POWER CURRENCY
James P Rogers
James Rogers
Covers and Illustrations: Ting He and Cong Yu
ISBN 978-0-9798559-0-0
© 2010, James P. Rogers (1964 - )
All rights reserved. This work may not be translated or copied in whole or in part without the written permission of the publisher or author except for brief excerpts in connection with reviews or scholarly analysis. Use in connection with any form of information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed is forbidden. The use in this publication of tradenames, trademarks, servicemarks, and similar terms, even if they are not identified as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights.
AXL, Inc. (www.axlinc.com)
CONTENTS
POWER CURRENCY 1
DOLLARS AND FROLLARS 11
ENGINES, FUELS AND ELECTRICITY 25
WANKERS 37
REPOCRATS 57
SLAVERY 2.0 67
SMART SURVEILLANCE GRID 87
MOVING POWER PLANTS 97
PEER TO PEER ELECTRICITY 107
KW CASH 119
STATE AND LOCAL SOLUTIONS 131
CHINA’S AMERICAN SYSTEM 147
ENERGY HOMESTEADS 159
TRAINGRID 169
POWER CURRENCY ECONOMY 181
BIBLIOGRAPHY 201
TABLES AND FIGURES
1.1 Types of money in America
1.2 19th and 20th Century Money,
2.1 Gold and silver specifications
2.2 Gold:Silver Ratios
2.3 Energy Units
2.4 Energy Conversions
2.5 Energy: Food
2.6 Money Supply and Inflation
2.7 Graph, money and prices
2.8 Inflation is exponential
2.9 Gold: Silver: Oil
2.10 Oil and Gold
2.11 Electricity in cents
2.12 Electricity and Gold
2.13 Food and Energy items vs. dollar
2.14 Electricity vs. food and energy items
3.1 Energy history
3.2 Energy and GDP
3.3 Electricity Prime Movers
3.4 Electricity Prime Movers - Small
3.5 Fuel imports and prices
3.6 U.S. Net Imports of Crude Oil
3.7 Oil Reserves
3.8 Liquid Fuel: KWH Conversions
3.9 Energy Storage: KWH Conversions
3.10 Electric Grid
3.11 Electricity Load Patterns
3.12 Power Currency vs Metals and Federal Reserve Notes
4.1 Banks by Assets
4.2 Top Derivative traders
4.3 Ownership
4.4 Cross Ownership of Instituations, Bank Cartel, Major Media
4.5 Federal Reserve Balance Sheet
4.6 Fractional Reserve, Money explosion
4.7 Fractional Reserve Collusion Scenario
4.8 Credit money explosion
4.9 Credit Money, Prices, Gold, exponential inflation
5.1 Debt and money creation process
5.2 Usury vs American System
6.1 Shift in assets
6.2 GDP/Debt projections
6.3 Collectivism and Freedom
6.4 Trade Balance
6.5 Manufacturing vs Finance
6.6 Taxes – 20th Century Shift
6.7 Debt per person
6.8 National Debt
6.9 Exponential Debt
6.10 Future Debt Projections
6.11 War and National Debt
6.12 National Debt Scam
6.13 Wankers Scam, Gambler’s dream
6.14 USA Loss of Wealth in Trillion Dollars
7.1 Collectivist Smart Grid: Freedom Smart Grid
7.2 Smart Grid Characteristics
7.3 Smart Grid vs Peer to Peer Electricity
7.4 Smart Grid: P2P Electric: Power Currency
8.1 Highway Miles and GDP
8.2 Horspower: Power Plants and Cars
8.3 V2G helps with Peak Load
8.4 Truck Stop 2020
9.1 P2P two homes
9.2 P2P street
9.3 P2P neighborhood
9.4 P2P Town and Up
10.1 KW Cash two homes
10.2 KW Cash Neighborhood
10.3 KW Cash Economy
10.4. Superdistribution
11.1 Some USA Stats
11.2 State Resources
11.3 State Money specifications
11.4 Banking System - States
11.5 Free Market Economy with Power Currency
12.1 China Money Supply
12.2 Wind in China
12.3 China’s American System vs America’s Usury System
13.1 Bureau of Land Management – US Public Lands
14.1 SSA Shortfall
14.2 SSA Costs
14.3 SSA - Low, Medium, High Costs
14.4 Life Expectancy
14.5 Energy Cost by income
15.1 Projections for 2030
15.2 Production and Consumption
15.3 Five Phases to Get to Power Currency
15.4 Future Production and Consumption
15.5 Tech, Cost curve
15.6 Future Hard Money, US Dollars and Federal Reserve Dollars.
15.7 Future money out to 2050
15.8 Collectivists vs People 2010
15.9 Collectivists vs People 2030
INTRODUCTION
The town went through an economic depression.
