Altebrilas:If an Esperanto money is linked to gold, I hope the gold will not be carried by ordinary esperantists in their private cars, like books of the Libroservo. It may be dangerous.

I prefer a record of all transactions, as in Local Exchange Systems, to follow the flows of added value in Esperanto movement and better understand the economics of nia movado.

Yes, having physical money is dangerous and expensive to handle. See my writings in a previous thread here in Lernu.

IIUC a key part of LETS systems is locality. A big part of participants personally know each others. Everyone share more or less same values, so agreeing upon compensation levels is relatively easy. There seems to be tools to handle LETS electronically (e.g. Community Exchange System and Community Forge), but I have no knowledge how well they could be adapted for esperantists to use. We are sparsely all over the world with widely different ideas what is worth what, so I doubt any system, which is not backed-up by hard money, would make it.

It is actually quite incredibly that today, in 2018, we are discussing whether or not to adopt a gold-fixed currency... Well, at least I am glad that this is only hypothetical prattling, as nobody ever does anything in this community.

Perhaps this is the reason why the Esperanto movement is believed to consist only of geezers (wanting a pre-WWI currency) and weirdos (wanting a pre-WWI currency in 2018)...

nornen:It is actually quite incredibly that today, in 2018, we are discussing whether or not to adopt a gold-fixed currency... Well, at least I am glad that this is only hypothetical prattling, as nobody ever does anything in this community.

That's a damned good observation

Personally I think there are two issues here. One, do we need a E-o currency at all? Two, what form it should have? These are intertwined. If we opt for physical money, it will remain a curiosity without real use. How would you pay with such money for a service or goods outside your economic zone? For instance a EU citizen wants to buy E-o music made in Brazil.

If we opt for electronic money, then there might be a chance provided it will have a base. Now since there isn't any "E-o market or production base" to base the currency on, well, why not gold standard. At least it provides some sort of stability as pointed out by Sudanglo.

But the purpose, the need? To buy E-o "stuff", books, music? Perhaps some translation services and on-line courses, who knows. Okey, occasionally there might be opportunities to actually meet some at a course, meeting or a congress, but for the most part the stuff would be either carried by post or in form of electronic transferable commodities. If the former case, someone must pay to the carrier and that has to be in non-E-o currency. See the argument for a base.

In the light of what I described above, Sudanglo's question, how we would use an E-o money isn't that bad.

Actually the surprising thing is that pre-world-war 1, when so many countries were on the gold standard, the Esperantists felt the need to have their own gold-backed currency.

Today, when all the currencies are floating and backed by nothing, a gold-backed currency would be a very desirable thing and a very attractive and unique initiative by the Esperantists.

However before that happens, the obvious stepping stone to our own coins and notes is to make use of the fact that many mints throughout the world issue gold coins.

I have suggested that to ensure a minimum loss on re-conversion back to fiat currency we have two standards for the Spesmilo. The original definition to establish the nominal value of any goid coin in Spesmiloj and a conversion standard for resale (change back to local currency) within the Esperanto community.

Obviously for that second standard to be acceptable it should not significantly exceed the mark-up employed by the various mints on their sales of gold coins, otherwise no Esperantist would want to pay the premium arguing that he/she could buy the gold coin cheaper direct from the mint.

In the absence of data on what other mints charge, I tentatively proposed that the standard should be 8 grams of 24 carat gold = 10 spesmiloj, as I could see that the Royal Mint had set their prices for single sovereigns as though they were 24 carat gold (rather than 22 carat). That corresponds to a mark up of 9% (24/22)

I have now discovered that Austrian Mint charges a similar mark-up on their very attractive 1 ducat coin (which they price at 130 Euro's).

How did I work this out?

The 1 ducat coin is .986 fine gold and weighs 3.5 grams.

To determine the equivalent weight, if the coin had been minted in 22 carat gold, in order to fix the nominal value in Spesmiloj we take 3.5 and multiply it by .986/.916 (.916 is the fineness of 22 carat gold). This gives 3.76 grams.

Now the current price of pure gold in Euro's is 35.15 per gram, so the exchange value of this coin is 35.15 x 3.76 = 132 Euro's which is very close to what The Austrian mint charges. Quod erat demonstrandum

Looking it another way, using the historic definition (8 grams 22 carat gold = 10 Spesmiloj), the nominal value of a 1 ducat coin is 4.7 Spesmiloj. (3.76/0.8).

And since a Spesmilo's value for exchanging (under the proposed defintion) is whatever 0.8 grams of gold is quoted at, in the newspaper or on the net, in your currency, multiplying that figure by 4.7 gives the exchange value of 1 ducat.

