Interesting idea here, in a paper presented to the British House of Lords in 2001.
Still, the authors advocate a “fiat” monetary system, declaring that the age of commodity money is over. In its 21st century stead, they coin the term (pun intended) “information money”.
It’s funny how many people, fairly educated in this area, appreciate the problem that there is a natural aversion to fiat money, but like the idea anyway, as if the natural aversion was simply something to be overcome rather than heeded, even a little bit. Some natural aversions are irrational or sub-rational (e.g., xenophobia), but many are not. There is no reason to operate with some kind of presumption against them; they should simply be tested with reason like everything else.
Seigniorage is an important concept in this whole thing. It’s strange that it took me so long to think of it, because I remember it was a big idea for Richard Timberlake when I first developed an interest in these kinds of things back in 1996. In the conversations I had with him he brought it up often. Discussed it a lot in his book, too.
Then again, Timberlake is (turns 90 this year) a hard money guy and a libertarian.
What is the aversion to fiat money about? It’s an understanding in the bones of just about every human being that we don’t dictate to reality; rather, reality dictates to us. Our task in this regard is, and always has been, to bring our minds and wills into conformity with reality, however imperfectly. To embrace fiat money is to repudiate this task; indeed to invert it, to command that reality will conform to our minds and our wills, not the other way around. We can pretend that our minds and wills are more benign and benevolent than the reality they seek to supplant, but this is a fatal conceit. Yet that is the basis of our monetary regime and any fiat money regime, and the reason why ours is not only failing but doomed to fail and always has been.
Attempting to address our many and serious economic issues in this second decade of the 21st century without taming our ideas of what money should be is empty tinkering.