The local manufacturing plant shut down. Money was leaving the
community. Unemployment was over 10 percent and the jobs remaining
were low paying. Most people in the town with mortgages owed more
than the home was worth. Foreclosures were at a record high. The
schools and the city budgets were deep in the red.
In this environment, the town adopted alternative currencies. These currencies were backed by land, labor and energy. The town issued loans against future production to help entrepreneurs get a start. The people and town set up local energy systems and used electricity credits as money. People laid off from the factory found new jobs or set up workshops making small energy systems.
People agreed to payment part in Federal Reserve dollars, and part in local currency backed by electricity production. As the local currency was accepted by many merchants for goods, and the county for some taxes, it circulated well. Many businesses earned more electric currency credits than they could use. With this, they went and consumed in the local economy. The grocer accepted the credits, and used them to pay the bills for his store and power for his shop. Soon, he had an excess of electricity credits and used these to pay his own employees as part of their wages and benefits. He used some to pay his own suppliers who in turn used the credits toward their own delivery vehicles. The local car dealer saw an excellent opportunity and established a new business converting old cars to hybrid electric vehicles. He took payment in paper money as well as electric currency. Soon he built his own wind generators, and then bundled electricity credits with the car sales.
Entrepreneurs built biomass plants which process community waste to make fuel. This stored energy feeds into the local electricity grid during peak hours. As time went on, they were able to build a large production base of electricity generation and even augment the pensions with electricity currency. They funded social programs for schools and elderly with the new money. In short, the town became self-sufficient and prospered.
They reclaimed their wealth and freedom.
POWER CURRENCY
Facebook, Groupon, Farmville, Google, Twitter, Paypal - the hot new economy. These great enterprises came from an idea, and spread like wildfire. There was some venture funding, but for the most part, these internet driven ventures all grew from an entrepreneur’s dream and tapped into the 21st Century rulebook. These are all great ideas, and a lot of the growth is driven by using some form of new alternative currency – facebook credits, groupons, game cash, adsense, and so forth. This currency motivates people to enter into that alternative economy and participate. The hypergrowth of these companies reflect that.
Right now, electricity is used as an alternative currency in many US States through ‘net metering’ laws. We can do more. Using the technology we have now, we can develop a new money - money that is backed by energy. With this new currency, we can wipe out debt, unemployment, poverty, and oil imports. Power Currency can lead to increasing the economy 100 times in our lifetime, and get us out of the 20th Century Drill for Oil economy and into the 21st Century Outer Space economy.
Right now we have installed capacity of just over one million MWH of electricity potential. China is building 500 thousand MWH capacity in just the next five yearsi. This is half of the capacity that the USA has built all during the 20th Century. The US Energy Information Agency thinks the USA will have an average growth rate of one percent per year through 2030ii. This would bring us up to 1.3 million MWH capacity. This is far too small. Using some of the strengths of Facebook, Google and Twitter, we can invent our way out of this economic downturn and increase our energy production ten-fold by 2030. The energy and money establishments are controlled by powerful interest groups, but this does not matter. We can make this happen and 95 percent of what we need, is already in our hands now.
The energy situation in the USA offers the biggest opportunity in the history of the world. Oil prices are passing records highs and energy is strictly controlled. Americans are creative and when faced with a tough situation, they invent and work their way out. Stressful times bring about great innovation.
Money is a human creation. Anything can be money if people put a value on it and it is accepted as a medium of exchange.
It is normal for money to change with the times. Normally, there is a dominant currency (such as Federal Reserve notes in the USA), then there can be all kinds of other types of money. In the USA, we tend to use only one type of money – the dollar, but there have been all kinds of money through history.
