Gold Pieces for Credits

[Condottiere]

On a local system level, there may be no reason not to use gold coins as legal tender, probably embedded with a chip and a little molecular twist to verify it's authenticity.

Imperial credits are used within the starport, but discouraged outside of it in order that the system regime has more a grip on currency conrol

 

[Tom Kalbfus]

On a local system level, there may be no reason not to use gold coins as legal tender, probably embedded with a chip and a little molecular twist to verify it's authenticity.

Imperial credits are used within the starport, but discouraged outside of it in order that the system regime has more a grip on currency conrol

What if Imperial credits were backed by gold? Lets say a credit is defined as a certain amount of gold. The gold is kept in a vault at a local bank, before departing a system, a person makes a withdrawal of physical gold from the bank and places it on board a starship. Naturally when making such a withdrawal, you can only withdraw large amounts in standard units such as 1 kg bricks. The rest is left as change or used to purchase silver or copper for the small amounts, now the price of silver or copper might be different in other systems, but we're talking about small change here. Upon arrival in another system, the characters make a deposit of their gold brinks into the local bank and then sell their silver and copper for currency. That seems to make sense

 

[Reynard]

The problem with 11,000 world is gold is going to be very scarce to cover all the backing for those trillions of credits. Part of backing money with precious metals was to give it actual value and allowed, if needed, to be paid in gold. Can you imagine shipping gold to creditors over the length and breath of the Imperium? Better to digitize the value which can at least be moved far more efficiently by X-routes. You can then tie physical currencies, services and materials to the value of a stable, universal Credit including this topics gold coin currency.

 

[F33D]

Imperial credits are used within the starport, but discouraged outside of it in order that the system regime has more a grip on currency conrol

That tactic just ALWAYS creates a thriving underground black market. Further devaluing the local currency.

Those that don't learn from history are condemned to repeat it. :shock:

 

[Condottiere]

I would suspect that memories of the Long Night would inhibit any policy that would cause a run on any major bank.

As regards currency controls, they might be implemented for any number of reasons, including keeping the exchange rate artificially low to promote exports, or prevent the influx of capital to snatch up cheap real estate or assets, or any sudden outflow that would destabilize the local economy.

 

[F33D]

As regards currency controls, they might be implemented for any number of reasons, including keeping the exchange rate artificially low to promote exports,

Which always leads to a crash. If they are stupid enough to that (for the millionth time), they are stupid enough to promulgate what lead to the bank runs, again.

 

[Condottiere]

This is on a local, system level.

 

[F33D]

This is on a local, system level.

Yes, I know. :lol:

 

[atpollard]

As regards currency controls, they might be implemented for any number of reasons, including keeping the exchange rate artificially low to promote exports,

Which always leads to a crash. If they are stupid enough to that (for the millionth time), they are stupid enough to promulgate what lead to the bank runs, again.

So where is China's crash?
Don't they regulate the exchange rate to boost exports?

 

[Tom Kalbfus]

The problem with 11,000 world is gold is going to be very scarce to cover all the backing for those trillions of credits. Part of backing money with precious metals was to give it actual value and allowed, if needed, to be paid in gold. Can you imagine shipping gold to creditors over the length and breath of the Imperium? Better to digitize the value which can at least be moved far more efficiently by X-routes. You can then tie physical currencies, services and materials to the value of a stable, universal Credit including this topics gold coin currency.

1 Copper piece cp with 25 grams of copper = Cr1 (40 weighs 1kg)
1 Silver Piece sp with 7.5 grams of silver = Cr25 (133.6 weighs 1 kg)
1 Silver Dollar $ with 30 grams of silver = Cr100 (33.4 weighs 1 kg)
1 Gold Piece gp with 10 grams of gold = Cr1,000 (100 weighs 1 kg)
1 Platinum Piece pp with 50 grams of platinum = Cr10,000 (20 weighs 1 kg)

Gold doesn't weigh very much for the value it contains. What is the big deal about hauling gold over interstellar distances. Lets take for example the most expensive thing a player could own in Traveller - a Starship. In the core rules, a Scout, Type S costs Cr27,540,500 new, so how much is this in gold?, it is 27,540 gold pieces and 5 silver dollars. Since each gold piece weighs 10 grams, that means all of that gold weighs 275.4 kg. Do you think you can transport 275.4 kilograms of gold within the 8 ton cargo hold of the scout ship? I think so. So lets say you are the captain of a scout ship and you have Cr27,540,500 in the local bank, and you plan to travel to another system, say you are on Terra and you plan to travel to Prometheus, a 2 parsec jump, and you worry if all that money is going to be available when you get to Prometheus. No problem, you withdraw your gold from the bank of Terra, you borrow a cart from the bank, you wheel it over to the starport, one of your crew mates assists you in getting the cart up the ramp in then you dump the gold coins in the cargo hold and you are ready to go. When you get to Prometheus, you fill the wheel barrow with your gold coins and you wheel it to the Bank at the Starport and you say to the teller, "I would like to make a deposit!"

