0
$\begingroup$

I have three post apocalypse tribes who each produce different goods, let's say black beans (protein dominant), potatoes (carb dominant), and vegetable oil (fat dominant). They're unifying into a larger confederacy and want to build commodity backed notes pegged to multiple goods as a guard against volatility and against one tribe being able to dominate the control of inflation/deflation. So if, for example, disease swept through the potatoes and reduced the harvest the currency would experience a less extreme level of deflation since in vague theory it would be buffered by the normal availability of black beans or palm oil. In practice though I'm uncertain how this would work.

And that's our question: How might a multi-backed commodity currency work? To simplify things, lets assume spoilage isn't a concern (magic, some advanced tech mcguffin survived the fall etc). Are there any real world equivalents? I know that over in Massachusetts land, they've talked about pegging the value of BerkShares to a basket of local goods as way of insulating the currency from the dollar fluctuations but I haven't been able to find any hard arguments about how this would work.

$\endgroup$
  • 3
    $\begingroup$ The point of a trading currency is that it acts as a store of value. When the harvest is bad, you want to use some of your stored money to buy food from others. It is therefore a bad idea o use something perishable or something whose demand and supply may vary. Pick something useless whose supply is not easily changed $\endgroup$ – nzaman Nov 22 '19 at 19:31
  • $\begingroup$ That's one of the three traditional uses of currency. The other two are medium of exchange and unit of account. Nonperishable food satisfies all three. To wit many peoples have used consumable currencies successfully (the native americans, the japanese, etc.) $\endgroup$ – WhiskeyHammer Nov 22 '19 at 21:42
  • 2
    $\begingroup$ You're trading. What happens when there's a surplus of beans and a shortage of potatoes. How much is a litre of palm oil worth? What about next year when there's a bumper potato harvest? What if you want to buy something from the palm oil tribe but they have excess potatoes? You need something whose value won't change significantly under normal market conditions, such as seasonal surpluses, if you want to trade. $\endgroup$ – nzaman Nov 23 '19 at 5:57
2
$\begingroup$

Sure. In ancient Rome, the coins were made of a variety of precious metals.

https://www.britannica.com/topic/aureus

There were official exchange rates between coins of equal size made of different metals. So many silver coins to a gold coin, so many copper to a silver, and so forth.

This was subject to many different kinds of debasement and outright cheating.

https://inflationinrome.weebly.com/inflation-in-ancient-rome.html

The fraction of a coin that was gold would be decreased, and decreased again. Tricks like requiring taxes be paid in pure gold coins, but government payouts were in the non-pure coins. This often meant there was an official rate, and an unofficial rate as offered on the black market.

In an economy there will be products, goods, or services that are relatively stable. A coin could be minted to be officially equal to one such unit of that good. Say one kg of high quality wheat flour. Or one square meter of fine silk cloth. And so on. It has to be something people want, but also something that can be readily standardized. Metals are good for this. But many things have been used. Tobacco, colorful beads made from sea shells, feathers, wheat flour, days of labor by an ordinary worker, etc. and etc.

There are very many ways this system can be abused, cheated, gamed, etc. So there will need to be corresponding methods of detecting such cheats and spoofs.

$\endgroup$
2
$\begingroup$

Quite frankly, there's a reason the world moved to fiat currency; I'm going to describe one form this could take, but you're not going to get perfection.

A normal precious-metal backed currency would be (at least theoretically) be exchangeable for X amount of gold/silver. This currency can be exchanged for a calorie of food, with the actual food used at the discretion of the government. This lets the government use whatever is most plentiful at the moment, which should protect against bad harvests.

How well does this protect against currency manipulation, though? Let's say you have control over the bean harvest.

  • You can price beans higher than the Calorie, but then you won't get beans used for backing, so you're not actually manipulating the currency, just pricing a good.
  • You can price beans at the Calorie, so beans might get used for backing currency, but that still doesn't actually affect the currency.
  • You can price beans under the Calorie, at which point beans will get used as the backing currency.

This is because the Calorie is essentially a low-bid auction. Whoever is willing to sell their harvest for the cheapest price will get used for backing. This means:

  • The Calorie will usually be priced just below the second-cheapest staple, as there's no good reason to sell for cheaper than the next lowest bidder. This means that three staples might be too few to prevent currency fluctuation. (One harvest fails, and a second tribe decides to jack up prices, knowing that the third tribe will want to go just below them.)
  • Anyone can cause currency devaluation at will by selling their goods below cost.
  • Interestingly, this doesn't affect the common folk that much. Because post-apocalypse tribes don't have 401k accounts, it doesn't matter that the Calorie dropped in value 40% over the last week, as their food still costs 2000 Calories per day.

How do you prevent this? By specifically disallowing selling food below the Calorie. You can either sell your food at the Calorie, which will give you access to the large government market created by being a currency backing, or you sell above if there's a shortage, or if you're selling a non-staple food. Because this is a low-bid auction, and the benefit for being the lowest is so high, I think you can handwave away most currency manipulation, and just say that everyone farming staples just sells at the Calorie.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.