

I love forex trading, but sometimes I think the whole concept of currencies is one of man's more stupid inventions. Why? because they are not really a store of wealth. Inflation basically destroys wealth, and exchange rate movement is just this wealth being competitively destroyed by the policies of different governments.

That is why gold is so strong at the moment: It doesn't pay interest to hold gold, but it is a super store of wealth. Why? Because gold is a very stable metal. You don't physically have to have to have much to be wealthy, because it is dense. You can't dilute or destroy gold - it is an element that doesn't bond that easily that it will corrode.

However, there is a better store of wealth - energy! You cannot destroy energy, only transfer it. Therefore it is a constant and therefore the ultimate store of wealth.

Peter Chapman, an English writer, wrote a brilliant book about this in 1975. In it, he said that everything could be priced in terms of energy. This is because anything and everything we do needs energy to be done. We need food, our cars need fuel, to make a pencil takes a distinct amount of energy. Therefore, a cost of energy can be calculated for everything. (He also said, and this argument is VERY valid when talking about CO2 emissions, that the energy cost of building a nuclear power station far outweighs the amount of energy produced over its lifetime)

Now, if we had a unit of currency called the kilowatt hour, we could quite easily deal with it. You would get paid in Kwh into your bank and when you wanted to buy food, you would go to the shop and buy your chicken, which would have a Kwh production price. The most energy efficient farmer would produce the cheapest chicken. It would be easy to buy gas or electricity because you would exchange your Kwh for - yes, you got it - a Kwh. Normal currencies could be replaced or exist as they do now. It would just be that instead of paying say, $50 for a barrel of oil, you would pay 50 dollars for 1,700 kwh. (Barrel of oil equivalent (boe) = approx. 6.1 GJ (5.8 million Btu), equivalent to 1,700 kWh). That means that 1 kwh would cost 2.9412 cents If the price of oil rose to $147 per barrel, then the price would be 8.6471.

OK, why don't we just use oil as the currency? Because it is not homogeneous. There are also many other different forms of fuel that would compete, so turning it around and using the ultimate constant - the unit of energy - is the logical choice.

I think that all currencies would eventually be replaced by kwh, because we use energy in everything we do. Otherwise, energy would be the ultimate gold standard, because there is so much around (even though we cannot 'capture' it).

So, if there are any politicians around - wake up and get real. Currencies are not necessary!

If anyone would like to take up the discussion, you are very welcome.
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