In theory we can choose any commodity to act as money. History shows some funny moments when the role of money was played by stones, cattle, beer, various metals, and most often gold. Yet while selecting a medium of exchange we should consider two notions: price-list invariant and price-list foundation.

 

Price-list invariant is a commodity that is a participant of the trade system. Prices of other goods and services can be calculated on the basis of this commodity. Any change in the amount of this commodity affects considerably all the other goods prices. Price-list invariant belongs to a small group of products that can be named price-list foundation. Price-list foundation consists of socially vital goods, and any short-term price fluctuations for them are reflected on the overall price level.

 

Let’s think about a commodity that satisfies the described above criteria... Well it is energy. And it has always been energy. To produce any kind of physical or intellectual good one needs power in form of electricity, oil, wood etc. plus some raw materials. But raw materials are not consistent in this equation. For instance, by no means always do we need gold to produce modern products. Therefore it would be a mistake to take gold as a price-list invariant. In times of Hammurabi there were two types of money: grain and gold. Grain was energy in those times, because people and cattle could subsist on it, and it was physical power for the most part that was dominant in any manufacturing process. But grain was not convenient to transport and to exchange; therefore gold was taken as an equivalent to grain and bounded to certain amount of it. Gold coin was good as long as it was tied to certain amount of grain.

 

As you might already guess, problems begin when we untie our medium of exchange from real price-list invariant.

 

For instance, when Columbus and his patrons discovered robbed America and had brought to Europe hips of gold - prices for the grain ran high immediately. That was the consequence of the fact that real price-list invariant was not gold... Same picture we are facing now when we are getting more and more US dollars in global economy, and the prices for food and basic goods rise. This is all consequence of releasing the tie between medium of exchange and real (yet implicit) price-list invariant.

 

Today we need to explicitly consider KW/hour a modern price-list invariant. Of course we cannot put KW/hour in our pockets directly, and that is why we need currency that is ensured with KW/hour. If we bind current global media of exchange - US dollar to certain amount of KW/hour and ensure that 1000 US is always 1 KW/hour (it is possible by managing emission) we will be able to avoid so called “economic crises” that are always triggered by disproportion between amount of real goods and amount of money. Therefore the first country that will make such kind of binding will have strongest positions in future economy. It requires understanding of price-list invariant as well as political courage. But major problem is the lack of good will to substitute “economy” that is based on some-one’s potential to print as much money as they want with economy that allows equal opportunities for all countries and regions.