Commodity Reserve Currency

Description

Mammouth.AI:

“Benjamin Graham, the legendary investor and father of value investing, proposed the idea of a Commodity Reserve Currency (CRC) as a way to stabilize the global monetary system. His concept was outlined in his 1944 book, "World Commodities and World Currency" (co-authored with Frank D. Graham), and later refined in his 1949 book, "The Intelligent Investor.

Characteristics

Key Features of Graham’s Commodity Reserve Currency (CRC):

* Backed by a Basket of Commodities

Unlike fiat money (which is backed only by government decree), the CRC would be backed by a diversified basket of essential commodities (e.g., wheat, cotton, copper, oil, etc.). This would provide intrinsic value and reduce inflation risks.

* Stabilizing Purchasing Power

The value of the CRC would fluctuate based on the prices of the underlying commodities, ensuring that money retains its purchasing power over time. If commodity prices rose, the currency’s value would adjust accordingly, preventing inflation.

* Automatic Adjustment Mechanism

The supply of CRC would expand or contract based on commodity prices, ensuring stability. If commodity prices fell, the currency supply would shrink, preventing deflation.

* Global Monetary Stability

Graham argued that a CRC could prevent economic crises caused by unstable fiat currencies. It would reduce speculative bubbles and currency manipulation by governments.

* Decentralized & Non-Political

Unlike gold-backed currencies (which depend on a single commodity), the CRC would be more stable because it was diversified. It would not be controlled by any single government, reducing political interference."

More information

Book: World Commodities and World Currency" (1944)