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Joseph Potvin,

Summary of Ben Graham's Commodity-Reserve Currency Proposal

Benjamin Graham (1894-1976) is widely remembered as the father of Value Investing, which refers to the identification and trade of stocks in relation to changes in their intrinsic value. He developed Value Investing though his experience as a Wall Street investor during the turbulent 1920s, 30s and 40s. It is little known today that Graham also dedicated much of his effort to macroeconomic reform that he considered could reduce uncertainty about the value of money in investment decisions. He developed and published plans for a Commodity-Reserve Currency system to price money in relation to its intrinsic value in the physical economy.

The functional mechanism of Graham's currency operation was a broad generalization of the "commercial bills" instrument (which most people today are familiar with as postal money orders, bank drafts, PayPal and Google Checkout). Commercial bills are short term, trusted instruments authenticated by an intermediary issuer, that convey the payment of a stated amount of money to a particular person, or to the bearer, upon proof of delivery of a stated set of goods or services. Graham was deeply concerned to align his proposal with core banking principles: that the currency must be both convertible and self-liquidating. Commercial bills are said to be "self-liquidating" because upon delivery, the stated amount of cash redeems each bill, at which point it goes out of circulation. Graham proposed that a reliable national or global currency could be created to function as a comprehensive system of commercial bills. Each unit of currency would represent a standard number of units of each of a couple of dozen major exchange-traded commodities. A federated network of Commodity-Reserve Banks would buy and sell standard commodity bundles, in order to maintain the average price of the standard composite commodity unit. The relative prices amongst the commodities would vary. When the average market price of the basket of commodities reaches a low threshold, reflecting a shortfall in effective demand, the Treasury or commodity-reserve banks would automatically purchase commodities for storage in the defined standard proportion, in sufficiently large quantities to stop the average price from falling further. When the banks purchase the commodities, they issue the commodity-reserve currency as payment. When the average market price of the basket of commodities reaches a high threshold, the Treasury sells commodities from storage in the defined standard proportion in exchange for any type of money.

In a market downturn surplus commodities would be taken off the market, while increasing the purchasing power of primary producers by paying them in the new currency. Once issued, the commodity-reserve currency circulates as a medium of exchange in normal trade, or it can be saved. In an upturn, the currency is always redeemable in terms of the standard proportions of the standard set of commodities held in storage.

This Commodity-Reserve Currency proposal was submitted at the Bretton Woods Conference in 1944, but sidelined at that time due to numerous practical and political concerns. The concept was adapted and promoted again in the 1960s by Nicholas Kaldor, Jan Tinbergen and Albert Hart. They suggested an alternative type of commodity-based bancor, merging John Maynard Keynes' policy concept of a neutral global reserve currency with Graham's intrinsic value mechanism. But they did not resolve the underlying practical and political criticisms, and the proposal has since disappeared from the field.

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Beyond Ben Graham’s Currency Proposal: Retrospect and Evolution (Scroll to keynote address.)

Beyond Ben Graham's Currency Proposal

Summary of Ben Graham's Commodity-Reserve Currency Proposal

The 29 June 2009 version of the following text was presented as the keynote address at the "Second Annual Symposium on Value Investing" hosted by the Ben Graham Centre for Value Investing, as part of the 16th Annual Conference of the Multinational Finance Society, 28 June 28 - 1 July 1, 2009, Rethymno, Crete, Greece. Please use this wiki instance to share your improvements. The paper and all contributions to it are licensed under the GNU Free Documentation License 1.3 or later.

Full title: Beyond Ben Graham's Currency Proposal: Retrospect and Evolution

Joseph Potvin
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Part 1: A Look Back at Ben Graham's Commodity-Reserve Currency Proposal
Part 2: Why Graham's Proposal Did Not Prevail
Part 3: Building Upon Graham's Essential Concept
3.1 A Call for Collaboration
3.2 Suggested Requirements from Systems Theory and Information Theory for a Currency Based on Physical Assets
Annex 1: Brainstorming an Earth-Reserve Currency Standard


Benjamin Graham (1894-1976) is widely known as the father of Value Investing (VI), the identification and trade of stocks in relation to changes in their intrinsic value. He developed VI though his experience as a Wall Street investor during the turbulent 1920s, 30s and 40s. It is little known today that Graham also dedicated much of his effort to macroeconomic reform that he considered could reduce uncertainty about the value of money in investment decisions. He developed and published plans for a commodity-reserve currency system to price money in relation to its intrinsic value (IV) in the physical economy. His proposals were considered at the Bretton Woods Conference in 1944, but sidelined. These commodity-reserve currency ideas were further developed under the United Nations Conference on Trade and Development (UNCTAD) and debated in the economics literature until the 1960s, but they have since been neglected by more recent generations of economists.

