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Precious Metals: The Path to Free Market Currency?

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Chris Posted: Sun, Jul 11 2010 5:06 PM
I've done a bit of thinking on the subject, and have come to the conclusion that paper currency is unnecessary. Why do we need something called a "dollar" or a "peso" or a "euro". Why can't we simply trade precious metals in the form of coins or bars? They need not be produced by a government; anyone can (and does) make coins of various sizes. If more coins are needed, more will be produced. If there are too many coins, they will be bought, melted down and made into other things (jewelry, etc). You wouldn't have to carry around a satchel of coins if you didn't want to; banks could handle transactions (similarly to how dollar transactions work with a debit card, check book, traveler's cheques, etc). There is no need for the government to provide paper money. However, to make the transition, I suppose prices would have to be set in ounces of silver or gold. I can't think of any way to do this but by making a law. And metal purity would likely have to be regulated to avoid embezzlement, etc. The biggest problem that I see is that rapid changes in the relative price of silver or gold would have an effect on global trade. A decrease would make foreign products more expensive; an increase would make local labor more expensive. It would be interesting to see the relative price of gold or silver to other commodities with respect to time. I understand that this idea is nothing new, but it seems as though it's better than the current system that the world uses. I'm wondering what people in this forum think of the idea.
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chloe732 replied on Sun, Jul 11 2010 7:14 PM

Chris,

First of all, welcome.  Please note that you should post this question under "Economics Questions", not "Members Issues".  The purpose of the Members Issues forum is explained in the opening post.

Re-post this under Economics Questions, and I'm sure a discussion will begin.  Again, welcome.

"The market is a process." - Ludwig von Mises, as related by Israel Kirzner.   "Capital formation is a beautiful thing" - Chloe732.

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Chris replied on Sun, Jul 11 2010 7:28 PM
Thanks for the welcome. Moved the post to the proper category.
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