Gold standard lunatics

The episode of BBC Radio 4's Analysis programme which aired tonight at 1930 GMT had a scary false dichotomy between the gold standard and our current monetary supply system.

It is true that it doesn't make sense to have a money supply without a physical referent, but that doesn't make the gold standard any more logical. If money supply was related to the amount of gold that has been discovered, the absurd situation arises that discovering a quantity of a comparatively useless metal would increase the size of the economy, and once all gold has been discovered, the economy cannot grow.

Relating money supply to the price of gold is nonsensical, because the price of gold must be in units related to the price of gold (as money is on the gold standard). Or, if the price of gold could float freely, money supply would be related to a free floating variable.

In the gold standard, gold had to be shipped. Ridiculous. All this relatively useless stuff did was sit in vaults wile it wasn't being transferred betwwen them. No wonder governments realised it was utterly stupid, and sold the gold without admitting it.

But the gold standard proponents were right that money supply should not be unrestrained. It is a starting point to say that it should be related to the amount of goods and services being produced. The problem here is the problem of growth in GDP - the planet is finite so far as physical stuff goes, so insofar as it relates to stuff, money supply should not increase. Services are a different matter. Technology is a case in point. Microproccessor based technology is getting smaller as it gets more powerful. It sis clear that, over time, we can get more service per unit of stuff. If we could quantify service, we might have a guide to the quantity of money that there should be, but how do you compare a basic human need (nutrition, say) against a higher order need or service (finding out where the nearest restaurant is using your smart phone).

For me, human well-being is the key and for the moment, I'm thinking money supply should be a function of the number of people alive and their age. I'm sure this is less than perfect, but it is a starting point.

Money

I've watched a series of you tube videos that show how money evolved from a convenient way of dealing with gold to a system of accounting which relies on faith in the US government. (The videos are from a US perspective, but it's not too different elsewhere). The US government is "reliable" in this sense becuse it represents the land, labour, food, mineral resources, etc, of the USA itself.

It's odd, because one of the key Venus Project ideas is the big database showing what tangible resources we actually have. The money that exists ultimately is supposed to represent these things, but apart from the fact that we can't measure the true worth (utility) of (say) a tree, compared to (say) a bus we don't actually know in total in one place what we have. If we did know this we would have better information on how much money there should be to represent it, instead of letting it grow arbitrarily.

The idea of coupling money to gold is unhelpful as the price of gold does not relate to the utility value of the actual resources we have and neither does the amount of gold that exists.

If we did know in total in one place what useful things we actually have, we could perhaps try to denominate it all in one unit, but would there be any point? If we direct ourselves to producing sustainable abundance, rather than getting money, we reduce and/or eliminate the vary scarcity that the free market is supposed to allocate out to everyone.