 

[simonh]

So lets say you are the captain of a scout ship and you have Cr27,540,500 in the local bank, and you plan to travel to another system, say you are on Terra and you plan to travel to Prometheus, a 2 parsec jump, and you worry if all that money is going to be available when you get to Prometheus. No problem, you withdraw your gold from the bank of Terra, you borrow a cart from the bank, you wheel it over to the starport, one of your crew mates assists you in getting the cart up the ramp in then you dump the gold coins in the cargo hold and you are ready to go. When you get to Prometheus, you fill the wheel barrow with your gold coins and you wheel it to the Bank at the Starport and you say to the teller, "I would like to make a deposit!"

So every starport will be full of people wheeling around barrows full of gold?

Credit and promisory notes, which is exactly what paper currency evolved from, were invented precisely because people carrying around gold coins everywhere back in the age of sail was completely impractical and in fact highly dangerous. Modern finance evolved precisely because na system based on physical asset gold and coin transfers has massive complexity, risks and transaction costs. Merchants and financiers learned all this hundreds of years ago.

The gold standard didn't collapse by accident, it collapsed because it imposes a massive speed and security cost on transactions that, in a modern economy with rapid economic changes, is completely impractical.

But at the end of the day, the gold standard still suffers from exactly the same problem fiat money does. The value of gold is not inherent, it' has value for exactly the same reason paper money does. Because we say it does. That's it. It has no magical extra source of value. It's valuable for exactly the same reason bitcoin is valuable - because people are willing to use it to trade with.

On earth, the supply of gold is fairly constrained, so arguably there's a limited supply but again you could say exactly the same thing about something like bitcoin. If you want to base your currency on a limits supply asset, a form of bitcoin looks pretty good and avoids the wheelbarrow problem*.

Simon Hibbs

* Really. Wheelbarrows. *facepalm*. Why do I even bother.

 

[Tom Kalbfus]

Bitcoin is only limited because its creator, a human, made it so, its creator could always turn on the spigot and flood the market with bitcoins if he wanted to, they are after all as their name implies, just 1s and 0s. There are as many 1s and 0s in the Universe as there are is ability to hold information. If the 200+ kilograms of gold is too much for you, you could try even more precious metals such as platinum or iridium. After all, the Emperor sits on an iridium throne, why not base the credit on iridium, I'm sure the technology is capable of keeping track of very small amounts of iridium. Most people in the OTU don't own starships, most won't carry around a starship's value worth of gold, for most things gold should suffice.
Here is an interesting article on iridium:
http://www.curiousnotions.com/home/metals.asp

 

[Reynard]

All in all it's MUCH easier to base the value gold or any material on the Credit.

 

[Tom Kalbfus]

All in all it's MUCH easier to base the value gold or any material on the Credit.

Could you imagine this man as emperor of the Imperum? What would happen if someone like Jimmy Carter became Emperor and he decided to greatly increase the money supply of Imperial credits in order to fight poverty?

 

[Reynard]

Imperium is a big place. Who says it hasn't happened somewhere at sometime more likely very localized and done by a Duke or Baron. I seriously doubt, by the way the Imperium is structured, the Emperor would ever have a universal anti-poverty program or an Orbital Habitats for Humanity either.

 

[simonh]

Bitcoin is only limited because its creator, a human, made it so, its creator could always turn on the spigot and flood the market with bitcoins if he wanted to, they are after all as their name implies, just 1s and 0s. There are as many 1s and 0s in the Universe as there are is ability to hold information. ...

That's really not how bitcoin work.

Simon Hibbs

 

[simonh]

What would happen if someone like Jimmy Carter became Emperor and he decided to greatly increase the money supply of Imperial credits in order to fight poverty?

