Musings on a NanoGold Standard
20 Pages Posted: 1 Sep 2012 Last revised: 3 Aug 2013
Date Written: August 2013
NanoGold is a simple device to make the return to a gold standard possible. Money is backed by nano quantities of gold. Because of advances in digital technology, I argue here that a NanoGold particle is a viable medium of exchange provided people can measure it accurately, validate its tangibility in transactions and safely store it. The NanoGold standard will be effective if a new social convention around monetary units takes hold: one nanoparticle of gold is worth the same as the real value of one dollar today. I analyze the undesirable wealth effect due to private holding of gold flooding the economy, and the conditions to prevent it. If central banks can enforce a minting monopoly on these NanoGold particles, then paper money has true backing. Monetary policy can generate price stability while postponing the deflationary trap to an infinitely distant future. The implications for Fiscal policy are potentially far-reaching. This new currency unit endows the government with virtually unlimited resources. A logical but stunning implication of the proposal is that the costs associated with runaway government debt and Ricardian equivalence can altogether be avoided under this new standard. The fallback position cannot be worse than today’s fiat monetary system.
Keywords: Gold Standard, Nanotechnologies, Psychophysics, Deflation
JEL Classification: E31, E40, E50, E58, E62
Suggested Citation: Suggested Citation