|
|
Government
|
Alternatives
|
|
17th Century |
Gold, Silver, Copper |
Wampum, Beads |
|
|
Colonial Paper Money |
Corn, wheat |
|
|
Continental Dollars |
Tea, Sugar |
|
18th Century |
Silver Dollars |
Hours of skilled labor |
|
|
Gold Eagles |
Tobacco |
|
|
Copper Pennies |
Iron, Steel |
|
19th Century |
State Bank Notes |
Whiskey |
|
|
US Notes (Greenbacks) |
Casino Chips |
|
|
Gold Certificates |
Commercial Paper |
|
|
Silver Certificates |
Company Scrip |
|
20th Century |
|
Bus tokens |
|
|
Federal Reserve Notes |
Store Coupons |
|
|
|
Stamps Military Scrip Community Scrip |
|
|
|
Baseball tickets |
|
|
|
Airline miles/tickets |
|
|
|
Phone minutes |
|
|
|
Liberty Dollars |
|
|
|
College credit hours |
|
|
|
Disney Dollars |
|
21st Century |
|
Paypal money |
|
|
|
Facebook Credits |
|
|
|
Virtual game money |
|
|
|
Google credits Net Metering (kwh) |
Types of money in America
How many of these types of money in Table 1.1 do you use? No doubt you can add a few more to the list. Not everyone will agree that facebook credits are a form of money. However, the people who use facebook credits to transact a deal certainly see it as money and use it as money. Now, so much of our society is dependent on energy.
The earliest form of money was straight one to one barter. Salt, copper, bronze, shells, gold, silver, rum, tobacco, grains, animals were all used. Farmers would trade their harvest for animal skins for example. Barter was not convenient as you needed to find someone to accept what you had to offer.
As society grew and became more complex, this arrangement was impractical. One of the innovations was the merchant who opened a general store. He stocked all the things the town might need. The farmers, traders, and housewives went there to buy and trade things as needed - cinnamon, sugar, boots, bread, coats, and canes. Still they could carry out barter of goods but they had more options regarding the things they could buy.
From this, the merchant would find there was a certain commodity which had general acceptance in the community. Tobacco was used as money in Virginia during colonial times. In other places, you might see corn used as money. It all evolved from social norms. People found a certain item that served best for their community. Throughout history, gold and silver have fit nicely as a medium of exchange. Gold and silver will always be good as money and there will always be a call to have money that is backed by gold or silver.
We could certainly have electricity and energy backed money, if people will agree to it.
New types of money can come because of innovation. Airline miles are an example of this. Some tech savvy teens and young adults use the new forms of virtual money. Facebook was built on top of the virtual money system, and is monetizing into traditional money later. In any case, it has to be accepted by people using the money, as the medium of exchange.
In times of trouble, people will come up with new forms of money out of necessity. The USA saw thousands of communities use community issued scrip during hard times. During the Banking Panic of 1907, there was a terrible shortage of money in the USA. Instead of general collapse, people found ways to use new forms of money. Clearinghouse currencies in small denomination were marked “payable through the clearinghouse” and the member banks agreed to accept them. Negotiable cashier’s checks were written in 5, 10, or 20 dollar amounts and were payable to some person or entity, “John Smith” or “bearer” or such. These were technically illegal but accepted by the population. Companies paid employees in large numbers of small amounts of scrip. The scrip was the liability of the company issuing it, and was passed from hand to hand as a form of money. Some streetcar companies paid their employees in streetcar tokens and tickets. These circulated well as they had value as streetcar rides. In 1907, banks went along with this as it helped to prevent runs on banks. People used alternative currencies and did not need to withdraw so much money from the bank. With a severe shortage of money in the city, people figured out how to deal with the situation.
Alternative currencies will always be accepted and work quite well if the people agree to use them. Most of these alternative currencies in 1907 were technically illegal. Everyone knew they were illegal, but nobody did anything about it. Part of the reason was the lack of currency, but also, the use was so widespread that the government could not stop it. To government bureaucrats and collectivists, this was a nightmare. This competes with establish centrally controlled money. iii
We can further classify money into fiat and commodity. People accept fiat paper money because they are forced to by the King or Government, and they feel confident they can use it later to purchase what they need. If people lose faith in the money or there is too much paper money, then that money becomes worthless. We see this during times of trouble such as with the US Confederate States, Weimar Germany, China in the 1940’s, and now in Zimbabwe. Our Federal Reserve dollars we use now are fiat paper money.
Commodity money is often called ‘hard money’. If there was a disaster, and the Federal Reserve dollars we use now have no value, what would you use for money? When economies break down, people tend to move to money that is commodity backed such as gold, silver, tobacco, tea, corn, jade, rice, etc... Commodity money itself has intrinsic value. In some situations, an apple or gallon of water would be worth more than a pound of gold.
It is worthwhile to go back to Table 1.1 and write in a few notes. If your State is under financial duress, think of new types of money they can use. As long as people will accept it, then it can be used as a sort of money. If there is a collapse in the paper money, what will you use for money?
