rapn21:

sudanglo:Keep your money in Spesmiloj, Robert - Viaj nepoj vin benos

Just because something is a good investment, doesn't mean it's a good currency

Of course, not, Robert. However I think you might agree that if a currency is a poor investment (or won't at least keep its value) it is bad money. Eg. any modern fiat currency - take your pick.

Brian, I think that the establishment of an Esperanto currency that can be freely converted into other currencies will take some time.

At the moment the value of the Stelo coins that are out there is very much dependent on whatever price is being set by those who have stock to sell eg UEA or those who have organised their production.

In fact if you decided to have minted an attractive coin you would have a nice little business flogging them to Esperantist collectors if you could get a price above cost.

What seems to me to be required to validate the existing stock of Steloj is to set a link between the Stelo and the Spesmilo (ie link them to gold).

I would suggest 1 Stelo = 1 Spesdeko, which today, given that an ounce of gold is 1072 Euro's, and an ounce of gold is 31.105/.7322= 42.48 Spesmiloj, would give a value of 0.2524 Euro's for 1 Stelo.

This is close to the exchange rate (I believe) that has been used in various congresses for the plastic Steloj , would settle the issue of the future value of the Stelo, and allow the calculation of the exchange rate in any national currency.

(Of course any particular Stelo coin at some time might fetch a higher price because it was sought after by collectors)

If you prefer to look up the price of gold in grams rather than ounces, the calculation becomes 0.7322 times the price of 1 gram of gold in your currency, to get the Spesmilo price, then divided by 100 to get the price of a Spesdeko. So 1 Stelo in dollars is 31.3 cents.

By the way if you look up the Vikipedia article on the Spesmilo it gives 0.733 grams of pure gold as the definition, but I think that is not quite right. I think the value of the Spesmilo was linked to the Pound (ie the gold sovereign) in the ratio of 10 Spesmiloj = £1.

Since the pound was very precisely defined at the time as 7.988 grams of 22 carat gold that makes a Spesmilo ((22/24) * 7.988)/10 = 0.7322 grams of pure gold

sudanglo:However I think you might agree that if a currency is a poor investment (or won't at least keep its value) it is bad money. Eg. any modern fiat currency - take your pick.

I completely disagree with this. The dollar, euro, and yen are all fine currencies. I would not describe them as "bad money." Money shouldn't be an "investment." You use money to make transactions of goods and services easier. Instead of trying to find a gasoline trader that will trade 10 carrots for a gallon of gas, I instead just sell my 10 carrots to someone who wants them for money, and then turn around and use that money to buy the gallon of gas I need. That's what money is for.

Investments are things you hold on to like stocks, bonds, real estate, and precious metals that you think will increase in value over time, either on their own, or through work/improvements that you put into them.

Are there mismanaged fiat currencies? Yup. Does that invalidate the concept of government-managed fiat currency completely? Nope.

Robert, I can't find the original quote in English at the moment, so I am going have to use the translation from one my articles on the Spesmilo that are going to appear in the BE .

Indas re-legi la saĝajn vortojn de la ekonomikisto David Rikardo, kiu jam en 1817 diris ‘La sperto ... montris ke nek ŝtato nek banko iam havis la liberan povon eldoni paper-monon sen fi-profiti de tiu povo’. Por ĝisdatigi tiun penson oni devus etendi ĝin al la kreo de elektronika mono, sed la principo restas.

And if all the damned quantitative easing that is going on in the world doesn't prove his point, then I don't know what to say.

Nobody would argue that today's paper money doesn't work well to buy a pint of milk. And of course neither the Spesmilo nor the Stelo have achieved that sort of usability.

However money also has to function of as a store of value and a unit of account.

When money looses its value it punishes savers, and creditors, and rewards debtors.

Governments are always issuing debt (borrowing money). So of course they are delighted, when they finally have to pay back, that they can do it in money that has lost its value.

Would you like to lend me a 100 Euro's. You will have to write that down as me owing you a 100 Euro's. I'll pay you back in 10 year's time. Ho Ho, sucker!

I would be much more wary of borrowing 100 Spesmiloj from you.

PS how much do you want for your plastic Steloj?

sudanglo:Indas re-legi la saĝajn vortojn de la ekonomikisto David Rikardo, kiu jam en 1817 diris ‘La sperto ... montris ke nek ŝtato nek banko iam havis la liberan povon eldoni paper-monon sen fi-profiti de tiu povo’. Por ĝisdatigi tiun penson oni devus etendi ĝin al la kreo de elektronika mono, sed la principo restas.