Let's see, if I understand you correctly. Pardon, if I sound repeating.

sudanglo:
However before that happens, the obvious stepping stone to our own coins and notes is to make use of the fact that many mints throughout the world issue gold coins.

IIUC you are suggesting, that there should actually be physical E-o money. That the basic coin would be of 22 (or 24?) carat gold and weight 8 g. It should have a nominal value of 10 ₷ (spesmiloj). Now if I would like to get one, I should pay ca. 280 euros accdording to today's rate. Obviously there should be coins of lesser values. The idea is, that the coins would be worth their gold value, so that if wanted to change my spesmilojs to euros, I could at least do that at a goldsmith, who would pay for the gold itself – if I can't find a better place to cash in my spesmilojs.

How would notes fit in into this scheme?

How would you protect this money against false coins and notes?

I see a lot of costs here. At least designing, minting, printing, distribution and staying alert against counterfeits.

you are suggesting, that there should actually be physical E-o money. That the basic coin would be of 22 (or 24?) carat gold and weight 8 g. It should have a nominal value of 10 (spesmiloj).

Not quite, Metsis. I am suggesting that any gold coin from an official mint could be used. But because the original definition is in terms of 22 carat gold, and the various coins available are of different fineness, you should in each case make a correction to find the equivalent weigh of that coin in 22 carat gold.

This is a very simple calculation. You take the weight of the coin and multiply by its fineness and divide by .9166 (which is the fineness of 22 carat gold).

For example a 20 Swiss Franc in gold (millions of those were produced) had a fineness of .900 and a weight of 6.451 grams. So to find the equivalent weight if the coin had been produced in 22 carat gold the correction is (6.4511 x .900)/.9166 =6.3341 grams.

Using the historic definition, a coin of that weight in 22 carat gold would be (6.3341 x 10)/8 = 7.917 Sm.

The genius of De Saussure's definition of the Spesmilo (8g of 22 carat gold =10 Sm) is that the equivalences of many gold coins of the time came out as very nearly whole numbers in Spesmiloj. In this case we could call the 20 franc piece an 8 Spesmilo coin.

But since (unlike before WW1) today you have to pay more for a gold coin than the value of the contained gold, I have suggested that for exchanges between Esperantists we trade at a kurzo of 8 grams pure gold =10 Spesmiloj.

So if you want to buy our nominally 8 Spesmilo coin using Euro's, you could use the actual weight of the coin and then pay the Euro price of that weight of gold (as published). The quoted gold prices are always for pure gold.

Or if you prefer you could calculate the current worth of 1 Spesmilo in Euro's and pay 8 times that.

Note the two approaches give similar results only because .9 gold is almost 22 carat gold

The essence of my scheme is that you use de Saussure's definition to give you the nominal value in Spesmiloj of any gold coin. But you price it to resell in Dollars, Rubles, Euro's etc using the 21st century exchange rate for the Spesmilo.

Of course, if you are using the coin to buy goods (or establish a credit for future purchase of goods) that are already price in Spesmiloj) you simply pay the Spesmilo price. Ie our 8 Spesmilo coin, which we have been using as an example, is adequate to buy two items of 3 Spesmilo's each and leave 2 Spesmilo's change (or credit in your account).

I'll deal with other points you raise in a later post.

How would notes fit in into this scheme?

How would you protect this money against false coins and notes?

Their are two protections required if we were to move to the second phase and start printing Spesmilo/Spescento/Spesdeko notes.

The first is that the note publisher must not over produce. The limit should be not more than he/she is holding in reserve in physical gold or gold equivalent to cover eventual redemptions (ie requests to exchange back into fiat currency). Perhaps because the level of redemptions cannot be predicted this should at least match the size of the issue.

So any issuer should regularly publish a balance sheet, showing the currency backing (perhaps at any time show it on request).

In other words, the issuer is not allowed to behave like a modern central bank and conjure money from nothing.

The second protection required is that there should not be any incentive for a rogue Esperantist to forge the notes. The simplest remedy here is to make all notes low value so it wouldn't be worthwhile.

Additionally perhaps there could be space on the back to track the succession of holders. Each time a holder gives a note to another Esperantist he should enter his her name and the name of the transferee and advise the issuer of the transfer by email.

Anybody doubting the legitimacy of a note could request, by email, confirmation from the issuer, who would always know who the current holder was. To make this even tighter, only allow transfer between members of Esperanto Associations - in that case, perhaps membership numbers could be used instead of names.

Larger amounts could of course be transferred anonymously using gold coin.

Gold coins have been faked - for example,when the gold coin has some numismatic rarity. But they are faked in such cases using the same grade of gold.

However, for obvious reasons only those gold coins that can be bought at a low premium over the gold content are likely to be used as Spesmilo coins.

