Currency Based on Tangible Commodities
There was a new central bank governor. He was though.
The currency was depreciation fast, it's been depreciation for over 50 years, whenever there is political turmoil, a slight upset, currency was taking the toll. All companies did not trust the currency anymore, all their reserves was in foreign currency. When they needed a capital, they access that foreign reserves. Anyhow if companies, kept their reserves in the depreciation currency the stock price would tumble. How would you think of holding your reserves for the next years investing, when 50% of currency depreciate into the air in just a year! And the public was following suit. You think of buying that house, saving for a mortgage, that car, big purchase. How can you hold your savings in this currency? Better yet, you can not make any projection for the year ahead. Will it be deprecation the same, or more? When a bank gives you %20 interest with this unknown, that is not enough incentive.
The new central bank governor had intensive business background. He knew a currency must keep its value. For business to thrive, once the depreciation begins it escalates further and further. The system needed to change, the fundamentals needed to change. But what can he do? After all he is just a governor with limited powers. And he knew that was not going to be easy. As for luck a new government was also desperately looking to revive the currency.
New governor prepared a proposal, he gathered deputy, chief, and other officers. He introduced it to them. He was going to get rid of the currency. Bring on a new currency, but the new currency will be based on commodities, tangible commodities. But unlike previous commodity based currencies and he did knew about the lessons such as 1930s liquidity crisis where central bank could not print money and none had easy access to money. This one was going to be based on various commodities. Commodities that country was able to produce. Commodities that are not just storable and stored but produced and continue to be produced. So in this system the commodities can change depending on the country can produce.
Commodities must be easy to store, storable, has not expiry date and at least %51 be produced in the country
He decided was
going to base the currency on following commodities
88% Gold
11% Silver
2% Boron
% 0.2 Copper
and %19.8 other elements
The above percentages revised each year. Depending on the production capabilities of the country. If for example Boron production decrease by % 1, than other elements can be added or subtracted to make up for it.
Yes, the total equals to %121. Why need for extra %21? The user of the currency was going get and be it is backed %100 by commodities but that 21% is for reserves. In case there was a production problem, a delay or needed to print extra money...etc that %21 gives that room. Anyone doesn't believing in the currency any more and wanting their money back in listed commodities, can go to agreed bank or any consulate. He fills a from saying how much want to deposit, give an appointment, the commodities shipped to the bank, user pays the courier charge and collect the commodities.
This new system makes all tangible commodities a currency. So all tangible commodity production up to %51, they are either nationalised or localised and raw exports restricted. You can only export production of mining company up to %49 in raw, you can do the rest in produced goods, such as cars, batteries, jewellery accessories where the commodities used for.
So unlike previous commodities based currencies, the new central bank does not have to store the commodities. They can store if they want to. As storage has added cost, such as security, staff, electricity and does not produce any income. Instead it is based on yearly production capabilities of mining companies. So that if any need arises the production is used for that need. In this way the currency are very much adaptable to needs of growing economy. Yes, you can print as much money as you want but you have to increase mining production, which you will need to employ people, increase exports which unlike stored gold that does nothing, this way you increase GDP.
But of course storing gold, does not become absolute. You still need to store some percentage to give trust to users.
He calls this new currency 'Hicac', as in High Commodity Access Currency, it has the same currency symbol as before.
Also he make changes to printing the currency. It's now polymer based, can not wrinkle, tear or get wet, has lifespan of minimum 20 years, it has various holograms visible only under certain wavelengths of light. The holograms different based on serial numbers. It has very rich graphics. It is very appealing to look at, and joy to hold, and gives amaze to whom saw it first time. It is more costly to print this currency, but since long lasting that cost is justified. It is just impossible to counterfeit this currency. How you print it, what polymer based, what graphics used only know to handful of people. And not one person know it all. Like the Coca-Cola recipe you can not replicate it and it is very easy to spot the fake.
The proposal was very much was the new government was looking for. It had been begin implementing without delay. Now the currency had discipline, a trust. For each passing month, the currency begin appreciation . Unlike previously they can control the deprecation and appreciation without harming the economy. This was the first proposal in monetary history. Got surprised by the World, and was eager to see if it was going to work or not. But it seems the country just solved their 50 year old problem. Their currency now had value. And that's all you needed, to keep its value.
Now hard worker who likes to work hard, can preserve their hard work without a worry, in turn gives them incentives to work harder . Company can now think years ahead to implement their production ideas. Inflation is no longer a problem. Velocity of money seems to be increasing. Best of all the value of currency is very controllable and adaptable to growing needs. And that is the way to preserve wealth especially middle income earners, as they are the backbone of country, and make the country prosperous that are long lasting as long as peace prevails of course.
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