[Zygote]

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the faith in this system was so strong that the richest person didn't even have possesion of his wealth. it was simply believed to be at the bottom of the ocean since it was so large it sunk the boat that attempted to carry it back to his home.

but the mere rumor of its existance was enough to grant him food, land, etc. since it was believed that the big stone wheel did in fact exist.

the problem w/ # is that we've been exposed to one type of money and that generating that type of faith in something new would be very difficult. i think that it would probably be ideal but impossible to move to now.

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I dont really see how this example explains much. He seems to be thinking money is some abstract psychology. This is not the case. The ability to redeem is very important. Gold would never have been dug out the ground for monetary purposes if that wasn't the case.

I also i disagree with the idea that switching entails massive costs. Society is much more maleable than you give credit for. We have seen many examples of industries in society move from socialist to private with nothing but success. We've also seen things in the other direction in that governments will change from gold standard to fiat money by the whim of a pen or design other odd structures and just impose them the next day.

IMO, with the entrepreneurial window open and the freedom of consumers and producers unveiled, on top of the necessity of maiting the division of labor and the vast economy, society will quickly adpot and continually improve on a monetary system.

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gold on the other hand, as worded in the first option, is another impossibility as has been proven in the past. governemtns cannot operate a gold standard without intervention in times of trouble. it has occurred in the past but always ends in disruption. the govt has such incentive to move the money supply that it will not stay locked to the production increases in gold

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i agree

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typically, you could expect though that a well administered faithful single commodity based monetary system with known reserves and a predictable production capacity that can increase steadily around a band would be ideal. in that way, the money supply could increase at about the rate of growth of the economy

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I dont like the way that last sentence is phrased. The money supply does not need to grow at all. As the demand for money rises the value of money rises which is all that is necessary. Since you said predictable though the market will make the necessary adjustments and this shouldnt be a problem.

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additionally, a money supply linked to the production of the commodity, seems like would limit the productive capacity of an economy to the production of that commodity. a basket of commodities imo would have strange effects since some of the basket would be weighted differently than other commodities due to their availability/relative abundance.

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I dont see why your first sentence is true.

The different weightings are meant to provide a less volatile purchasing power for each monetary unit. The main basis of the system is the idea that surplus commodities represent societal wealth. Societal surpluses should be the basis of money by Graham's idea.

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to switch to a gold standard now would entail the govt taking control of all production and that would only be in the US. china and tons of other metals producers could influence the US monetary system as could importers. the world (productively speaking) would have to agree to a system of controls on production

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aside from the governments having their hands tied i dont see this as so bad.