A modest proposal

I propose that some enterprising individual or organization create a private currency that is backed by an index fund or several index funds.

This currency could be used online, like those gold-backed online forms of money, and the currency could also be printed or minted.

Since I don't know much about monetary economics or any other economics, I'll leave the fancy rebuttals and fleshing-out of the idea to you experts, but after thinking about it briefly I believe I would like to use such a currency.

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A few more details

(Replying to myself)

I guess what one would want is a published open standard so that various providers could offer interoperable currencies with their own choice of index (or other) funds, each competing for traders on the basis of fund selection, reputation, etc.

And i'm sure there's all sorts of cool crypto and "smart" stuff one could incorporate into such currencies...

Re: market currency

There would need to be a way to control for stocks denominated in inflated FRNs.

I prefer precious metals. They are a physical store of wealth that can't be confiscated with a keystroke.

Re: market currency

Do you take the same approach with your investment portfolio?

A metal-backed or equity-backed currency would perform equally well as a medium of exchange and a unit of account, ceteris paribus. Equity seems like it's probably a far better tool as a store/generator of value, and for liquidity.


For those who want more short-term security -- which I guess is the traditional use of money -- a private, credit-backed currency (say, using bond index funds) seems like it would work better than the currently-used currencies. Credit cards and bank deposits to some extent provide that functionality, but in a much less flexible and efficient way than I think my idea would.

I think it would always make sense to use credit rather than equity.

Hmm... I think all I did was rediscover private currency.


I think you've stumbled upon an excellent idea. My upper-middle class parents keep several thousand dollars in their checking account. If that was in some sort of currency convertible to ETFs...easy $240 average per year! (4k * 6%)

Of course, once this started to be widely , a intermediary(ies) would quickly pop up to buy shares at, say, 90, then 95, then 99% of the ETF value for quick cash. Meanwhile, the cash in your checking account woud do decently...

The only thing I'd do would be to buy some deep-out-of-the-money calls, options to buy the ETF at around 60-70% of its current value, should some unforseen market meltdown occur.

Perhaps someone would also write softwqare to analyze checking account transactions and calculate tax liabilty on cap gains and dividends? It wouldn't be that hard.

Question: would the day-to-day, or longer-term, uncertainty of the value of such a currency matter?