Half a croissant, on a plate, with a sign in front of it saying '50c'
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Consumer Goods-Based Currency

If one wanted to end inflation, here is one method.
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Take 10(or so) common consumer goods, and fix the price. I recommend such items as toilet paper, eggs, ground beef, sugar, salt, paper, flour, etc.

These items will be available throughout the year at grocery stores at the designated price. 1% or so of the taxes collected will be reserved to subsidize and or smooth out the rough patches in the production of these items to make sure they remain abundant. If technology forces a long-term adjustment to be made, 1 or 2 items can be re-indexed to the new reality at a yearly meeting. If , for example, ground beef production is sucking up all of the subsidy cash, then raise the price of ground beef. Or, if new technology makes salt super-abundant, then lower the price of salt accordingly. But, the overall cost of the items is not to change. 1 pound of beef + 1 dozen eggs + 1 pound of sugar... etc will always total to $20, or whatever other price point.

There will be only 10 items fixed, all other items will be allowed to float freely against the dollar. Pegging the dollar to a basket of 10 goods will help smooth out the fluctuations of any single item, and keep prices from spiraling hopelessly upward continually. In a drastic case, one good may be replaced by another if sales volume falls so low as to be a poor economic indicator, or prices end up being too eratic from year to year. Also, emergency meetings might be convened. In a way, it will slightly resemble the dow. Ideally, adjustments will not have to be made for years at a stretch.

Retiring seniors will still have to worry about medicine, but they can at least be assured that their next dozen of eggs will always be the same price, day after day.

People wishing to exchange their paper money for something more "real" would either have to buy these goods, or something that is floating against the dollar.

Feedback is requested. Obviously some will fishbone because they like the slow steady inflation, some people might worry about the deflative pressures such a scheme might produce. Other just might say it's unworkable, and this is the feedback I'm most interested in.

Madai, Nov 22 2004

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       interesting.   

       I'd expect the following: 1) the price of non-price-fixed goods would still experience inflation. It makes sense to only price-fix food, but I think welfare and food stamps already ensure that people can have a minimum of food. 2) eventually 1% of all taxes will be insufficient to cover the cost of price-fixing 10 food items. 3) there's not a clear reason to restrict inflation anyway.   

       Enterprising people would buy truckloads of subsidized food and smuggle it over the border to people who will pay its full market value.
sninctown, Apr 21 2006
  
      
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