The global monetary disorder of the current decade is opening minds once again to Graham's way of thinking about monetary system discipline. This paper reviews the origins of Graham's commodity-reserve currency proposal, explains why the approach did not prevail at the time, and suggests some general criteria from systems theory and information theory for any new attempt to link money to tangible economic life. It encourages renewed collaboration to develop, prototype and test a family of practical options inspired by Graham's monetary work, and by those who inspired him.

Footnote 1: This paper is the keynote address at the "Second Annual Symposium on Value Investing" hosted by the Ben Graham Centre for Value Investing, as part of the 16th Annual Conference of the Multinational Finance Society, 28 June 28 - 1 July 1, 2009, Rethymno, Crete, Greece . The work was prepared by Joseph Potvin in his capacity as a private citizen. Nothing he expresses here, or in discussions related to it, can be taken to represent the views, directions or policies of his employer, Treasury Board Secretariat, of the Government of Canada. His undergraduate degree in economics is from McGill University, Montreal, and he holds an interdisciplinary Masters degree from Cambridge University, England, focused on economics and technology. The author thanks colleagues who have reviewed and provided insightful comments on earlier drafts, in particular Anthony Cassils and John Waugh.

Part 1: A Look Back at Ben Graham's Commodity-Reserve Currency Proposal

The last time the world was forced to fundamentally re-think markets and money was during the 1930s and 1940s. In that period Benjamin Graham wrote four books. Two of these, Security Analysis with David Dodd (1934) and The Intelligent Investor (1949), have remained prominent throughout the past half century at the foundations of an investment strategy known as “Value Investing”: the identification and purchase or sale of stocks in relation to their intrinsic value. For this leadership, he is referred to as the “Dean of Wall Street” (Graham 1996) and the “Father of Financial Analysis” (Irving & Milne 1977). Graham's two other books, Storage and Stability (1937) and World Commodities and World Currency (1944) were logical extensions of his unwavering focus upon intrinsic asset value, as they explained why and how to provide money a foundation in essential commodity price and supply stabilization. In a 2007 paper on The Monetary Economics of Benjamin Graham, Columbia Univerity economist Perry Mehrling observes:
"For Graham himself, the disconnect between the world of money and the world of goods was fundamentally a source of macroeconomic investment risk that could upset any amount of careful security selection by the conservative value investor. Graham wanted a money that would remove uncertainty about the value of money from the investment decision by aligning the price of money with its intrinsic value. (Mehrling 2007)"

Through the depression of 1920-21 and The Great Depression of the 1930s, Benjamin Graham observed that even well-managed banks and investors ultimately depend upon coherence in the monetary system. In our own time, the relative stability or failure of various banks through the global financial shocks of 2008-09 demonstrates the benefits of adherence to core operational banking principles (Bank for International Settlements 1997, 2001). But Graham emphasized the importance of a more basic value principle: that the currencies the central and commercial banks deal in should be genuinely liquid in the sense of being reliably convertible into useful physical commodities, which depends upon reasonably stable price and supply.

Graham's original macroeconomic proposal attracted the interest of many leading economists of his generation, among them J.M. Keynes (1938), F.A. Hayek (1943), N. Kaldor (1964) and M. Friedman (1951), and his ideas were circulated at the International Monetary and Financial Conference, Bretton Woods, New Hampshire in 1944. Keynes and Friedman rejected Graham's proposal on practical grounds, while Hayek and Kaldor both supported it as the reasonable way forward. Their vigorous debates subsided with the passing of that generation, and it has almost been absent from applied or academic economics in recent decades. But markets and money around the world are again in the midst of redefinition. In these circumstances, Graham's monetary proposal bears reconsideration as a way to reconnect money to tangible reality, to tame fluctuations in commodity supply, demand and price, and to harness market forces in the public interest.

Graham developed his initial ideas on commodity price stabilization during the market disruptions of 1920-21 that followed the end of World War I (Kahn & Milne 1977). As a 26-year-old newly-hired partner at the Wall Street firm Newburger, Henderson & Loeb, he reasoned that what was needed was a general mechanism to contain speculative commodity price volatility during a bull market, and to accommodate surplus capacity during a bear market.

