What can be done to prevent another bubble

[20000miles]

I've literally just come up with a solution - how about backing money by energy? Energy is a measurable commodity, is practical (easily stored and transferred) but is also infinite yet requiring work to be gernerated: methinks some sort of wacky green solution lies therein. Give me a few days to work it out.

Sadly, 'energy' isn't fungible, homogenous, durable, recognisable, divisible or portable - all the characteristics precious metals have.

That being said there's nothing stopping you from using a jar of energy to pay for your groceries...just don't expect too many people to accept your method of payment.

Of course you probably will have to look for a solution when you eventually find yourself in this situation...

[20000miles]

A few years ago,a Moscow mafia gangster offered millions to a fund manager to manage with a proviso attached. If the fund manager lost significant money,the mafia would murder him. The fund manager declined the business.

That's one solution to risk management.

Another solution is education. All bankers should be required to study the history of banking crises in capitalism's business cycles,especially the banking crisis of the Great Depression.

Are you saying that free and compulsary State education is inadequate?

But I hope you're not serious with that suggestion. Considering that the major schools of economic thought are bitterly divided over the causes and correct policy responses to the 1930s crisis.

Which ones would you teach?

Another solution would be to have banks operate under strict state supervision - this solution comes with a free red armband for every banker.

[Retrolives]

Mr. Hank, the quantity of money in the economy has no effect on the workings of the economy. If there was one billion euro in the economy or 100 billion euro in the economy, prises would adjust according to people's preferences for goods.

The fact that under a gold standard there is little increase in the money supply is a good thing. Prices always fall under capitalism as the costs of production decrease because of the actions of competing entrepreneurs. It will be easier for people to see their standards of living increase also as if they were to just hoard cash they will become richer every year because prices will fall and they will be able to but more! Now that's a real pension!

Money has three purposes, none of which require a specific quantity. All that is necessary for a currency to operate is that it is sufficiently divisible to pay for small amounts of goods. That is why gold is so wonderful because it is easily cut into smaller pieces. Of course, in a free market exchanges would still be made with notes but these notes would represent different quantities of gold.

In this way, increases in population and capital and producers goods will not effect the functioning of a gold standard.