The Bank For International Settlements uses its own special currency, the Gold Franc, as a unit of account. While there are no actual physical Gold Francs in existence (at least not that they'll admit to) the BIS uses them for internal accounting purposes and, because all members agree to this, it works out just fine. This is similar to my notion of using gold as a unit of account.
After learning about the BIS and their Gold Francs, I wondered why other people couldn't use them - not as a mere accounting abstraction but as solid, real physical items.
What's a Gold Franc and how much is it worth?
The BIS was founded in 1930. At that time, the Swiss franc was worth about 1/100 oz. of gold - that is, an ounce of gold cost about 100 francs. The BIS settled upon using Swiss gold francs as its unit of account and, after Switzerland began devaluing the franc in 1936, the BIS continued to use the gold franc at it's previous value. Thus the BIS uses a unit which no longer exists anywhere but in its ledgers.
At the time, the Swiss gold franc was valued at 0.29g (grams) of pure gold, which works out to slightly less than 1/100 oz - actually 1/107.2413793, or 0.009324759 oz. This has remained the official value of the Gold Franc ever since.
How could we use it?
There is nothing forbidding banks anywhere in the World from keeping accounts in currencies other than their native currency; banks in tax havens, especially, keep accounts in a multitude of currencies. Likewise, there is nothing preventing private mints from issuing coins on their own accord; while they cannot issue coins in national currency units (i.e. US dollars) they can and do issue commemorative bullion coins all the time.
Then there are the banknote printers. Many companies, mostly in the US and Europe, print government currency. There is nothing forbidding them from issuing notes of their own creation as long as those notes do not pretend to be a national currency.
As noted, the Gold Franc is no longer the national currency of Switzerland.
So, why couldn't a private party issue Gold Francs?
There is no reason at all it couldn't be done. Indeed, economists such as F.A. Hayek have proposed that banks issue private currencies based on all sorts of commodities and averages of commodities. It is certainly legal, as long as the currency created does not pretend to be a national currency - that is, a "real" or "legitimate" currency.
introduction
I originally offered up this proposal several months ago. In that time I have had some second thoughts about the Gold Franc and how it should be issued. Please read the first proposal, directly below, then the revision further down. If you have any comments, good or bad, e-mail me with them. Your input will only make things better.
DEFINITION: the Gold Franc (gf) is equal in value to 0.29 grams of pure (0.999 fine) gold.
CONVERTABILITY: the Gold Franc is 100% convertible into gold metal at its stated rate. This is accomplished by issuing coins and paper notes containing amounts of gold equal to the face value of the piece, i.e. a gf100 coin would contain 29.0 grams of gold. Paper notes would contain less but, unlike fiat paper, would indeed contain precious metal (see my proposal for paper money with intrinsic value to see how this would work).
DENOMINATIONS: the Gold Franc is divided into 100 cents, which are further divided into 10 mils. Thus 1 mil = 1/1000 franc. This makes the Gold Franc one of the most precise of all currencies; it can measure value down to 1/100,000 oz of gold, or about 1/3 US cents.
In addition to fractionation, the Gold Franc is also issued in whole amounts up to gf10,000.
COINS AND NOTES: Gold Francs are issued in the following forms -
FRACTIONAL SILVER COINS
GOLD FOIL NOTES
GOLD COINS
GOLD BARS
EXPLANATION
The Fractional Token Coins are the smallest of the bunch: mil coins and single-digit cent coins. These may be made in just about any base alloy: the issuer will have to decide which is best when the time comes to mint them. They have no metal value.
Fractional Silver Coins also have no official metal value, though they do have precious metal content. These are the 2-digit fractional coins and thus much more susceptible to couterfeiting, hence the security feature of making them from silver. Their metal value in silver is approximately half their face value in gold; this allows the issuer to enjoy seignorage and makes it less likely that the coins will be smelted for their silver content.
Gold Foil Notes are a favorite subject of mine. These are paper notes with precious metal foil embedded in them; thus, they have intrinsic value. it is possible to include up to about 3 grams of metal in a note the size of the US dollar; this would be equal to 10 francs, or about US$30 at today's rates. Notice that the face values of the notes equal the metal content, a quality of the Gold Franc which is unique in the modern World.
The Gold Coins and Gold Bars are about what you would expect, simply bullion coins with their face values exactly equal to their metal content at the stated rate of 0.29g/franc.
As stated above, the Gold Franc equals 0.009324759 oz. of gold, or about gf107.25/oz. This is significant, for it means that while the Gold Franc is almost exactly 1/100 oz. it is not quite that much. Any amount of gold which is exact to a fraction of an ounce will in fact contain more Gold Francs than hundredths of an ounce. For instance, a half-ounce coin, containing 15.55 grams of gold, does not contain gf50, but gf53.62. This "fudge factor" is very important in establishing people's trust in the Gold Franc.
