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I just watched Rango, and I got curious of the realistic implications.

Let's set the stage.

  • Desert environment.

  • Realistic 21st century American tech, unlike the movie.

  • Some foreign country based on a trade economy.

  • They're starting to accept foreign trade, but considering that they lack a currency, they settle on using something everyone wants: clean water.

  • For transaction to be legal, it must be in any size bottle with volume marked, purified (Minerals allowed, as long as they're what you find in common tap water.) and certified sanitary.

  • Like in Rango, there are banks. They have the expected, a purification center, a test for cleanliness, and a holding tank with UV sanitation system added. Purification is provided for a fee, and required to deposit.

  • Let's assume they've got easy access to high-quality retail water cleaning machines. I've seen those at camping stores, and they'd sell like hotcakes here because...

  • ...Everyone has to find their own water and clean it. There's a river that one could build a home near, or pipe water from, but tax is higher and there are heavy regulations. Tax is really low away from the river.

  • City water is a thing, but you have to pay for it with something else. Remember that it's a trade economy, the logic is that they sell stuff to the city and get paid in water.

So, what would this imply? Anything really weird? Could it even hold up?

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  • $\begingroup$ @user6760 That may be a new question. Please keep comments reasonably focused on the question; if you want a discussion, you can come to chat. $\endgroup$ – ArtOfCode Apr 25 '15 at 7:54
  • $\begingroup$ In the Metro 2033 series books, ammunition is the currency. Then in the games they had to twist it for game balance, creating "makeshift ammo" and "army ammo", one for shooting, the other for paying, with huge price difference and only minor accuracy/damage difference. $\endgroup$ – SF. Apr 25 '15 at 23:37
  • $\begingroup$ The Mayans actually used coco beans as currency. The elite even drank them, which literally meant they drank money. (the poor could not afford it) $\endgroup$ – Cort Ammon - Reinstate Monica Jan 7 '16 at 2:45
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Sure, anything is valuable IF EVERYONE AGREES IT IS VALUABLE. The reason paper money is valuable is because the nation backs it and says that it is worth a certain value; and said nation is able to back up that claim with its own national profits from goods and services (GDP) and its reserve (typically in gold).

Hence, if water is rare enough to become precious, it is possible. However; currency is initially invented using precious metals not only because they are hard to find; but also because they are pretty when worked, highly durable (against chemical reactions, not impacts), and workable into something that you can carry around.

The issue with water as a currency hence lies its portability and durability more than anything. How many 2L bottles can you realistically carry with you? Its generally assumed by travellers / backpackers that you can carry at most 2/3 of your body weight in a camping backpack. Problem is, whilst fresh water weighs a handy 1kg (2.2 lb) per litre; the more contiminated it gets, the heavier it also gets; seawater is considerably heavier due to the salt.

And then, you can lose your profits really easily. Half of it could evaporate, spilling your drink costs you a weeks wages, and you could totally screw up the economy by tapping or contaminating water supplies.

Furthermore, water is used in everything. We drink it, we use to make food, we use to clean, to create alot of things, to carry away waste etc. It would be a nightmare to keep a pocket book of your exact ingoings and outgoings, even if you meter the precise incoming and outgoing water from every home.

Due to these idiosyncracities, water is a poor currency, and its going to be abandoned as such in any sufficiently large society. Frontier villages might directly use it, and it will remain an important barter good, but as the actual main thing to trade its rather unlikely.

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Water was currency in the novel "Dune", for many of the same reasons you mentioned in your question, but the value of such currencies is always limited by the special circumstances which limit or eliminate the more "formal" mediums of exchange, so water may be "currency" for a very limited time and over a very limited geographical range.

Even in Dune; water was only valuable on the planet Arakis itself (paying someone in water on a different planet would get you laughed at), while "Spice" ended up being the universal currency/trade good because of its absolutely unique properties and limited availability.

Even on Dune, while "Spice" was the formal store of value, no one in their right mind would walk around with a bag of "Spice" to buy groceries; the value was translated into some form of currency for actual day to day transactions. When money was backed by gold or silver bullion, few people walked around with a bag of gold, but carried paper currency with an agreed on redemption value that was theoretically reflected in a nation's bullion reserves. This was one of the weaknesses of monies backed by precious metal; if the reserves changed (i.e. a gold strike, or selling the gold to fund a major war), then the value of the currency was also affected (there might not be enough gold to redeem the amount of paper currency in circulation). Of course modern "fiat" currency has a few issues of its own...

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  • $\begingroup$ Really interesting. By this logic tho I'm confused about how guys money works in the first place.. Anyway, do you remember Dune's author's name? $\endgroup$ – Vector Lightning Apr 25 '15 at 17:48
  • $\begingroup$ Frank Herbert's Dune is a good example. I agree that I think everything (including water) considered 'precious' would be represented by fiat money or credit. $\endgroup$ – Mikey Apr 26 '15 at 0:14
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One implication of using water as currency is that the value of any particular unit of that currency would be consistent in relation to other units of the same currency, but would have extremely dynamic purchasing power depending on how thirsty the service provider or product merchant is.

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Despite your very plausible practical ideas, water is not that great in either of the two functions of a currency, as a store of value or as a medium of exchange.

However the Romans did use a consumable substance as currency, namely salt. That is where the word "salary" comes from. Of course it is less vulnerable to accidental loss than water is, as eharper256 said. Tobacco has also been used as currency, in colonial America, and cigarettes were an unofficial currency in prison camps in both world wars. So it can happen - but it usually only arises because something (often inflation) stops the usual options working.

Your plot difficulty, then, is to create the circumstances which mean that water continues to be used as a currency. Possibilities include: a powerful person who is rich under the water economy enforces its continued use, or a religion or ideology arises which decrees that water is the only truly valuable thing and so must be used. After all it's not unknown in real life for societies to make bad decisions about the choice of currency!

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