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I want to create an interplanetary empire in a single solar system. It is ruled by an Emperor and his court officials.

I want this interplanetary empire to utilize a complex economic system where each planet has its own fiat currency and is free market to an extent for each planet. On the interplanetary level, however, the Emperor creates a gold standard currency to avoid the issue of hyperinflation and other disadvantages of fiat currency. He issues an edict to make him the sole producer of minted gold coins. (the planets cannot use gold as currency, only the Emperor)

This currency is intended to be an anchor for fiat currencies. That is, it serves to have a static/stable value making it an attractive reserve currency. This may also have the benefit of giving more power to the Emperor. Wherein the Emperor allows how much of gold coins are circulated in the any given planet's economy, affecting the economic growth/decline of certain planets if they misbehave.

The reason for the Emperor utilizing a gold standard instead of just another fiat currency is more or less arbitrary. It's not intended to be a panacea to economic ailments, but something I personally wanted to be in my world. (this includes the disadvantages as well, which I'd like to explore in a story I;m currently writing)

But I would like your guys' opinion. What would the economic climate be in this scenario? Can this interplanetary economy grow or would it stagnate and ultimately fall apart? Would the economy be stable? What issues can you foresee in this gold standard/reserve currency?

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    $\begingroup$ What happens when someone discovers an El Dorado asteroid? Is it claimed by the Emperor? Are the discoverers rewarded with fiat currency at the nomimal rate? The reason I ask is because it sounds like this gold standard has an arbitrary value (decided by the Emperor) whereas previous gold standards focused on the notions of financial safety and conservative fiscal policy. In this situation, the gold standard is merely another fiat currency, is it not? $\endgroup$ – Tenryu Mar 4 '18 at 4:16
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    $\begingroup$ Possible duplicate of How can I make money work across separate planets? $\endgroup$ – Tim B II Mar 4 '18 at 4:46
  • $\begingroup$ In that scenario, the gold can be mined by the person/company that found this asteroid. They can use the gold however they wish, but it won't have any "legal" value if the gold coins weren't produced in an Imperial mint. What they could do, however, is exchange some or all the gold they mined in gold coins that they could use as they see fit. It'd otherwise serve as a massive surge of cash flow into that person/company account or the planet's economy. This, of course, is dependent on whether the Emperor permits it, but in most cases I can't imagine not. $\endgroup$ – tempestwing0101 Mar 4 '18 at 4:47
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    $\begingroup$ @tempestwing0101 then the emperor is still using fiat currency, if the price of gold does not affect the value of the gold coin then it is not on the gold standard it is just a fiat currency that happens to be made of gold instead of paper. $\endgroup$ – John Mar 4 '18 at 7:17
  • $\begingroup$ @John What would you think if we assume the Emperor does create the gold standard in the strictest sense, yet chooses to move it between gold to bimetal or even trimetal standard? The idea there would be that the gold standard remains yet, if an increase of money supply is needed than the emperor could switch between a bimetal standard with say gold AND silver as needed $\endgroup$ – tempestwing0101 Mar 4 '18 at 23:29
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This is a reasonable system, but making it gold standard won't work.

France has it set up that its former colonies like French Polynesia and Central African countries use the CFP and CFA franc respectively. The CFA franc and CFP Francs are set at a fixed exchange rate with the French franc. Your system would be much the same.

Now with the Imperial currency, making it tied to gold isn't the best idea. On Earth, gold is precious because it's rare, and most of what has been mined has been locked away in vaults as monetary reserves for countries and banks. But with an entire solar system to mine, gold will become just a pretty rock about as valuable as iron is today. Basing the imperial currency around a fairly common substance doesn't work.

You'll need something rarer and even more valuable to run the system.

If anti-matter is usable in your system that could be just the thing necessary for the empire. It's hard to make and keep stable, but possible. So if the Imperial government makes, stores and sells the majority of anti-matter, they can control the overall economy remarkably well. This would work better than the gold standard as a lack of new gold finds won't lower prices drastically like has in the past. If they need more money they can increase anti-matter production rather than just abandoning the system as many countries did during WW1 when they found they didn't have enough gold. Or if they find inflation is getting worse, they lower production of anti-matter.