GOLD FRANCS - The Coins With Something Extra
I propose that, although the Gold Franc is slightly less than 1/100 oz, all coins made in Gold Francs should be weighted as if the Gold Franc was equal to 1/100 oz. That is, a gf10 coin should not contain 2.9 grams of gold (0.29 x 10) but rather 3.11 grams (31.1 / 10). This means the actual intrinsic value of the coin would be more than its face value.
This practice would make Gold Francs quite valuable, and indeed would make them worth more than their official exchange value. In fact, this has been done plenty of times throughout history by private issuers of gold coins to ensure that their product did not go under its stated value due to erosion and other kinds of wear. Their coins were meant to be used, not admired in little plastic cases, and use would result in a gradual loss of metal. Thus, making their coins a little over their stated value was an insurance policy against public disfavor.
Isn't competition wonderful?
Today there are hundreds of issuers of gold coins, both public and private. All are in competition with each other, some as holders of value (bullion coins) and others as collectors' items (commemoratives). The Gold Franc would be a third kind, namely gold coins intended to be used as money, and made with that purpose in mind. Intended to be circulated rather than admired or socked away in a strongbox, Gold Francs would have to be durable in spite of frequent exchange. Thus the overvaluing.
A Simpler Coinage System
Above I proposed four types of Gold Francs: token coins, silver coins, gold notes, gold coins and gold bars. That was fun, but in practice any circulating money system has to be a lot simpler, as well as cheaper to the issuer.
Instead, I now propose that the Gold Franc system consist of only two kinds of money, token coins and gold coins: no silver, no paper, and no bars.
The reason for eliminating silver should be obvious: it creates a de facto bimetallic system, and that is simply inviting trouble. While silver may be weak enough now to justify the amounts cited above, there is no gauruntee these ratios will stay the same. If the silver content became worth more than the face value, we'd soon find ourselves with a shortage of change. Worse, we'd have to issue new coins with less silver, which would ruin our reputation as a reliabe minter - either that, or issue the same silver coins at a loss. Neither is acceptable.
Likewise, issuing paper, even with intrinsic value, could be a big mistake. For one thing, it's easy for anyone to counterfeit, though without the gold. But do people scan every bill they receive? Not at all; they want to believe their money is good. So a counterfeiter could easily pass fake Gold Franc notes and be gone before they were discove3red. Indeed, I can think of at least one Government that has counterfeited foreign currency with the intent to devalue it, and I can see no reason why that wouldn't be done to us. No, if we're going to be victims of counterfeiters, let's not make it easy on them. Coins are a lot harder to make.
There is also the economics of issuing money to consider. Paper doesn't last long; coins typically last ten times longer. When you consider that coins are also cheaper to make in the first place, you understand why many in the U.S. want to switch to a $1 coin - and why issuers of Gold Francs should not even flirt with paper.
Finally, perhaps we should not issue gold bars. I think coins up to gf1000 (10 oz.) would be reasonable, but making solid units bigger than that only locks up gold in inconvenient amounts. I would even say no coins should be made above gf100 (1 oz.) but that's not for me to dictate. Indeed, someone will probably come out with enormous bars of gold, but those would be hard to subdivide and thus less useful as money. I believe sticking with small units is best.
The Coins Themselves
Now let's see at what the coins would actually look like. I am unable to put graphics on the net, so I'll have to describe them.
General Design
All Gold Franc coins, no matter what size or composition, would have similar backs (reverse). The rim would be divided into 36 sections of 10 deg. each. Centered around the top of the reverse would be the slogan SOLID VALUE NEVER FAILS, each letter and space taking up 10 deg., for a total of 230 deg. (the space between VALUE and NEVER would be top dead center).
Centered on the bottom would be the phrase GOLD FRANCS or, in the case of one, GOLD FRANC on gold coins, or GOLD CENTOS on fractional coins. The lettering of the main slogan would be Roman and facing outward, but the bottom phrase would be sans serif and face inward. The center disc of the coin would have a number representing its value in Gold Francs or Gold Centos, stamped large enough for the blind to feel.
The front (obverse) of each coin would have PURE 999 FINE GOLD written across the top, the size of arc it takes up determioned by the size of the coin - the larger the coins, the less arc it would take. Across the bottom would be the amount of the coin written out. The top slogan would be bold, while the bottom would be fine.
The cameo or device on the face of the coins could be anything. On the gf1 coin I favor a 1960s-style hippy-trippy daisy; I explain why below. It could also be any other simple design or a portrait of someone. Let me state right now that I would never honor a politician or any other State scumbag by putting them on one of my coins - at least not unless I was minting wooden nickels!
Token Coins
The token coins would be in centos which equal gf0.01. The term "cento" is used because it has not been used by any other issuer - there are cents, centimes, centavos and centissimos, but no centos. This makes our fractional unit unique, as well it should be: after all, a Gold Cento is worth 3 U.S. cents.