If you listen to the media, you hear that loss of the paper money would lead to loss of money itself. This is propaganda. The money will change to something else. If you are a doctor, dentist, carpenter, or plumber you will be fine. If you are a lawyer or college professor, you may or may not do so well. If you are a farmer, and can control your land, then your land and crops will be fine as money. Sorry to say but people with guns will do better than people without guns.
There is also paper money that is backed by some commodity, which falls in between. Examples in Table 1.1 are U.S. Dollar Gold and Silver Certificates.
Previously in Table 1.1 we listed types of money. Below are the levels of money supply during the 19th to 20th Century. Today we only think of one kind of money – the Federal Reserve Dollar. This is not normal. Prior to 1970, there were a lot of different types of money. There was hard commodity money, United States Dollars and Federal Reserve Dollars.
This data in Table 1.2 comes from the US Statistical Abstracts which you can find on the Census siteiv.
|
|
Hard Money |
United States Money |
Bank Money |
|||
|
|
Gold & Silver |
Coins |
Gold & Silver Certifi-cates |
Green-backs |
Bank Notes |
Federal Reserve Dollars |
|
|
No debt |
No debt |
Debt |
|||
|
1800 |
16 |
|
|
|
10 |
|
|
1810 |
27 |
|
|
|
28 |
|
|
1820 |
22 |
|
|
|
45 |
|
|
1830 |
26 |
|
|
|
61 |
|
|
1840 |
79 |
|
|
|
107 |
|
|
1850 |
147 |
|
|
|
131 |
|
|
1860 |
228 |
|
|
|
207 |
|
|
1870 |
90 |
|
32 |
325 |
328 |
|
|
1880 |
294 |
|
13 |
328 |
337 |
|
|
1890 |
485 |
|
429 |
335 |
182 |
|
|
1900 |
753 |
26 |
609 |
318 |
375 |
0 |
|
1910 |
800 |
46 |
1282 |
335 |
687 |
0 |
|
1920 |
801 |
91 |
357 |
278 |
691 |
3,065 |
|
1930 |
677 |
117 |
1382 |
288 |
652 |
1,402 |
|
1940 |
430 |
159 |
1649 |
248 |
166 |
5,163 |
|
1950 |
1125 |
370 |
2218 |
321 |
88 |
22,760 |
|
1960 |
1760 |
549 |
2157 |
318 |
57 |
27,094 |
|
1970 |
5002 |
1,126 |
225 |
297 |
29 |
47,627 |
|
1980 |
0 |
1,500 |
0 |
100 |
0 |
117,400 |
|
1990 |
0 |
2,000 |
0 |
0 |
0 |
254,400 |
|
2000 |
0 |
2,500 |
0 |
0 |
0 |
549,300 |
|
2010 |
0 |
3,000 |
0 |
0 |
0 |
873,300 |
19th and 20th Century Money, in millions Source: Figures for coins, silver and greenbacks are estimated 1980 – 2010. Source: US Statistical Abstract and Federal Reserve Bank
You can see that the money supply was somewhat steady until about 1970. In fact, it was very difficult to inflate. The money was fixed to silver and gold. We needed to dig it out of the ground so there was a natural limit on currency inflation. If there was too much silver in the economy, it would find its way overseas in exchange for silk, tea, spices, and other goods. There is no such limit to paper money, especially in the computer age.
You can also see a clear shift in our money from debt free over to 99 percent debt. The Federal Reserve Dollars come from money that is loaned into the economy. Note the enormous growth in the amount of Federal Reserve Dollars in the past few decades. These new types of Federal Reserve Dollars can simply be printed, and if they run out of paper, they can put the values in the computer or put bigger numbers on the paper bills.
Through our history there was a shift in types of money
1620 to 1913. Money is primarily commodity backed. Most of the money that came into circulation was produced in the form of gold and silver. There were other forms of money in colonial times. Most money is debt free, while debt money is used for mortgages and commerce.
1913 to 1965. There is a steady shift from United States dollars to Federal Reserve dollars: debt-free money to debt based money.
1965 to 2008. Debt free US dollars are eliminated and close to 100 percent of money is Federal Reserve Dollars backed by US Government debt.
2008 to today. Money today is backed by US Government debt, sub-prime mortgages and bad commercial debt.
There is a huge inflation in money supply. In the 1950’s there was still some restraint on the printing of money but by 2008 this restraint has died. Now, most of this money is not printed; it is put into the bank’s computers as digits. It is too easy for the Federal Reserve to make money now, and this causes fast growth in money inflation and price inflation.