Graham's early thoughts on currency were influenced by coverage in the New York Times (4 and 6 December 1921) about an innovative proposal to the US Goverment from industrialist Henry Ford. Ford was proposing way to finance completion and operation of the massive Wilson Dam project and nitrate plants at Muscle Shoals on the Tennessee River in Alabama. The megaproject had been started in 1918 near the end of the First World War, but work had been stalled due to the post-war market crash of 1920-21. Debate was underway in Congress to finance the project through government debt, by authorizing the issue of $30 million in Treasury bonds. A front page article in the New York Times on 4 December 1921 reported that Ford had presented an unsolicited proposal he claimed would demonstrate a way to eliminate the need for government debt and interest obligations on major public works projects, and instead provide a flow of money to government as well as underwrite the purchasing power of the currency. Ford wanted a 100-year lease on the Wilson Dam project and the nitrates plants, and to finance construction and operations he asked that the Treasury issue, and loan to his firm, a special currency in the amount of $30 million backed by the federal government's ownership of the natural resource being used, and the capital infrastructure being built. He explained that his firm would use the new currency to pay wages and supplies, and in addition, pay to the Government an annual 4 per cent rent throughout the life of the lease. After 25 years, he observed, the full amount of the special credit issue would be retired, and yet the government would continue to receive annual rent payments from his firm throughout the remaining 75 years of the lease. Ford asserted: "We shall demonstrate to the world ... first the practicability, second the desireability of displacing gold as the basis of currency and substituting in its place the world's imperishable natural wealth". In detailed coverage on 6 December, Thomas Edison, the inventor and a close friend of Ford, supported the proposal and commented: "The whole country has an abiding faith that Ford will not operate it to get every dollar possible out of it for himself. He will make it an American institution, doing the greatest good for the greatest possible number."

In the following months, Edison further took up the cause. On 20 February 1922 the New York Times reported that Edison had sent a letter to bankers and economists throughout the country to solicit their views on a generalized system whereby the US Government would "issue currency to build the dam and ditches and construct the power station ... backed by actual value which continues forever". In the letter, Edison expanded upon Ford's idea by proposing that the federal government should also set up warehouses for the storage of basic commodities, against which the Treasury or the Federal Reserve Bank would "issue 50 per cent of the market value of these commodities in money (such market value being based on the average selling price over a period of twenty-five years and so endorsed in the certificate)" (New York Times, 20 February 1922). The other half of the value would be provided as an equity certificate that the producer could choose to hold, sell, or use as collatoral. Combining Ford's and his own ideas in a fixed proportion, Edison proposed:
"...say 90 per cent of our currency was issued for one-half of the value of necessities of life and 10 per cent issued on projects like this land and irrigation operation, not separately, but both back of a uniform currency of one character and made unchangeable by amendment to the Constitution by popular vote, so that this ratio of 90 per cent and 10 per cent could not be changed. ... Do you think that civilized countries have from experience and knowledge of economics, reached a stage where they could drop the fiction, unreality and chaotic state of a currency based on gold, and adopt a money back of which is real useful wealth of twice the value of the money issued? Must we always remain on a gold basis? Is it beyond the wit of man to devise any equivalent method? (New York Times, 20 February 1922)"

The Times dedicated a full page in its 16 July Sunday Special Features section to Edison's “commodity-dollar” concept (Garrett 1922a; 1922b), followed by a letter to the editor by Edison the following Sunday in which he further pointed out:
“What is really wanted is a single currency based entirely on mortgage loans with twice the value of the par of the bank note behind it. To do this it would be necessary to withdraw greenbacks and gold and silver notes, put these in the vaults and then issue a single type of currency representing loans on property of twice the value (average value over a period of years); all such loans to be self-liquidating through the warehouse plan with commodities, including gold and silver (Edison 1922).”
The Ford-Edison plan for the Wilson Dam project was rejected by Congress, as were other competing private sector proposals, while the Alabama megaproject became mired in a nationwide controversy over public versus private ownership and operation of major infrastructure facilities. Only a decade later was project construction resumed by the New Deal's publicly-owed, debt-financed Tennessee Valley Authority.

Benjamin Graham's own first formal draft of a commodity-reserve and currency mechanism inspired by Edison's idea appeared ten years later, after the crash of 1929. In 1931 Graham had begun meeting with an informal group convened weekly by the President of the New School for Social Research in Manhattan, to discuss possible solutions to the economic crisis. He circulated to the group a short mimeographed paper (1931) advocating four ideas, one of which was his first description of “The Commodity-Reserve Plan”. He developed this idea more formally, and submitted an article entitled "Stabilized Reflation" to The Economic Forum quarterly journal (1933). Unknown to Graham at the time, a similar concept had also been published in a 1932 pamphlet "How to Stop Deflation" by Professor Jan Goudriaan (1932) of Rotterdam. The two soon exchanged regular correspondence.