If someone offers you a coin which is apparently gold but is actually just gold plated base metal, it will either be the wrong weight, of if the right weight will have the wrong dimensions. All mints publish the specifications of their coins. [The periodic table confirms the paucity of base metals with similar density to gold]

There has been faking of gold bars using gold plated tungsten, but that is not relevant here. I have never heard of the faking of coins using this technique - only faking with gold.

Dankon pro klarigoj.

So... Let me go through this. I will round numbers to make things easier to read.

First we have, that "any gold coin from an official mint could be used". You have many times mentioned British sovereign gold coins, and the smallest I could find is a quarter-sovereign, that weights 2,00 g and has fineness of 916 mg/1000 mg or 22 carat. Let's see, whether I can do the math correctly. Today's gold price of 35 €/g and your 8 g ≘ 10 ₷ rule give us the current rate of something like 1 ₷ ≘ 28 € . That quarter-sovereign coin would be worth of 70 euros to me today or 2/8 x 10 ₷ = 2,5 ₷ forever. A "slight" problem is, that in order to get one I should pay today 150 ￡ (166 €) for it. I have hard time to believe anyone would go for that deal, but let's assume I got one such coin.

I have the coin and find a place to actually buy something in spesmiloj, e.g. at Libroservo. Now the receiver has to google for my coin in order to identify it properly and possibly weight it to get assured, that it's a pukka gen. Should my shopping be worth less than 2,5 ₷, the seller and I need to figure out, how they can pay the difference to me. In the opposite case we need to figure out, how I pay the difference to them. It doesn't exactly sound like a smooth payment process.

The coins are too valuable to be practical tender at gufujo. So we need notes to cover smaller nominations. What nominations these should be? Let's compare to euro. It has two levels, 1 € = 100 ￠, and

• coins in 8 nominations: 1 ￠, 2 ￠, 5 ￠, 10 ￠, 20 ￠, 50 ￠, 1 € and 2 €
  
• notes in 6 nominations: 5 €, 10 €, 20 €, 50 €, 100 € and 200 €

That's 14 different nominations, but the two biggest nomination notes are actually rarely used. Also the two smallest coins are seldomly used at least in some of Euro countries (There is nothing to buy with those), so there are 10 nominations more or less for daily use. That's actually a little too many.

Let 1 spesmilo (remember ca. 28 €) be made of 1000 spesoj as the name suggests: 1 spesmilo = 10 spescentoj = 100 spesdekoj = 1000 spesoj. Then indeed one speso is quite small to be of practical use (1 speso ≘ 2,8 ￠).

So, let's say the smallest unit should be in around 5 ￠. That's a 2 spesoj note. If we start at that and coins begin to cover above the spesmilo level, we could end up with a more manageable amount of nominations

• 2 spesoj (≘ 5,6 ￠)
  
• 10 spesoj (≘ 28 ￠)
  
• 50 spesoj (≘ 1,4 €)
  
• 100 spesoj (≘ 2,8 €)
  
• 500 spesoj (≘ 14 €)
  
• 1 ₷ (≘ 28 €)

Suppose I locate a speso note dealer (either the issuer or a middle-man) and manage to change my coin into notes, 2500 spesoj or less depending on how much the exchange fee is. Now I go to the gufujo and buy tea and buns for me and my two friends, sum 300 spesoj. To avoid expensive security features on the notes you suggest, that the notes ought be traceable. This means, that the notes have a serial number (or similar) plus there is a record somewhere, that declares, that I hold the notes with certain serial numbers. When I pay, the receiver of the payment may want to check at the moment of the payment, that I really possess the notes I pay with. If not at the same time, at later moment they should update the record to show, that they possess the notes now. Otherwise they might not pass on the notes. This applies also to the notes I might get in return, should I for instance pay with a 500 spesoj note.

An email-based system would be horrendously slow and clumsy for checking. Something like the serial number in a QR code format on note and a phone app would be more practical, but... What prevents someone to copy the codes and that way generate more money to themself? Ok, you impose a rule, that one can only receive within certain short time frame, when someone relinguishes the codes, which they possess. Or some other mechanism where both parties can trust, that the transferred money is legal.

But that's electronic money! What do you need the physical money for at all?

At the end you have only three options for the whole system to work (in order of descending costs):
1) you build security into the notes with graved printing, micro printing, watermarks, holograms, security strips and so on
2) you build an electronic system of payments
3) you create a monetary system with low trust

The option 1 requires a nation or sufficient economic base, which E-o doesn't have. The option 3 dooms such system of being marginal value. Who would accept money, that you can't use yourself to buy something? The only feasible alternative for a start-up monetary system is the remaining one, to be electronic. To have the credibility the money in such system may well be backed up gold, i.e. the "notes" are like shares to that gold like in the original gold standard monetary systems.