Besides water, can you think of a commodity used by more people than energy? Everyone uses electricity. The Census says there are 111 million homes in America, and 111 million homes use electricity. If we can find a way to use energy – especially electricity - as a medium of exchange, then we have a money for the 21st Century. It has the commodity advantages that gold and silver have, and has the widespread use that paper money has. In Table 1.2 if we extend to the future, Power Currency would fall into the category of ‘Hard Money’.
Of course the biggest drawback is we cannot really store watt hours, or kilowatt hours. To fix this, we consider Power Currency to have three components.
Machines – steam turbines, nuclear power, PV cells, wind turbine, generator, car engine, ship engines and farm machines.
Fuels – oil, coal, biomass, sunlight (if harnessed), bio-diesel, ethanol, gas, wood, and waste.
Electricity – the making, delivery and use of electricity.
Electricity us used by everyone but cannot be stored. Fuel can be stored, and could be used to back money but is difficult to distribute except through centralized means. Engines cannot really be used as money but they are a good alternative to gold and silver as an asset. Working together, engines, fuel and electricity can provide the foundation for a new type of money. We will go into detail how this works later in the book.
Economic textbooks say that money has three characteristics – medium of exchange, unit of account, and standard of value. In this chapter we covered medium of exchange - money has to be accepted and valued by society. We will cover unit of account and standard of value later in the next chapter. Electricity is used by everyone but can we figure a way to make it the basis for money.
You say, ‘Stop! ‘We can’t do that! You are messing with THE MAN, the IRS, Uncle Sam, Big Oil, Wall Street! They will never allow it! I want my money back!’
You are right, we need to make sure things are legal. You see the ‘Liberty Dollar’ in Table 1.1. The founder of that is in jail. He went a bit too far and challenged both the money monopoly and the Government. These proposals assume that the necessary legal steps are done. Congress can pass laws. States can issue money under some restrictions. Some alternative monies can exist if done the proper way.
Now, with modern technology and our energy backed economy, kilowatt hours can be a new widely accepted form of money. As an alternative money, it could be as legal as facebook credits or Disney dollars – it is tolerated. As a Government backed money, it can have the strength of gold and the acceptance of paper money. Many States already allow some very limited form of this through ‘Net Metering’ or ‘feed in tariffs’ where electric utilities are required to purchase excess energy from homeowners who have solar energy systems. It would not take too much to take this to the next level. It has the potential to change the game and the economy.
I make the case for Power Currency as a national currency that replaces our existing money system.
DOLLARS and FROLLARS
Money needs to be a ‘Unit of Account’ that is recognized by all parties. It needs to be divisible without destroying value, and have the same value in different places. It needs to have a specific weight, measure and size. A one ounce gold coin will be accepted in London or Beijing as being a one ounce gold coin.
In the 18th Century, the U.S. States had their own coins, paper money, banks and policies. There were many different currencies in circulation – pesatas, francs, pounds, and sovereigns. There was scrip issued by states, cities, or large companies. It was a money changer’s dream. This was chaos but it worked to a large degree.
At the time, the Spanish dollar was 377 grains of silver. It was the most used coin in the colonies. In 1792, Congress wrote and President George Washington signed the Coinage Act which determined the exact composition of the dollar. Silver was the primary unit of measure and gold was derived from its relation to silver. Alexander Hamilton measured a basket of dollars and took the average. As the dollars were worn out a bit, the content was a bit less so the US dollar was set at 371.25 grains of silver.
|
|
Dollars |
Gold |
Silver |
|
|
|
grains |
grains |
|
Eagles |
10.00 |
247.500 |
|
|
½ Eagles |
5.00 |
123.750 |
|
|
¼ Eagles |
2.50 |
61.875 |
|
|
Dollars |
1.00 |
|
371.250 |
|
½ Dollars |
0.50 |
|
185.625 |
|
¼ Dollars |
0.25 |
|
92.812 |
|
Dimes |
0.10 |
|
37.125 |
|
Nickels |
0.05 |
|
18.587 |
2.1 Gold and silver specifications
Note: 1 ounce = 437.5 grains and one pound = 7000 grains
Gold coins were called EAGLES, and the EAGLES had a relative value to the dollar. In that same Act, President Washington signed into law a death penalty for anyone who counterfeited money or debased the coins. Here from the Coinage Act of 1792:
Section 19. And be it further enacted, That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of the fine gold or fine silver therein contained, or shall be of less weight or value than the same out to be pursuant to the directions of this act, through the default or with the connivance of any of the officers or persons who shall be employed at the said mint, for the purpose of profit or gain, or otherwise with a fraudulent intent, and if any of the said officers or persons shall embezzle any of the metals which shall at any time be committed to their charge for the purpose of being coined, or any of the coins which shall be struck or coined at the said mint, every such officer or person who shall commit any or either of the said offenses, shall be deemed guilty of felony, and shall suffer death.v
So there we have it, the Government put a penalty of death on anyone who worked to debase the currency.
