Fiat currency constitutes a promise whose base was unclear from the start and whose fulfillment at some point in the future is uncertain.
Energy currency starts as a scientific fact whose fulfillment is specified and unchanging regardless of time.
Down through history, virtually every commodity and craft item has been used as currency. Gold and silver are the most enduring. These metals can be produced in a broad scale of units with consistent, measurable quality, in many parts of the world and they are easily transportable.
Raw energy has never been used as a currency although some of its forms, coal, seal oil or firewood as a base for transactions in other goods certainly must have been used regularly.
In its most pure form, electricity, energy provides the ultimate in scale, ease of measurement and transportability. Lower level energy commodities like coal, oil, natural gas and the newcomer hydrogen offer an interface to virtually every human endeavor.
Only in the past century have world energy networks been developed to fully drive the commercial economic machinery. In that time and for several centuries before, well established currency mechanisms were in place. Hence the primacy of fiat currency based trade.
To turn this about, in a world with well developed energy networks and no viable fiat currency in operation, it is hard to imagine energy not being instantly adopted as the functional currency.
But as human civilization and commerce has developed, fiat currency mechanisms which, although highly flawed and unstable, operated well enough to allow the economic development which we enjoy today.
Despite this, the weaknesses of our monetary systems, even in the commercial domain, are all too apparent and the effects of human activities on the environment are well past the alarming stage.
At this point in time in human history, the inherent problems of fiat currencies are well recognized and the global network of energy “arteries” matches the breadth and depth of international commerce.
Energy is the universal commodity and it is well suited for use in the 21st century as an enduring currency base.
Upgrading our monetary systems to be more be robust and more clearly representative of the entire real wealth creation process.
This can be done one step at a time and can be started very rapidly.
The world of commercial transactions involves a galaxy of financial instruments. Energy currency contracts (promissory notes) can be introduced as one more star in the heavens. Their advantage of course, will be their vastly higher level of certainty.
As energy currency contracts grow into the market, they will replace the less reliable fiat currency instruments on a displacement basis as the market adopts the more efficient, less fluctuating “promises”.
Energy currency will have to be internationally regulated to assure the solid foundation of the of the contract notes. A scientifically measured, easily conceptual base for a currency has never been possible before. All previous fiat currencies have been based on government edicts and the realistic hope that the notes will be convertible into real goods as expected. There has never before been a real, easily quantifiable base, used to underwrite a major currency. The added attraction is the very high degree to which energy is a major component in every real good, process and service.
Energy currency will not only add stability and certainty to a turbulent international trade market, it will offer better illumination of the true structure of our economy and society.
The decision makers whose cooperation and initiative are vital to energy currency adoption are national political and industrial leaders. It is unlikely energy currency will be promoted by financial traders whose livelihood depends on the imprecision, volatility and uncertainty of the currency market as it exists today.
As energy currency comes to increasingly dominate the market for international transactions, national currencies will have considerably less dynamic pressure placed on them. However, in the place of volatility, will be a long path to alignment with the real currency of energy.
At some point, energy currency will begin to replace fiat currencies in domestic economies. This will have to be a trend which national governments run ahead of and lead rather than run from. Pegging national currencies to the kilowatt will require a set procedure and disciplined timing. Many governments have pegged their domestic currencies to foreign currencies in the past and there is a great deal of precedence for this procedure. The difference will be the involvement of scientific measurements of energy (internal and external) upon which the new currency will be based.
At some point in the distant future, should energy networks become so pervasive or battery storage capacity become so highly compact, raw energy will become the currency for all transactions from a single piece of candy at a neighbourhood store to the purchase of blocks of office towers in large downtown cores. Energy based fiat currency will have given way to just simple energy as the universal currency.
The rapidity of adoption of energy currency for all levels of transactions will depend on the ability to maintain the scientific integrity of the process of energy money creation ie the notes printed must never exceed the real deliverable (in the timeframe specified) energy base.
The confidence this process provides will inspire the rate of adoption.
The reverse but reinforcing feedback of this process might well be the loss of confidence in fiat currencies causing pressure (ie a hopefully slow motion run) towards energy currencies.
To avoid introducing instability in the system, there must be a sufficient reserve of energy currency that if a run from a national currency to an energy currency occurs, the reserves can be used to stabilize the national currency until conversion can take place in an orderly manner. Pressure on national baseless currencies must be anticipated.