[DcifrThs]

i haven't voted yet.

i think 3 may be the best option if it started from scratch. in "Money Mischeif" by Milton Freidman, he tells of the island of somethingorother somehwere. on this island, the wealth of the individuals was linked to large stones that had to be mined, shaped, and carried to a location.

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.

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.

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.

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.

the problem, again, is that some producers have huge incentives to overproduce and thus increase the money supply, so the govt or an over-arching authority would have to take control of the productive capacity for that commodity/basket of commodities.

so the question you asked is very difficult to answer. and the answer i'd give depends very sensitively on how it is worded.

if you ask "starting from scratch, which would be best"

i'd say the free market monetary system.

if you ask "given where we are now, which would be best"

i'd actually say the fiat monetary system. the reason is because faith in this system is so strong overall and the administration of it has widespread support.

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.

to switch to a free market system now would also be very difficult for faith and similar reasons as discussed above.

i'm much more comfortable w/ my answer to the question regarding "starting from scratch" than i am w/ my answer to the question "given where we are now."

aka, i'm open to disucssion on the vote for fiat system we have now and how to overcome the huge obstacles to a switch.

thoughts?

Barron