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[Neonivek]

There's no reason gems can't be put on a scale as well.

Of course not.

What I meant was that you couldn't make a universal currency out of Gemstones (only barter) because you couldn't get uniform value out of them.

It would be as if every bill had random numbers on it so instead of 2, 5, 10, 20, 50, 100, 500, 1000 you get 3.55, 5.87, 10.54, and so on.

If you assume a static value, you still need to assume that there's always somebody willing and capable of paying that value (In a market situation, the lack would cause a price drop).  Otherwise, you'll run into issues of confidence in the currency (because all of a sudden you might not be able to sell the artifact).

What I meant was that I don't know if artifacts should have their values adjusted too much by their materials because their intrinsic value can be derived from their use, abilities, and artistic license that transcends the fact that it may be made out of gold.

[Atarlost]

I suspect most dwarfish currencies would wind up backed by narrow giant cave spider silk gloves. 

[Granite26]

Having Paper money actually not be tied to real money comes a bit later.

And even that is contested by the Europeans... Not that I support baseless monies, since they made economies a bit unstable.

The reason you don't want to have backed currency is because it limits the size of the economy to the size of your (gold) reserves.  Specifically, if you've got 5 gold bars in storage as your store of value, you only have 750 dwarfbucks in circulation.  Sure, one dwarfbuck can buy a scone and then the baker buys a club and the weaponsmith buys a flute, but people need to be able to store their value (maybe the weaponsmith is saving for retirement) and then that dwarfbuck gets taken out of circulation.

So you start buying up all the gold you can, and sticking it in a vault, and your supply of money grows, so your economy can grow too.  Eventually, you run out of gold to use to back your economy, so you invade other continents and take their gold and silver.

Eventually, your economy reaches a point where it isn't feasible to have a store of wealth that large, so you start to float your currency.  (Not that I think it's a GOOD thing to have a floating currency in the hands of the government, but it's a trade-off)

[Dvergar]

Isn't any established currency usually made of a material that is in fact useless?  For example, wooden beads, shells, specific stones, lead, paper

Of course those damned spanish had to create the golden Bullion, but you get the point

[Euld]

So you start buying up all the gold you can, and sticking it in a vault, and your supply of money grows, so your economy can grow too.  Eventually, you run out of gold to use to back your economy, so you invade other continents and take their gold and silver.

This is exactly what I had in mind, except, you don't have to use just precious metals in the hoard, that's the point of being able to choose any object to be put in the hoard (the hoard wouldn't be a stockpile either, it would be a zone allowing you to store limitless amounts of hoarded items ).  And yes, your economy could very well run on giant cave spider silk gloves.  It would be able to do that because this isn't like a real world economy (because they suck).  Essentially what goes on is a big game of pretend.  A certain amount of worth is shut away from the dwarves and protected, and to represent that worth, paper money (I should probably call it cloth money at this point, lol) is distributed in exchange for jobs completed.  Everyone pretends that the paper money is actually worth something, when the truth is that it isn't.  Your fortress's economy would not fluctuate without warning because you directly control the hoard and the printing, all that changes are the prices, which your nobles do without abandon anyway.  You don't trade your money to other civilizations 'cause it's worthless to them, instead you trade items of worth, like the kind of items you would put in the hoard

[Pilsu]

Gold bars are currently far too cheap to act as a basis of any economy. Their trade value would need a x10 modifier and the amount of coins made would need to be cut harshly to get even close to having the individual coins hold any real value

[Starver]

Isn't any established currency usually made of a material that is in fact useless?  For example, wooden beads, shells, specific stones, lead, paper

Of course those damned spanish had to create the golden Bullion, but you get the point

One could argue that[1] gold has no actual 'value'.  You can't eat it, you can't make plants grow with it, it can't make warm clothing and it's hardly the best building material.  As with shells and other things its a combination of comparitive rarity (c.f. "adopting the leaf as currency" from H2G2) and authenticity of product (which is the biggest challenge to 'cheap-to-produce' banknotes) that means it can be a currency standard.