In 1792, the proportional value of gold and silver was set at 15 units of pure silver to 1 unit of pure gold. Standard gold was defined as 11 parts pure gold to one part alloy composed of silver and copper. As long as both were used for money there was a natural ratio of silver and gold. Over time, there were some adjustments made to the coinage to account for changes in the balance of international trade. Still, Congress was able to control itself because it worked within the constraints of gold and silver. There was some inflation and deflation in the money, but overall, the money stayed pretty consistent in value over a long period of time.
|
Dollar (grains silver) |
Eagle (grains gold) |
Silver: Gold |
|
|
April 2, 1792 |
371.25 |
247.5 |
15 to 1 |
|
June, 1834 |
371.25 |
232 |
16 to 1 |
|
January 18, 1837 |
206.25 |
258 |
8 to 1 |
|
February 12, 1873 |
378 |
258 |
14.6 to 1 |
2.2 Gold:Silver Ratios
Even until 1857 foreign gold and silver coins were allowed as legal money.
Anyone could bring in silver, and government put it into a form that all of the economy could agree upon.
The silver came from the people. People could take the silver to a mint where it was coined into very exact sizes, weights and mixed with exact amounts of alloys. Anyone could go out and dig up gold and silver, or conduct trade to attain silver, then bring it to a mint to be coined. The laws were focused on the weights and measures of the money. The government was there to provide a service to mint coins and ensure there was a ‘unit of account’. They opened up the minting of silver to all people, and to allow foreign coins to be used. The first mint was established in Philadelphia in 1792 and we now have mints in San Francisco (1854), Denver (1906), and West Point (1973). It was too troublesome to ship the gold to Philadelphia to mint so the Government also had mints established in Charlotte, North Carolina (1838–1861) and Dahlonega, Georgia (1838–1861) to mint local gold deposits into gold coins. Andrew Jackson set up a mint in New Orleans, (1838– 1909) to help people in the South and West. It minted gold and silver in all denominations. Carson City (1870 - 1893) was set up primarily for silver coins. There have been private mints especially during gold rushes. These private mints would coin gold or silver to US specifications and the money was circulated just as if the Government did minted the coins.
This unit of account lasted until the Coinage Act of 1965. This cut the US dollar ‘unit of account’ with silver. In the 1960’s gold started to break its ‘unit of account’ with the dollar until August 1971 when the dollar cut all ties with any gold or silver. Go back to Table 1.2 and you see that prior to 1970, the amount of US dollars was steady, and since 1970 there is a terribly fast rise in the amount of Frollars in circulation.
The final characteristic of money is ‘standard of value’. Money must be able to be compare values over time. So money paid today will be valued at some similar measurable form at some time in the future. It can be readily stored and retrieved so that people can save it long term. As such, it needs to be stable and not be inflated away into nothingvi. This is the biggest challenge with Power Currency as electricity cannot be stored. We address this in a bit.
Taking the total money supply from Table 1.2, divide that by the total population in the United States, then take a look at the money per person and price index (inflation).
|
|
Money Supply (millions) |
Money Supply per Person |
Price Index (1913=100) |
|
1860 |
435 |
14 |
71 |
|
1870 |
775 |
20 |
102 |
|
1880 |
972 |
19 |
83 |
|
1890 |
1,431 |
23 |
78 |
|
1900 |
2,081 |
27 |
80 |
|
1910 |
3,150 |
34 |
97 |
|
1920 |
5,283 |
50 |
200 |
|
1930 |
4,518 |
37 |
167 |
|
1940 |
7,815 |
59 |
140 |
|
1950 |
26,882 |
178 |
241 |
|
1960 |
31,935 |
178 |
296 |
|
1970 |
54,306 |
267 |
388 |
|
1980 |
119,600 |
528 |
824 |
|
1990 |
257,500 |
1,035 |
1,307 |
|
2000 |
553,300 |
1,959 |
1,722 |
|
2010 |
879,300 |
2,855 |
2,177 |
2.6 Money Supply and Inflation
Source for Price Index: Statistical Abstracts, Bureau of Economic Analysis
We get a strong relationship between the growth of money and rise in prices. Who has not seen the prices of gasoline, food, housing, and such items increase over time? Chocolate bars were a nickel and now a dollar. With a dollar you could buy a coffee and the Sunday newspaper. Greenspan, Bernanke, Geitner and mainstream economists will say that inflation comes from short term trends and daily events like a droughts civil unrest, China’s booming economy. Those events might affect prices for a day, week or year, but over a long period of time, currency inflation causes price inflation. If they print trillions of extra dollars to bailout banks, then we will see an amount of inflation about equal to that increase in money supply. They get the extra money, you pay the higher prices.