Npbody is sayig that fiat money is impervious to bad management. It's advantage is that it can be managed and is a viable foundation for an economic system. Gold isn't, as has been demonstrated many times throughout history. It involves very high transaction costs, has always been substituted by credit instruments anyway, and offers no actual counterveiling real benefits, even is there was actualy enough of it, which there isn't.

To you as an individual with your single human scale need for cash and credit, it might seem to work out ok. The problem is it just isn't scaleable to advanced economies distributed over massive space, involving billions of accounts and thousands of trillions of transactions. Wheelbarrows aren't going to cut it. Even paper and coin money is getting too expensive to manage to be worthwhile compared to electronic payments, which reduce transaction costs and make goods and services cheaper.

I mean how would you buy goods from Amazon in a gold economy, mail them a bar of gold and they'd send your goods by return post? How much is that going to increase the cost of the transaction, with Amazon having to manage warehouses full of gold on top of their goods?

Simon Hibbs

 

[simonh]

So where is China's crash?
Don't they regulate the exchange rate to boost exports?

China has a managed float. They gave up on a fixed exchange rate in 2005.

The apparent exchange rate is only half the story though when it comes to say boosting exports. The headline exchange rate for the RMB has appreciated significantly since 2005. It is still lower than it should be in theory, but the ballancing inflation in china (which has been pretty brutal) wipes out the discrepancy anyway. In trade weighted terms, the net effect is that the RMB is roughly correctly priced.

Simon Hibbs

Edit - My wife is Chinese and her sister works at a bank over there.

 

[Tom Kalbfus]

What would happen if someone like Jimmy Carter became Emperor and he decided to greatly increase the money supply of Imperial credits in order to fight poverty?

Npbody is sayig that fiat money is impervious to bad management. It's advantage is that it can be managed and is a viable foundation for an economic system. Gold isn't, as has been demonstrated many times throughout history. It involves very high transaction costs, has always been substituted by credit instruments anyway, and offers no actual counterveiling real benefits, even is there was actualy enough of it, which there isn't.

To you as an individual with your single human scale need for cash and credit, it might seem to work out ok. The problem is it just isn't scaleable to advanced economies distributed over massive space, involving billions of accounts and thousands of trillions of transactions. Wheelbarrows aren't going to cut it. Even paper and coin money is getting too expensive to manage to be worthwhile compared to electronic payments, which reduce transaction costs and make goods and services cheaper.

I mean how would you buy goods from Amazon in a gold economy, mail them a bar of gold and they'd send your goods by return post? How much is that going to increase the cost of the transaction, with Amazon having to manage warehouses full of gold on top of their goods?

Simon Hibbs

What the Imperium lacks is the near instantaneous communication that we have in our world today, in that respect the Imperium is more like the 18th century, where we did have a gold standard. Payments were made in gold in the age of sail, the electronic economy only works in a single system. You deposit your gold at a local bank and then you can use electronic payments, if you leave the system, you have to make a withdrawal and take you physical gold with you if you want to have it to spend. Anyway, how is anyone to tell what is a legitimate credit and what is counterfeit? Its not like you can make a phone call to the Capitol of the Imperium, you can't e-mail the Imperial Bank and determine if the credits are legitimate or not. You can do all sorts of things to foil counterfeiting, but the most effective thing is to use gold, as that can't be counterfeited, it is easier to tell if it is real gold than to call up the Imperium Bank to check for counterfeit notes. Also the further you travel from the Imperium, the more people will demand that outlanders pay in precious metals or buy the local currency with gold, because at least they can authenticate that.

 

[simonh]

What the Imperium lacks is the near instantaneous communication that we have in our world today, in that respect the Imperium is more like the 18th century, where we did have a gold standard. ...

There are developed worlds and planetary systems in the third imperium that must make our global economy look like a village fair in comparison. An argument along the lines that the 3I is a smaller, less developed and less sophisticated economy than ours with simpler needs is, I think, somewhat naive.

If 3I credits are based on a secure encrypted block chain currency like Bitcoin, they're not effectively counterfeitable either.

As I've said before, in the 18th Century we had an fairly advanced global banking and trade system based on paper currencies and transactions. This was because physically lugging gold around for every transaction just doesn't scale. The moment you start using a paper or electronic currency backed by gold, you might as well have a fiat currency.

Simon Hibbs

Edit - I just read the full wikipedia article on the gold standard. I'd referred to it, and other articles before during this discussion but highly recommend just reading it through. It's actualy very interesting.