It can be shaped into statues, etc, but that's for someone who can not only afford to aquire enough gold for the statue (either paid for in shells/paper/favours/electronic credit, or removing possessed gold coins/bars/leafs/othergoods from their "ready cash" stock in order to use in the project) but can also spend additional payment on commissioning the relevent artists and artisans to transform it into an added-value form.  A bit like artefact creation, in that you can't "get change for a large statue", traditionally, but it's possible to mutually agree a relative value on it (explicitly or implicitly) when using it in a barter with a any combination of currency/goods/favours/etc that you might care to pursue.


[1] At least pre-electronics, and even then I don't think the demand for gold contacts on chips/etc is as significant as that which various other metals have gained that are heavily used in the actual semiconductor mixes.

[kurokikaze]

One could argue that[1] gold has no actual 'value'.  You can't eat it, you can't make plants grow with it, it can't make warm clothing and it's hardly the best building material.  As with shells and other things its a combination of comparitive rarity (c.f. "adopting the leaf as currency" from H2G2) and authenticity of product (which is the biggest challenge to 'cheap-to-produce' banknotes) that means it can be a currency standard.

Don't forget ease of use. Gold don't rust, don't rot, and is easy to represent large value with small weight.

[profit]

Any object has the value of what the person who wants the object is willing to pay.

A solid diamond billions of times larger than the earth exists in the galaxy, but its not worth anything because no one is capable of moving, shipping or even touching it. 

A tiny diamond, no bigger than the tip of a pen, cut, an held into a ring can have immense value, because it is used by men for securing a lifetime mate through a ritual known as engagement.

Items have value only because people want them.

IMO cow manure has more utility than a lot of "precious" stones.... But for the most part you never see it held in an alarmed glass case.

[Starver]

Don't forget ease of use. Gold don't rust, don't rot, and is easy to represent large value with small weight.

c.f. Lead.  Lead has been valuable in its own right, and even used as currency insofar as bars with an intrinsic value related only to potential use, or similar.  Gold is pretty and rare and difficult[1] to fake.  It's 'ease of use' would otherwise only lend itself to artwork crafting (you wouldn't make a solid gold broadsword, except for vanity's sake) and the non-rusting/rotting property merely makes it a constant.  In actual value to a person, a gold coin would only be worth a large value because of its representation of a large value that other people would accept.  Flooding the society with an exces of gold coins would not make everyone rich, just leave those already possessing of gold coins with a lower 'purchasing power' than they previously had.  And as soon as you find that your ten gold coins can no longer buy you the loaf of bread, and you wish you still had the sack of grain you'd received them for, earlier.

What's the Star Trek currency[2]?  Gold-pressed Latinum or something.  Because gold can be synthesised easily through Replicator technology, but (in a hand-wavium fudge of technobabble similar to the dilithium-looks-like-quartz-but-is-4-dimensional-so-can-contain-antimatter-reactions thing) apparently Latinum (or whatever it is) cannot be, for whatever reason.  So 'chits' of GPL are standard that is accepted for inter-and intra-species trading throughout the 'civilised galaxy', or at least parts of it that directly abutt the federation and end up featuring in Enterprise[X]- (and DS9-)based storylines.




[1] Across most tech-levels of society, given that any particular measure to counterfeit has been pursued with appropriately sophisticated measures to detect such counterfeits.  Though usually all that's needed is familiarity with The Real Thing to readily identify attempts to pass gold-plated/painted lead, iron pyrytes, etc, with the occasional "Euraka!" moment adding displacement tests to the fold.

[2] At least outside of the "credits" economy within the federation that is largely glossed over, but I find surpsrisingly 'communist' and "to each according to their need, from each according to their ability" given that it was a 60s/70s US series in classic "better dead than red" era.

[profit]

[2] At least outside of the "credits" economy within the federation that is largely glossed over, but I find surpsrisingly 'communist' and "to each according to their need, from each according to their ability" given that it was a 60s/70s US series in classic "better dead than red" era.

