"Universal Value" & Price the Dollar to "Years of Sustenance" Standard

For years, I've been opining about what I call "Universal Value" which I think is one of the most fundamental aspect of economics. This idea runs contrary to free-market purists who think "the market as a whole can never be wrong" and that "crashes should not be avoided with regulation". (Maybe you should skim my February 10, 2009 post or my December 25, 2006 post for previous allusions to what I hope to explain here). So this post may only be a tiny bit interesting to those who are excited by monetary policy (the poor bastards). Here's my first attempt at articulating my idea to re-attach the dollar to a new "standard". Problem: Possible Rampant Inflation - devaluing American currency and thus our investments & assets. (q.v. countless examples of third-world countries where people carry wheelbarrows full of local cash to the market to pay for a few meager groceries). Many of you already know that I think tying currency to gold or any other shiny metal, regardless of its scarcity, is fundamentally absurd despite that history/tradition. Gold-standards are/will be worthless once people stop placing such an extreme premium on that yellow shiny element. So tying a currency to gold is systemically just as precarious, if not more so, than one that is "untied" or freely subject to the market. So here's my solution (which may or may not be original or effective): STEP #1: The government can create an ultra "bundle of goods" (which others have recommended) which... (here's "my" twist) are a function of a human's needs for a given year. This ultra bundle of goods would include: - shelter/safety for one year - nutritious food for one year - clothing for one year - minimal medical treatments - entertainment/education for one year - utilities Then the government could find locations in the US where it would be most economical to establish such housing (e.g. Wyoming, Texas or other wide-open but less-populous areas). I would think there would be overwhelming interest from communities across the country (especially depressed areas like Detroit, Cleveland etc.) seeking government funds to create these communities. NOTE - I'm not saying we put all of these in one segregated area. I'm saying the opposite of that. I would want there to be such communities in virtually every zipcode. Once you figured out the cost of this extraordinary "ultra bundle of goods" on a per year basis (dividing the cost of building & sustaining it by the number of years it will last) you would get the cost of a "Year of Sustenance" (YoS). Here's my first rough budget: - shelter for one year (e.g. a private trailer or apartment in a safe, unpolluted area) = $3k - nutritious food for one year (e.g. 2000 calories per day of assorted MREs) = $2k - clothing & goods for one year (e.g. those sufficient for the climate of that location) = $1k - minimal medical treatments (e.g. set by international human rights standards) = $1k - entertainment/education for one year (e.g. computer with access to the internet and/or DVDs & TV) = $1k - utilities (e.g. clean water/plumbing and solar electricity) = $2k GRAND TOTAL = $10,000 per year (but this could easily be "scaled-up" to nicer standards - e.g. "a house with a yard and fresh food" - for more money) STEP #2: The government actually builds/buys millions of these minimal housing/sustenance communities with their accordant amenities. They then make them available to the public for rent. Hopefully, not just as "the projects" for low-income people. (Social services / charity implication: the homeless, victims of domestic violence, parolees etc. could be given temporary access to these communities). STEP #3: The government then prices the dollar relative to the cost of "one year of sustenance". Thus, in this example, one dollar would be worth 0.01% of a "YoS". - $100 would be worth 1% of a "YoS". - $20,000 would be worth 2 "YoS". And one million dollars would be worth 100 "YoS". STEP #4: The US would then be required to have "YoS" built/ready for all the dollars in circulation. This is akin to casinos being required to have cash for every chip in play. The US could get sufficient "YoS" ready by at least 3 ways: a) actually building & supplying them - q.v. the WPA which helped America emerge from the Great Depression. b) buying them from real-estate developers desperate to fill up their oversupply of space or manufacturers with fallow factories. c) getting legal commitments from established companies which make those items based on mutually-agreed-upon exchange rates (e.g. Apple agrees to build 10 million laptops or Wall-mart agrees to feed 10 million people for year in exchange for 1 million acres of specified public land --- should it ever have to come to that). CONCLUSION: By requiring the US to have "YoS" built/ready, the dollar could never drop below the floor of 1/10,000th of what it costs to survive (albeit austerely) for one year. Assuming life-expectancy is 80 years, $800k would enable you live for a lifetime. Building up a next egg of cash/U.S. bonds worth $400k would guarantee you a 40-year retirement instead of possible death if markets or inflation destroys your investment. Now compare my idea to third-world currencies where inflation has been so rampant that they printed "100 trillion" dollar notes. At least with my idea there is a floor preventing further damage. The living at "YoS-level" certainly ain't desirable for most Americans in 2010 but it ain't supposed to be. It's just a floor. Otherwise, properly regulated markets can determine the swings. I know there are countless implications to this idea but I wanted to get this first draft posted. It's a work in progress. And I further note that it could be fundamentally flawed and impossible (but I currently just don't see how that's so). Stay tuned for further exploration of this topic. Good karma to you.