The token coins must be made of a cheap base metal that is durable yet inexpensive. In addition, it should feel weighty to the hand and remain shiny throughout its life. This eliminates aluminum, which is light and grows dull easily. We may want to use a clad coin of stainless steel with a lead core; at least then it wouldn't rust.
The token coins will be as follows:
The edges are important: they must be different from U.S. coins so people don't mistake one for the other. Note that we have no coin equal in size to the U.S. penny. I should also point out that all of these coins will be of the same composition and appearance, probably silverish, though brass coins should not be ruled out.
Gold Coins
The gold coins should be sized differently that the token coins if possible; in two cases they are the same. Their edges are reeded, however, so they won't be mistaken for their token counterparts. Also, as all of these coins are gold in color and very heavy, there should be no problem confusing them with US coins. In the case of the gf100, the U.S. 50-cent piece, though the same size, weighs a lot less and is worthless (double meaning intended).
Here are the bullion coins of the Gold Franc system:
As stated above, all of these coins have reeded edges.
Huh? What about the 1-Franc?
Oh, you noticed that, did you? I've saved that for last because it is unique. The 1-Franc coin will be both a token and a bullion coin. How? Simple.
The 1-Franc will contain an amount of gold equal to its stated value - in this case gf1, or 0.29 grams. That's an incredibly small amount of gold, as you know if you've ever seen those teensy 1-gram bars coin dealers sell. Imagine one of those things chopped in thirds. Then imagine that third pressed as a coin! Pretty dinky, huh?
That is why the 1-Franc coin will be bimetallic. It will have a plug of pure gold surrounded by a body of base metal. The design on the face of the coin will be something circular - I favor one of those hippy-trippy daisies from the 1960s that girls used to sew all over their clothes. Those have the virtue of having a dot in the center, and that dot could be the gold plug.
On the back, the 1-Franc will have a number 1 in the center disc, but offset so it doesn't cross the gold plug. The base metal will have a much higher or lower melting point than gold, so the gold can be removed by heat - or, perhaps it would be easier to simply punch the gold plug out with a rod of some kind. In any case, its bimetallic nature will not prevent the 1-franc from being used as a source of fungible gold.
Finally, the 1-Franc will be 24mm across, the same size as the 10 cento and the U.S. quarter, but with a toothed edge, like a sprocket wheel, different from both of those other coins. This will make it easy to identify by touch alone.
What's It All Worth?
As of this writing (December 8, 1998) one Troy ounce of gold costs $293.50. Multiplying that by 0.009324759, we find that one Gold Franc today would be worth $2.73681672 or about $2.74 rounded off. That's even more than the British pound! In case you're interested, a dollar on December 8, 1998 cost 0.602924 pounds; converting, the Gold Franc is worth #1.65. This makes the Gold Franc the highest-valued currency on Earth.
Not bad for a theoretical currency unit!
Here's what the various coins would be worth today, if they existed:
----------------------- 1 cento -- $0.0274 5 centos - $0.1370 10 centos - $0.274 20 centos - $0.548 50 centos - $1.37 1 franc -- $2.74 5 francs - $13.70 10 francs - $27.40 20 francs - $54.80 50 francs - $137.00 100 francs - $274.00 200 francs - $548.00 500 francs - $1,370.00 1000 francs - $2,740.00 -----------------------
One of the interesting things about the new euro is that there will be e500 bills, which today would convert to approximately $595. Newsweek smarmily reported that the only people to make use of it would be smugglers and drug dealers. Certainly it's only a matter of time before the U.S. pressures the E.U. to drop the e500 bill. And certainly the new note will be a favorite of counterfeiters.
Ah, but the Gold Franc! It's solid gold, not paper, and the largest unit is worth almost $3,000 - and that's only at today's prices! Much better to carry around, I think, that a bunch of thin, crinkly paper.
Money For Mars
The Lastword in Newsweek's special "Euroland" issue is entitled "Money For Mars." I thought the author would actually talk about money to be used on the Red Planet. Unfortunately he merely spewed more of the hip-sounding liberal blather that Newsweek and Time (is there any difference?) are notorious for. But he got me to thinking.
If there is to be a common currency for space, I can't think of a better one than gold. For one thing, it is just as likely to be valuable Out There as Down Here; perhaps more, as it is so useful as glazing and insulation (the Apollo astronauts' visors were shielded with gold, and you've all seen the gold foil on the Lunar Module). Besides which, I think it will be a lot easier to make metal money in space than paper. True, governments on Earth (notably Australia) are converting to plastic notes, but whether paper or plastic, it's a waste of valuable hydrocarbons which can be better employed elsewhere. Indeed, we may find that paper and plastic are too valuable to use as money! At least then the dollar would be worth something though ...
-- Jim Kelley
Columbus, Ohio
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