Electronic money solves also the problem of byuing remotely. What if I want to buy music at Vinilkosmo or books from La Katalogo de UEA? Or should I post my coins and notes?

OK Metsis, here's my reply.

I envisage the implementation of gold standard money for the Esperanto community as having two phases.

First of all we start using gold coins among ourselves for larger sums. This implements in full the store of value function of money. The medium of exchange function is partially implemented, being limited to larger transactions.

Initially, perhaps for obtaining foreign currency to spend at congress. Later perhaps as the popularity grows for creating a credit with UEA or some other overseas Esperanto Association for future purchases. Transactions are made face to face.

The difference between using officially minted gold coins as Spesmilo coins instead of lumps of gold is that it is easy to check the gold content, because weight, diameter and thickness are standardised.

Any gold coin from an official mint can be used provided that the mint does not demand so high a premium over the gold content price that you would lose out on exchanging it for a fiat currency.

You would not use the 1/4 sovereign because the mark up is too high (as you point out).

You could use a full sovereign from the Royal Mint or a ducat from the Austrian (and maybe other qualifying coins from other mints) because the premium over the gold content is low and matches my suggested simple formula for the Spesmilo/fiat currency exchange rate.

Look at it this way, I'm offering you my gold coin at pretty much the same price you would have to pay for it if you bought it from the mint, and you will be able to resell it without a significant loss to another Esperantist, and at a better rate than you would get from a Jeweller or Pawn broker.

Because, under my scheme, the mark-up is fixed for every gold coin at a ratio of 24//22 over the gold content, you could, if you found a gold coin from some country's mint at a lower mark up (say 6%), then you could make a small profit. And perhaps, say, a Finnish Esperantist would be quite happy to let an Esperantist from that country have that profit because ordering from the relevant mint was not convenient or would incur postal charges.

However, if you wanted to offer me the 2.5 Sm coin that a 1/4 Sovereign would represent I would be happy to pay 70 Euro's, just as I would be happy to pay 4x70=280 Euro's for a full sovereign. Pity that you paid through the nose for it, but you should have known better!

Once the idea of reviving the Spesmilo becomes accepted, you can then move on to the implementation of the lower denominations in paper form and work out exactly the appropriate details, and who would be a mosted trusted issuer.

The key aspect in all monetary systems is trust. Trust that money you get will be accepted, when you yourself have to pay.

Let me repeat a bit of history, even if I'm sure, that you know all this. In ancient times the trust was achieved by the value of the material of the money itself. Salt, copper, silver, gold etc. coins were worth equal to the material they contained. This was somewhat diluted, when the mints reduced the finess of the coins (e.g. Roman silver sestertii became almost worthless at the end of West Roman empire for many reasons, not the least because of gross mismanagement of economics). Then the Chinese invented paper money, that detached the value from the material. Paper money was proxy money, the note could be converted "back" to the backing-up metal, usually silver or gold. And the third stage was, when the notes were detached from those back-ups and became backed-up by the economics of the issuing nations.

Since there is no E-o economics, that could back-up any E-o money, such money has to win the trust by other means. You suggest going back to the first stage: the money is (more or less) worth of the material it's made of. In principle any material will do as long as it accepted by everyone in that community (cf. Chinese salt coins). However in contemporary material abundance for an international community were few materials will do. You're right, that gold is appealing here, because of its chemical stability and standardisation of the coins.

The problem is the price of gold. I don't have any statistics, but I can imagine, that very, very few people actually have any gold coins (I don't personally know any, who would have). So to start any E-o money economy a sufficient number people should first obtain gold coins. As we both observed the British quarter-sovereign is out of the question because of the mark-up. The mark-up is less ,say for instance, for a full British sovereign, but it costs 905 € (815 British pounds) for me! That makes it worthless as tender, because there are no everyday things you can buy with it. Think about it. Who would trust so much on an E-o money system, that they would be willing to bind several hundreds of the money they now have into money they hardly can use? No, you have to win the trust by offering a way to actually buy something. Starting at the gufujo price level is a better start.

It all depends on, what the E-o money should be for as you asked in the beginning of this thread. Should it be a security against the fluctuations of the contemporary currencies? Yes, gold is such, but why mix spesmiloj into this? You invest in gold using your pounds, euros or whatever and cash out the gold back into your currency, when you need – and hope for a profit. You don't trade gold against gold.

On the other hand if you seek after money, that would empower/reinforce la movadon, it has to be such, that can be used. This means, that the money is obtainable in small nominations and it can be trusted. One way to create the trust is to stabilise it by fixing it to gold, by being proxy. How you issue such money in small nominations?