Triffin's suggested solution was to create an artificial reserve asset, tied to a basket of commodities.
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Among others, Benjamin Graham and Friedrich von Hayek advocated a basket of commodities, the latter within the context of a system of private currency.
The value of the dollar should be stabilized against gold or a basket of commodities (the 21-commodities-based system used in the 1990s by Fed Vice Chairman Wayne Angell would work).
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There used to be clearly defined battle lines between pessimists like Mr Ehrlich and optimists like Julian Simon (an economist who bet Mr Ehrlich that the inflation-adjusted price of a basket of commodities would not rise over time because of growing populations).
That reduces the diversification benefits of owning a broad basket of commodities.
Bank of America research finds that since 1930 a representative basket of commodities including metals, agricultural products and energy has produced lower returns than stocks, averaging 8% a year compared with 11%, but with much lower volatility.
This would be a global currency explicitly backed by a basket of a dozen or so precious commodities, such as gold, silver, oil, etc.
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Monetary policy would then be guided by the market prices of a basket of inflation sensitive precious commodities such as gold.
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The use of a sufficiently robust basket would result in a balance of errors as variations in one direction in some commodities cancel out variations in the opposite direction in others.
While it is included in the commodities basket it is in fact a medium of exchange and one that is officially recognised (if not publicly used as such).
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