See also Gold As A Unit Of Account

One of the problems with paper money is its lack of intrinsic value: no matter how beautiful the note or how desirable it is to trade in the country that issued it, the note itself has nothing inherently valuable in it. Lots of people, myself included, would like to go back to using money with intrinsic value.

The problem with that is convenience. Paper money is nice and foldable, flat, easy to carry in large or small amounts; gold and silver coins are not. The problem is not so much the weight of large amounts of metal - most people use checks for large purchases anyway - but rather carrying units small enough to be realistically useful.

A candy bar, for example, costs about 50 cents anywhere you go. Today that would be about 1/10 oz. of silver; it would be less than 1/600 oz. of gold. Now, in terms of silver that sounds fine - you get a candy bar for the equivalent of an old silver dime - but what about things that cost less? What about fractions less than 50 cents? True, a 1/20 oz. coin is possible, though awfully small. But how do you deal with amounts down to 1 cent - equal to 1/500 oz. silver?

You'd have to use sheets of gold and silver foil, wouldn't you? And that would be totally, ridiculously impractical, wouldn't it?

Maybe not.

Consider the British pound. In 1935, currency flight was such a problem in England that the Government started putting metal threads in their paper notes - not, as they claimed, to prevent counterfeiting, but to detect money in packages being sent out of the country. Still, using their great talent for euphemism and employing their perverse sense of humor, I suppose they told the truth when they claimed these were for "security" purposes.

Just recently, in 1990, the United States started adding the same kind of "security" threads to the dollar. Again, these are not for counterfeit-prevention but for cash-flow prevention, and they are still called "security" threads. These threads are detectable to such a fine degree that, not only can airport metal detectors tell that you're carrying cash, they can tell exactly how much.

This tyrannical technology, though now being used to oppress people, can be used to liberate them.

If you just carried those security threads around with you, they'd quickly be destroyed, you'd lose them, and anyway they'd be useless as cash - too small. Being inside a paper bill protects them and allows you to carry them everywhere - whether you like it or not.

Why couldn't precious metals be embedded in paper notes? There is no reason they couldn't. The same technique used to make paper money with "security" threads could be used to make paper money with REAL security threads - threads of gold and silver.

Using a paper bill about the size of a US dollar, it would be possible to put up to 2 or 3 grams of metal inside: 3 grams is about 1/10 troy oz (it's actually 3.1g). This is about the smallest gold coin in use today - 1/10 oz. - and thus the "crossover" quantity between paper (foil) and coins. For larger amounts, a larger paper note could be used.

The beauty of paper notes with precious metal threads in them, however, is not how much they could contain, but how little. Using threaded paper, it would be possible to circulate amounts of gold and silver as small as 1/1000 oz. - maybe less. This would allow for amounts even smaller than the US cent to be exchanged: if an oz. of silver is around $5.00, then 1/1000 oz. is around half a cent (or a "ha'penny" in British usage). Thus, not only could paper money have intrinsic value, its value could be more precisely defined as well.

With such precious metal money, our present heirarchy of low-value coins and high-value paper would be turned on its ear. Now, the paper notes would be worth only fractions of an oz. while coins would be worth one or more oz. apiece. I find this appropriate, since in any precious-metal money system, it's obvious that more metal is worth more than less metal. Also, from a tactile point of view, coins ar more "substantial" than paper, and it is fitting that they should be worth more.

Notice that there would be no need to change cash register drawers. The same drawers used for fiat paper and fractional coins can be used for fractional paper and solid metal coins; only the relative values would be reversed.