2.7 Graph, money and prices
Look at the curve in Graph 2.7 and imagine the future. At some time in the future – it is inevitable - we will see a pound of coffee costing 1,000 dollars, homes selling for billions, rent for a one bedroom apartment costing one million dollars – in Camden New Jersey.
All it takes to destroy the money is a consistent inflation rate over a long period of time. The Consumer Price Index fits an exponential curve. The rate at which the CPI is growing year-by-year is calculated mathematically by the equation:
y0 is the CPI at the start of a certain period of time
y1 is the CPI at the end of the period of time
r is the annual growth rate of the CPI during the period of time
N is the time period in years.
Here is how it looks if we fit it to an exponential curve starting in 1913. The smooth curve is growing three percent per year and the dotted curve is the actual price inflation according to the Bureau of Labor Statistics. You can see that inflation was moderate and has taken off like a rocket in just the past few decades.
2.8 Inflation is exponential
This translates into gold prices. This is the benefit to owning precious metals. You hear a lot about the need to buy gold and silver. It is not that the gold or silver is getting more valuable. The issue is that there is a flood of new paper money on the market but the amount of gold and silver on the market is about the same. The value of each paper dollar is getting less and less. If you buy and hold gold or silver, in a few decades you will have maintained some level of wealth.
Let’s look at the price of gold in relation to silver and oil. In general, it takes about 40 ounces of silver to equal one ounce of gold, and it takes about 15 barrels of oil to equal one ounce of gold. We can predict this ratio out into the future. The ratios to silver and oil will fluctuate some but remain in some consistent band.
|
|
Gold |
Silver |
Oil |
|
1950 |
1 |
47 |
20 |
|
1960 |
1 |
38 |
18 |
|
1970 |
1 |
20 |
20 |
|
1980 |
1 |
29 |
17 |
|
1990 |
1 |
80 |
16 |
|
2000 |
1 |
56 |
9 |
|
2010 |
1 |
40 |
12 |
|
2020 |
1 |
30 to 60 |
10 to 20 |
|
2030 |
1 |
30 to 60 |
10 to 20 |
|
2040 |
1 |
30 to 60 |
10 to 20 |
|
2050 |
1 |
30 to 60 |
10 to 20 |
2.9 Gold: Silver: Oil
This chart shows the dollar prices of gold and oil over the past century.
2.10 Oil and Gold Source for data: US Geological Survey, Energy Information Administration
There is a simple theory about why there is a fairly constant ratio among these commodities. These things take effort to bring out of the ground. They are not so easy to find and are finite. All these factors give a restriction to commodities that you don’t see with paper money. In the future we could see a cup of coffee cost $10,000 dollars, but we will not see a cup of coffee cost one ounce of gold. There is no limit to paper money. Paper money can be printed and have numbers put on the paper.
But, what about making gold and silver money again? Gold and Silver are excellent forms of money, and they will always be money. Many States are looking at gold and silver backed money. The problem in the 21st Century economy is that gold and silver are used in many electronics products and we have a problem with hoarding. Let’s look at this.
In 1792, there was not as much opportunity to hoard as developed later with faster sea travel. In the period of a few days, a whole year’s production of gold can be moved anywhere around the globe and put into vaults. Billions of dollars are spent each year to extract the 2500 to 3000 tons that is mined each year. If you put all the gold ever mined (160,000 tons) into a football stadium and covered the area within the goalposts and sidelines, the height would be less than three feet. If you then add the yearly total to this, the amount of gold would be a sheet slightly thicker than half an inch.