Thankfully the field of economics has advanced since 1817 and most of those theories have been replaced with more accurate depictions of the world. You no longer hear about the Iron Law of Wages or the Labour Theory of Value, which Ricardo believed, because we have experience since then that shows it isn't true. Likewise with the gold standard which is a relic of history.

sudanglo:And if all the damned quantitative easing that is going on in the world doesn't prove his point, then I don't know what to say.

Didn't people warn that QE would lead to hyperinflation and destroy the currency? Whatever happened to that? The dollar and euro experienced historically low levels of inflation so I guess QE wasn't so bad after all.

sudanglo:However money also has to function of as a store of value and a unit of account.

Considering the low level of volatility fiat currencies experience, they do an excellent job of this. The price of gold is far more volatile, so by your own logic it is less suitable as a basis for a currency.

sudanglo:When money looses its value it punishes savers, and creditors, and rewards debtors.

Considering there are far more debtors than creditors in the economy, this benefits most people.

uuuummmmmm

Robert, the interesting thing about the Ricardo quote is not the who but the when. Even 200 years ago it could be said that history showed that issuers of fiat currencies succumbed to the temptation to abuse their power.

With a link to gold for either the Stelo or the Spesmilo and convertibility into gold, or that day's equivalent in national paper money, doubling or tripling the issue can't undermine the value of the currency.

As to how much inflation (destruction of the currency) one should expect from all the world-wide quantative easing we have had, I suppose that depends on the extent of deflationary pressures in the various economies. I still feel that it is an inflationary time bomb waiting to explode. Time will tell.

But in any case you can't deny that it is currency manipulation.

Politicians say that there isn't a magic money tree. But with fiat currencies there always is.

sudanglo,

I'm not an economist (but I have read my Marx), so pardon, if I am dense here.

A currency, money, is a means of exchange, that requires trust.

Brian, I think that the establishment of an Esperanto currency that can be freely converted into other currencies will take some time.

I think, this is the key issue. We need a way to create trust first within a small community and when the user base is strong enough, then open the currency for the rest of world™.

The simplest way this trust can be achieved, is to have the money itself been made by something valuable. In the history there have at least been salt, bronze, iron, copper, silver and gold coins. This limits the money being something physical, i.e. no electronic money, not even bills.

Then you can base your currency on something valuable, usually on silver or gold. This means, that there is an authority, at which you can exchange your money to the valuable. Depending on level of trust this doesn't require, that there should be full coverage, but let's say, 10% of the money in circulation.

IIUC, are you now suggesting gold standard? Who would be that authority, which would cover at least partially the money in gold? Banko de UEA?

I know, that during some depression (Thatcher era?) LETS (local exchange trading system) were invented in Britain. The basic discovery was, that people were short of money, yet they needed services, which they could pay with their work. LETS were/are pure bookkeeping currency, where the value was always negotiated between the seller and the buyer. If I mow your lawn twice, we agree, that you pay me ,say, 10 LETS. When I need a baby-sitter, I would pay him/her those 10 LETS and so. Those systems worked, because there were relatively small communities and upper and lower limits for how much you could have LETS on your account.

On the downside LETS were worthless outside the community. You couldn't buy a beer with them, since breweries couldn't accept them, because they needed raw-materials, machines and work from those who did't accept LETS and so.

Suppose we introduce Speko as LETS. Given current technical possibilities we could have a mobile phone application for trading in Speko. A starting point, a recommendation could be that 0,25 euro for 1 Speko.

Or how would you or anyone else introduce the money to the community?

Metsis, it would be lovely to have a Spesmilo or Stelo coin in gold with a nominal value equal to its precious metal content value. However because of gold's phenomenal density only high nominal value gold coins would be practical - otherwise they would be ridiculously small.

I estimate that the lowest nominal value of such a coin would be 5 Spesmiloj (i.e. 4g of 22 carat gold) or 500 Steloj (1 Stelo = 1 Spesdeko) worth around 125 Euro's.

By the way, did you know that Indian jewellers commonly melt down British gold sovereigns (a convenient source of certified 22 carat gold) to make jewellery and that, for example, a 16 gram gold chain would be referred as 2 gold (ie made from 2 sovereigns). Since 10 Spesmiloj = 1 Sovereign, an Indian Esperantist could refer such a gold chain as 20 SM.

Anyway, for Esperanto money in less valuable metals, trust in their value is the least of the problems. It's the convertibility that would induce trust.

It's the practical issues in redeeming the coins (or notes) which presents the largest problem.

Ideally any national Esperanto association should have a set-up that that would facilitate redemptions, so you wouldn't have to wait until your next big international congress to get your Steloj or Spesmiloj changed back.