I was thinking of a new world currency which can be used around the world. It works like gift vouchers but for a commodity rather than a fixed value. Currently you can buy a Starbucks card with SGD10 value. But instead this system works by buying the actual commodity. Essentially a pre-purchase of essential products.
Have a commodities voucher for staples, rice, sugar, potatoes. These vouchers will have no expiry date and can be used to claim in approved supermarts within a particular country. These vouchers would be good as cash. The price will be set by the supermarts. Essentially, a 5kg rice voucher can be purchased now at prevailing rates and can be used years later. This asset is inflation protected as the inflation is borne by the supermart/government. This voucher needs to be regulated and guaranteed by the government. Supermart will have a bid ask spread for people who want to convert this asset back into cash. Works similarly to traveller's cheques but based on a commodity/necessity. There will be a cheapest to deliver concept like for bonds but with a standardized quality/grade. A market may be created for trading across different commodities, sugar, salt, potatoes, quantity should be standardised consumable quantities for ease of exchange at the supermart.
This "currency"/(will be referred to as voucher for this post) will help people who have no faith in the financial system or cannot understand inflation. At least when investing in this currency, they are guaranteed to have food to eat and will be able to keep up with inflation regardless of when they purchased the voucher. This protects the consumer and sets a new currency in the world. (USA 5kg potatoes can only be used to claim in USA. SGP 5kg rice can only be used to claim in SGP.) As the currency can be consumed by exchanging it for food, it will not be deflationary in nature. But neither will this currency be inflationary in nature. Also, the currency can be used along side the normal currencies as small change still needs to be traded in traditional currencies.
Basically, traditional currency will be used for immediate exchange. And this voucher will be used for future exchange/storage of value. The voucher should be able to exchange for cash at the prevailing rates to buy other products with the traditional currency.
A worker's salary would be paid in X kg worth of rice, X kg worth of potatoes, X kg of sugar, X kg of salt. etc. A basket of products so that he/she will always have food to eat and that their salary will always keep in pace with inflation even if he gets no change in salary. His REAL SALARY remains constant. Whereas now if your increment does not keep up with inflation, your real salary goes down. People can even have a bank account which stores the different commodity he owns. Interest would be REAL interest and also hedged against inflation. Everyone could own an account card which can directly credit/debit the rice as he claims against the supermart. So everyone would have a commodities portfolio in their account and some free cash for spending on other immediate items which are out of the voucher system which should be luxury products and non-necessities.
Administration of the currency will be between the government and supermarts to ensure that the food costs and storage costs are hedged so that they can provide a fair market exchange for trading of this voucher system. You should be able to convert this currency back into cash but at a spread for the supermart to earn from the spread as they provide the service of storage/hedging/transport of these commodities. The commodities would be on a constant state of renewal from the supermarts as they sell the products daily so the storage costs should not be too high. I would not expect people to suddenly withdraw 10,000kg of potatoes unnecessarily. Although the supermart should have some protection to the amount a person can withdraw at a single instance. Example if someone wants to withdraw anything more than 100kg rice or 10kg salt depending on product, they must give ample notice to the supermart, 1week or as determined when the voucher system is put in place so that the supermart can prepare the product for delivery.
Currently there is a commodities exchange but that is based on the existing financial system. It trades in large quantities which are not practical for the common man. Also, it does not take into account the transportation costs and storage for the common usage. The above mentioned voucher system would clean up the inflationary nature of the current system and do away with the deflationary nature of gold. It also helps the man on the street to keep up with inflation and living costs and maintain his standard of living even during inflationary times. If this system is put in place, there would be no inflationary times as the vouchers would be used as a currency and is already inflation adjusted. There will still be fluctuations between USA salt vs USA sugar, USA potatoes vs SGP potatoes as the cost of delivery would differ. Costs of living would take a new meaning. As there would be no real "costs" any longer. Cost of living would be about 300gms of food per meal. Luxury handbags may see inflation as it would be out of the system but who really cares. People would be investing in actual commodities to keep themselves alive.
The administration would help work out the delivery and storage of products to consumers and they can get a margin as they currently do. The supermarts will have large quantities of current cash to bolster the company and potentially do business in other industries, so that it stays afloat as all products have been pre-purchased in the form of vouchers.
The new system would work very much like the barter trade system in history but now storage would not be a problem. There would also not be a monopoly across supermarts as there can be multiple supermarts providing the service as long as they are approved by the administration. They will be competing to keep costs low so that they can sell more vouchers. Traditional currency would still exist and help facilitate trade in other products. For people who are concerned about the survivability of the supermart, they do not need to be too concerned as there would be a group of supermarts providing this service. Also, it is similar to insurance products where there is faith that the company will continue to be around. This is the same as putting money in banks.
Although this is a radical idea. I believe this system could truly revolutionise the economy and we would not be counting everything in dollars and cents. The financial system would change as this printing money nonsense would probably stop since both inflation and deflation would probably be handled this way.
Maybe you can provide more comments/insights and build upon this idea? Do you think such a system could work? Maybe in the far future such a system may come into place.