It also shows the inherent flaw of communism/socialism.  "to each according to their need, from each according to their ability" only works if you can replicate infinite amounts of all resources with no human work, and have a mystical, nigh inexhaustible energy supply and a universe of space to continually and forever expand in, and holographic doctors...

Otherwise capitalism (and not this farce that the US calls capitalism) does a much better job for resource distribution.

But yes, supply and demand was always active during the barter process and in order for something to have value it needs a finite supply (Hence why for the longest time it was free to breathe... Till they decided to cap CO2 and now its becoming more expensive by the minute)

[JoshuaFH]

You know, I'm not an economist, but how come no one has talked about taxes yet? Looking at the wikipedia article for fiat money, it would appear that fiat money has value because it can be used to pay taxes.

If a fortress of a certain size were ordered by the dwarven capital to pay taxes, and the circulation/production of money were handled by nobles, then I think that would help give money value, while also preventing hyperinflation/deflation.

[Silverionmox]

There's no reason gems can't be put on a scale as well.

Of course not.

What I meant was that you couldn't make a universal currency out of Gemstones (only barter) because you couldn't get uniform value out of them.

It would be as if every bill had random numbers on it so instead of 2, 5, 10, 20, 50, 100, 500, 1000 you get 3.55, 5.87, 10.54, and so on.

Medieval currency wasn't expected to have an exact value.. the size, material and stamp of coins were an indicator. People usually conducted trade with a few coins as if they had that value, modified for trustworthiness of the coin (eg. if the lord that issued them was know to be preparing for war, it would probably be valued lower). When large transactions took place, it was worth measuring the coin by metal and weight also, to ascertain that the deviations from the assumed value all averaged out. The same goes for gems: they can be used as daily coin if they're coming in recognizable size and material (perhaps indicated by a noble metal ornament, as suggested in another post).

That would probably only happen locally, since gems are rare enough to be used up as jewelry, magic component etc. in the world as a whole. That doesn't preclude that it could happen if gems were more commonly present, or if a leading civ had enough of a few common types and imposed its standards through trade, culture or conquest.

That's why I say use a barter system as the standard economic interaction: trading with coins is the same as trading with cattle, but they're portable and they don't smell.

[2] At least outside of the "credits" economy within the federation that is largely glossed over, but I find surpsrisingly 'communist' and "to each according to their need, from each according to their ability" given that it was a 60s/70s US series in classic "better dead than red" era.

It also shows the inherent flaw of communism/socialism.  "to each according to their need, from each according to their ability" only works if you can replicate infinite amounts of all resources with no human work, and have a mystical, nigh inexhaustible energy supply and a universe of space to continually and forever expand in, and holographic doctors... Otherwise capitalism (and not this farce that the US calls capitalism) does a much better job for resource distribution.

I'll bite my tongue and try not to open that discussion, I'll only mumble that it's absolutely necessary to determine which economic systems are factual, which are fictional and how you call those varieties before a useful discussion can even start.

[Scope]

Interesting idea, but I see no reason to stick specifically to paper money. If the player had the ability to designate anything he wanted as currency (with this example being a new type of cloth product), that would be awesome.

*crosses fingers* please let me designate pigtail socks as my currency.

[Silverionmox]

If I'm not mistaken, the Egyptians had a currency backed by grain. It was basically a coupon that gave acces to a storage unit of grain (pot, barrel, vault, who knows). That had the interesting consequence that there was a natural negative interest on the currency, and it was in your advantage to pass it on as quickly as you could, instead of hoarding it. It would be great if the economic system could handle such considerations instead of just using the economic habits of the expansionist powers of the latest centuries. (A variation on that idea is radioactive metal as coin metal: the radiation would indicate the value, and it would predictably decrease in value as time passes because of the half-life of that particular element. The radiation would be an extra incentive to bring it back into circulation, instead of piling it up under your pillow).