Buffalo Rising Online

Oct 1st, 7:46am By Dr. Richard S. Knaub

Here’s an idea to toss into the discussion on the Wall Street bail out. Let’s put our currency back on a standard. The Gold Standard was good for reconstruction after World War II. It was used by the International Bank for Reconstruction and Development, now one of five institutions in the World Bank Group and the International Monetary Fund.

It helped to be able to tell people that their paper money was backed by something stronger than the promises of the government. The problem is that in order to go on a standard, the price of the standard has to be fixed. That means that some commodity would have to have its value fixed by international agreement.

Supposing that commodity was a Carbon-Free Kilowatt Hour? This is the kind of kilowatt hour delivered from a wind turbine or a solar cell. It is clean energy, not contributing to global warming. It is something that every country on the planet could generate so every country could access the wealth without having to trade its resources away just to join the international economic club. Every country would have incentives to conserve energy so as to maintain and build its wealth.

Every day the sun would bring more wealth to every country or the winds would, and no country would be held hostage for energy. Best of all, energy cannot be created or destroyed, only transformed. So it can be stored in the form of hydrogen until it needs to be converted back into water and energy through a fuel cell or burned directly if it is heat, not electricity that is needed. Either way there is clean, pure water available for drinking.

By fixing the price of these Carbon-Free Kilowatt Hours internationally, investment costs for the infrastructure to generate them will be fixed and immediately cost effective. Arguments like coal or oil being a cheaper source of energy won’t work anymore, because now it is clean energy backing the dollar against the Euro or the Yen. A kilowatt hour from a natural gas powered generator, the cleanest fossil fuel, has to deduct the energy of sequestering the carbon from burning the gas, so there is a net loss of energy from the output of that generator. The dirtier the fuel, the less cost effective it would be to use. There is an incentive for clean energy.

For a city like Buffalo, it could regain its prominence in the national economy. The winds of Lake Erie would generate Carbon-Free Kilowatt Hours day in and day out. The Federal Reserve branch here could keep track of these new stronger dollars as they flow into the national economy from Buffalo, like the gold mines of the west use to pump gold into the treasury of the 19th century. NYSERDA’s program to subsidize solar panel installations would become the model nationally to make us the strongest economy in the world again, and to free us from the Chinese creditors and the OPEC oil dealers.

International Monetary Fund agreements would focus on adopting technologies to develop Carbon Free generation facilities which would back the country’s currency with the same security that the dollar, the yen and euro uses. With this standard it is possible to get every country in the world on it. Countries wouldn’t have to trade their resources for credit and be forced to open their markets to international goods at the expense of their own industry, particularly their agriculture industry.

History shows that restoring confidence in the financial system with a commodity backed currency works. That is worth a sizable amount to the security of a nation. The Carbon-Free Kilowatt Hour is a commodity which is not really traded now, so there is no international market which would need to be managed before the standard could be implemented. It just needs to be set, based on available technology, and gradually implemented until the currency is fully backed as production increases. That has a considerable value. But this new energy/economic system would have an almost immediate effect on global warming, and that is priceless.