ss 1,2

prout.econ

Non-Gold Bullion

January 7, 1995

Q: Can money be backed by bullion other than gold, or by a combination of metals and commodities having intrinsic value?

Now, regarding monetary systems and gold: Gold is a very fundamental and precious commodity, yet it is not so rare. So it makes a very suitable backing for financial development. But certainly other commodities may be used. Only it must be very carefully monitored so that these commodities do not become themselves like paper money. They must have intrinsic value. They must be precious in some sense - somewhat rare, but not so rare as to be inaccessible. They must meet similar criteria to the gold based economy, and they should not be produced only in one section, one area of the world. They must be accessible in many places.

So if in a local area there is the production of precious gems of a certain type, these gems may be used to back the economy, just as gold is used, for they are valuable to all. But in another area, though they may greatly value the gems produced in the first area, they have no gems that they can produce, but they produce uranium, also very valuable. So for their local economy this valuable good may become a basis for economic back up.

Like this, precious items produced in a given area which are precious to all, even outside that area, may be ascribed a certain value and utilized as monetary backing. But it must be carefully regulated before review boards that are beyond the local sphere, because the item should not be overly rare, nor should it be overly common, and its value must be intrinsic and universal. It cannot be simply valuable to the local people but not to others, then the local money would have no value on the open market. So if, in the northern region, there is much production of gold, it has a certain intrinsic value and can be used to base the economy of that region, because it also has value in all the other places of the world.

Now if the diamond is produced in another area, it also has value throughout the world. So it may also be used in that given area as economic backing. But this must be regulated by an international board. If this kind of economy is established, it must be strictly regulated by an international board represented from all of the countries. There cannot be local decision in this matter.