Remember, you first heard it on EarlyRetirementSG
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Have a commodities voucher for staples, rice, sugar, potatoes. These vouchers will have no expiry date and can be used to claim in approved supermarts within a particular country. These vouchers would be good as cash. The price will be set by the supermarts. Essentially, a 5kg rice voucher can be purchased now at prevailing rates and can be used years later. This asset is inflation protected as the inflation is borne by the supermart/government. This voucher needs to be regulated and guaranteed by the government. Supermart will have a bid ask spread for people who want to convert this asset back into cash. Works similarly to traveller's cheques but based on a commodity/necessity. There will be a cheapest to deliver concept like for bonds but with a standardized quality/grade. A market may be created for trading across different commodities, sugar, salt, potatoes, quantity should be standardised consumable quantities for ease of exchange at the supermart.
This "currency"/(will be referred to as voucher for this post) will help people who have no faith in the financial system or cannot understand inflation. At least when investing in this currency, they are guaranteed to have food to eat and will be able to keep up with inflation regardless of when they purchased the voucher. This protects the consumer and sets a new currency in the world. (USA 5kg potatoes can only be used to claim in USA. SGP 5kg rice can only be used to claim in SGP.) As the currency can be consumed by exchanging it for food, it will not be deflationary in nature. But neither will this currency be inflationary in nature. Also, the currency can be used along side the normal currencies as small change still needs to be traded in traditional currencies.
Basically, traditional currency will be used for immediate exchange. And this voucher will be used for future exchange/storage of value. The voucher should be able to exchange for cash at the prevailing rates to buy other products with the traditional currency.
A worker's salary would be paid in X kg worth of rice, X kg worth of potatoes, X kg of sugar, X kg of salt. etc. A basket of products so that he/she will always have food to eat and that their salary will always keep in pace with inflation even if he gets no change in salary. His REAL SALARY remains constant. Whereas now if your increment does not keep up with inflation, your real salary goes down. People can even have a bank account which stores the different commodity he owns. Interest would be REAL interest and also hedged against inflation. Everyone could own an account card which can directly credit/debit the rice as he claims against the supermart. So everyone would have a commodities portfolio in their account and some free cash for spending on other immediate items which are out of the voucher system which should be luxury products and non-necessities.
Administration of the currency will be between the government and supermarts to ensure that the food costs and storage costs are hedged so that they can provide a fair market exchange for trading of this voucher system. You should be able to convert this currency back into cash but at a spread for the supermart to earn from the spread as they provide the service of storage/hedging/transport of these commodities. The commodities would be on a constant state of renewal from the supermarts as they sell the products daily so the storage costs should not be too high. I would not expect people to suddenly withdraw 10,000kg of potatoes unnecessarily. Although the supermart should have some protection to the amount a person can withdraw at a single instance. Example if someone wants to withdraw anything more than 100kg rice or 10kg salt depending on product, they must give ample notice to the supermart, 1week or as determined when the voucher system is put in place so that the supermart can prepare the product for delivery.
Currently there is a commodities exchange but that is based on the existing financial system. It trades in large quantities which are not practical for the common man. Also, it does not take into account the transportation costs and storage for the common usage. The above mentioned voucher system would clean up the inflationary nature of the current system and do away with the deflationary nature of gold. It also helps the man on the street to keep up with inflation and living costs and maintain his standard of living even during inflationary times. If this system is put in place, there would be no inflationary times as the vouchers would be used as a currency and is already inflation adjusted. There will still be fluctuations between USA salt vs USA sugar, USA potatoes vs SGP potatoes as the cost of delivery would differ. Costs of living would take a new meaning. As there would be no real "costs" any longer. Cost of living would be about 300gms of food per meal. Luxury handbags may see inflation as it would be out of the system but who really cares. People would be investing in actual commodities to keep themselves alive.
The administration would help work out the delivery and storage of products to consumers and they can get a margin as they currently do. The supermarts will have large quantities of current cash to bolster the company and potentially do business in other industries, so that it stays afloat as all products have been pre-purchased in the form of vouchers.
The new system would work very much like the barter trade system in history but now storage would not be a problem. There would also not be a monopoly across supermarts as there can be multiple supermarts providing the service as long as they are approved by the administration. They will be competing to keep costs low so that they can sell more vouchers. Traditional currency would still exist and help facilitate trade in other products. For people who are concerned about the survivability of the supermart, they do not need to be too concerned as there would be a group of supermarts providing this service. Also, it is similar to insurance products where there is faith that the company will continue to be around. This is the same as putting money in banks.
Although this is a radical idea. I believe this system could truly revolutionise the economy and we would not be counting everything in dollars and cents. The financial system would change as this printing money nonsense would probably stop since both inflation and deflation would probably be handled this way.
Maybe you can provide more comments/insights and build upon this idea? Do you think such a system could work? Maybe in the far future such a system may come into place.
Remember, you first heard it on EarlyRetirementSG
<<PREVIOUS POST // NEXT POST>>
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