The USA has 8,192 tons of gold stored in vaults at Fort Knox, West Point, and the Federal Reserve Bank of New York. This averages out to about one ounce per person in the USA and it all can fit into a cube about the size of one 900 square foot apartment with a ten foot ceiling. It could be put on one ship and carried off in one day. That is the main weakness of a gold standard. If we go back to the gold standard for our money, it will be too easy to manipulate and would provoke war in some extreme cases.
In China there are gold shops popping up all over. The people buy the gold, but they will not spend the gold. It is being hoarded. It is used in gifts and jewelry, but never to transact normal everyday things.
Electricity as ‘Hard’ Money
Now, lets look at electricity. Here is the price of electricity in terms of dollars.
2.11 Electricity in cents
You see the trend by now - the big inflation started around the early 1970s and has gone up about four percent each year. Well, that does not look so good. How can we use electricity as a standard of value if the value keeps changing? There is no way to predict the future, and the value of our money would drop quickly over time.
It is the depreciation of the dollar that is the issue here. In terms of gold, the price of electricity is quite steady. In fact, electricity in terms of gold or silver gets a little bit cheaper each year, reflecting the technology. Things like computers, mobile phones and such get cheaper – the same is true of electricity priced in relation to gold and silver.
2.12 Electricity and Gold
Here is a look at the prices of common items - electricity, gasoline, Flour, beef, bacon and apples. We put all items in a chart and compare them to the dollar with 1980 as our base year. The prices of all items rose in terms of Federal Reserve Dollars.
2.13 Food and Energy items vs. dollar
Here
are the same items but now priced in terms of electricity. We simply
do a series of ratios to get this. The price fluctuation over a
period of thirty years is quite stable. Electricity as a standard of
value over time is stronger than the paper money we use now.
2.14 Electricity vs. food and energy items
There is some variation, but the numbers tend to stay constant. Electricity maintains a nice steady stability in prices. Electricity meets the theoretical requirements of money:
Medium of exchange – widely used by nearly everyone
Unit of Account – indisputable and recognized value
Standard of Value – consistent value over time in terms of other items
Let’s go back to the issue of ‘unit of account’. Power Currency has its greatest strength in this regard.
|
Energy Units |
Power is Energy Flow |
|
Kilowatt Hour |
Kilowatts |
|
Calorie |
Calories/minute |
|
BTU |
BTU/second or BTU/hour |
|
joule |
joule/sec = watt |
|
Horsepower hour |
Horsepower/hour |
2.3 Energy Units
Just like ounces of gold or silver, energy and power measurements are recognized the same by everyone around the world.
1 joule = 0.239 calories (cal)
1 calorie = 4.187 joules (J)
1 British thermal unit (Btu) = 1055 joules
1 Quad = 1000 trillion Btu, approximately 172 million barrels of oil equivalent (boe)
Each of these measures is convertible to the other.
|
BTU |
British Thermal Unit -- can raise the temperature of one pound of water one degree Fahrenheit |
|
Cal |
Large or kilogram calorie -- can raise the temperature of one kilogram of water one degree Celsius |
|
cal |
Small or gram calorie -- One cal can raise one gram of water one degree Celsius |
|
ft-lb |
The energy exerted by a force of one pound moving one foot |
|
KW-hr |
Energy to run a 1000 watt appliance for one hour |
|
joule |
The energy exerted by a force of one newton moving one meter |
|
|
|
1 watt = 1.0 joule/second = 3.413 Btu/hr
1 kilowatt (kW) = 3413 Btu/hr = 1.341 horsepower
1 MW (mW) = 1,341 horsepower
1 kilowatt-hour (KWH) = 3.6 MJ = 3413 Btu
1 horsepower (hp) = 550 foot-pounds per second = 2545 Btu per hour = 745.7 watts = 0.746 kW
2.4 Conversions
To further illustrate the conversions between the various measures, lets convert to food. The energy in food is measured in calories, which is convertible to BTU’s and Kilowatt hours.
|
|
|
Calories |
BTU |
KWH |
|
McDonalds cheeseburger |
|
320 |
1270 |
0.372 |
|
McDonalds french fries |
|
645 |
2560 |
0.750 |
|
Beer |
350ml |
151 |
599 |
0.176 |
|
Apples |
100g |
59 |
234 |
0.069 |
|
Banana |
100g |
92 |
365 |
0.107 |
|
Hershey’s chocolate |
100g |
550 |
2183 |
0.640 |
|
Bread with grain |
slice(32g) |
80 |
318 |
0.093 |
|
Ice cream |
100g |
126 |
500 |
0.147 |