This gives them the benefits of a fiat currency, while keeping something solid and valuable to cover their bills.*

I know this isn't a perfect system, but it seems the most workable out of all the options.

Edit Minerals we can dig up won't be very valuable when you can mine asteroids worth 60 trillion British Pounds.

asteroid-thats-worth-60-billion-years-financial-output-entire-WORLD.html

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    $\begingroup$ "But with an entire solar system to mine, gold will become just a pretty rock about as valuable as iron is today." That's a highly dubious assertion. $\endgroup$ – RonJohn Mar 4 '18 at 4:58
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    $\begingroup$ @RonJohn, please check the link in the edit. There are asteroids we know of today that are estimated in the hundreds of billions up to 60 trillion. $\endgroup$ – Dan Clarke Mar 4 '18 at 5:03
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    $\begingroup$ @tempestwing0101 Californium — $25-27 million per gram. The most expensive chemical element ever. It has been synthesized only once since its discovery in 1950. brightside.me/wonder-curiosities/… $\endgroup$ – Dan Clarke Mar 4 '18 at 5:05
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    $\begingroup$ @RonJohn Eros is a 33 km by 13 km by 13 km banana. There are over 200 asteroids that 200 km in diameter or larger in the main asteroid belt alone. There are 1.1 to 1.9 million asteroids over 1km in diameter in the main asteroid belt. Now add in the Oort Cloud, the various planets, gas giants, and the other asteroids going through the solar system, precious metals are not going to be very precious once space mining gets up and running. space.com/51-asteroids-formation-discovery-and-exploration.html $\endgroup$ – Dan Clarke Mar 4 '18 at 5:19
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    $\begingroup$ Antimatter might work: limited supply, small size, hard to forge. The containers for it can be made from gold alloy, and shaped like coins. $\endgroup$ – Bald Bear Mar 4 '18 at 18:49
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On paper it's a sound system. Each inhabited planet gets to set its own economic policies, but interworld trade can only occur using interworld currency (gold).

This is kind of how international payments used to be made here on Earth. Even now, countries that want to deal internationally have to spend a "hard currency" of some sort (like sterling or US dollars) when buying their arms and major hardware.

The one reality check as I see it is this: are you sure they're going to have enough gold to support this system? Even now, the estimate for how much gold has ever been mined since the beginning of human interest in the stuff is about 187,000 tonnes. This is about $7.50 trillion US dollars. The US spends almost a third of that each year importing stuff.

Even multiplied by four or five inhabited & industrialised planets, this is not a lot of bling.

Plus, speaking of bling, a hefty portion of all above ground gold is siphoned off by jewelry and by technology.

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So the gold coins are used not just for interplanetary trade but also on the planets? I'll look just at the interplanetary trade aspect. There are two ways to make this gold standard work in practice:

  • Each planet has a vault in some "central bank" or "clearinghouse" and gold coins are moved between them if there is a trade imbalance between two worlds.
  • Gold coins are transported between planets when the need comes up.

The latter is problematical if space travel is expensive. The former makes all this gold meaningless -- they could just as well move plastic tokens, or bits and bytes. Or there is really just one vault, and clerks swap the "this box belongs to ..." labels as gold changes ownership.

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It's really not the 'gold standard' in the historical sense if it's the minting that gives value, not the substance. Part of the reason why the historical gold standard worked was because while you could make counterfeit coins, there are foolproof and verifiable ways of someone auditing exactly how much actual wealth you had in this system, because gold was gold was gold.

In an interplanetary market, you'd need a peasantry that didn't have access to molecular bombardment (or gold was low enough in value per ounce that X-to-gold schemes would be cost-prohibitive), and a government that was okay enough with social mobility that a peasant becoming suddenly noble-tier wealthy via an El Dorado asteroid wouldn't destroy the social hierarchy. An Emperor-type setting might make that difficult.

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