There were two central elements to Graham's concept. The first part he outlined as a distributed public sector corporation to intervene in the market to stabilize prices for commodities that meet the requirements of being both economically important and easily storable. Graham acknowledged this storage system to be a variant of the ancient commodity reserve systems maintained in China, Peru, Egypt, and Rome, as well as in 17th century France. He observed:
“This twofold mechanism of storage and price control was formally set up some five centuries after Confucius under the name of the “Constantly Ever-Normal Granary (Chen 1937). With considerable variations as to price policy, and with more or less serious interruptions due to political conditions, the system of the Ever-Normal Granary has existed in China 'in nearly all ages from 54 B.C. to the present time' (1937: 30).”

The second part of Graham's proposal was a currency that would represent a standard composite unit of the reference commodities on a model more sophisticated than Edison's plan. The commodity unit “is monetized directly in the same way that gold and silver have been coined into currency (Graham 1937: 226).” At this time Graham was apparently unaware of the earlier “tabular standard of value” by W.S. Jevons (1877: 328ff; 1884: 123ff), who proposed:
“Might we not invest a legal tender note which should be convertible not into any single commodity, but into an aggregate of small quantities of various commodities the quantity and quality of each being rigorously defined? ... This scheme would, therefore, resolve itself practically into that which has long since been brought forward under the title of the Tabular Standard of Value. (Jevons 1877 328)"

However Graham did note that a half century earlier, Alfred Marshall recommended to the Royal Gold and Silver Commission of 1888 the issuance of currency against reserves of gold and silver in a fixed ratio, referred to as symmetalism.Graham comments that “The advantages of this arrangement were acknowledged by all the members, but the suggestion was rejected because too much time would be needed to gain popular support” (Graham 1937: 267n). Marshall was aware that his proposal amounted to "an extensive reconstruction of our whole monetary system" (Marshall 1996: 208). But Graham found Marshall's mechanism suitable to a multi-commodity unit, stating:
“It will be recognized that the underlying principles of symmetalism and of our commodity-unit currency are identical. Our monetary proposal may therefore be defined as symmetallism applied to a fairly large group of basic commodities, instead of to gold and silver (Graham 1937: 216).

In Graham's design, a federated network of commodity-reserve banks would buy and sell standard commodity bundles to maintain the average price of the standard composite commodity unit, accepting that relative prices amongst the commodities vary. When the average market price of the basket of commodities reaches a low threshold, reflecting a shortfall in effective demand, the Treasury or commodity-reserve banks purchase commodities for storage in the defined standard proportion. They purchase in sufficiently large quantities to stop the average price from falling further, issuing the commodity-reserve currency as payment, instead of fiat or gold-backed money for these transactions. When the average market price of the basket of commodities reaches a high threshold, the Treasury sells commodities from storage in the defined standard proportion in exchange for any type of money . “Such an arrangement would amount simply to putting the State in the role of a shrewd long-term operator in basic commodities, blessed with an unlimited bank roll” (Graham 1937: 39).

Graham's initial list included 23 major exchange-traded commodities:
Wheat (all grades)
Barley (No. 2)
Cocoa (Accra)
Corn (No. 3 white & yellow)
Cottonseed oil (yellow refined)
Oats (No. 3 white)
Rye (No. 2)
Sugar (granulated)
Cotton (middling upland NY)
Silk (Japanese 13-15)
Wool (raw)
Flaxseeds (No. 1)
Rubber (smoked sheets)
Cottonseed meal
Tobacco (avg farm price + 10%)
Coffee (avg import price)
Tallow (inedible)
Copper (electrolytic)
Lead (refined)
Tin (straits)
Zinc (prime western)
Petroleum (Kansas-Oklahoma price at well + 20%)
The currency unit, once issued, would circulate as money in normal trade. Graham distinguished his plan from Edison's, which was carried out by means of non-interest-bearing loans against individual commodities (Graham 1937: 226). While Graham considered Edison's plan unworkable, he noted:
“We must add, however that Edison's monetary philosophy was much broader than his specific plan. ... We should like to claim for our plan that it carries out the fundamental concepts of the great inventor, which his own plan would fall short of realizing (Graham 1937: 226).”

With the worsening economic situation in 1931, the stabilization of basic commodities price and supply had become a common objective amongst economists and politicians in many countries. The US Government expressed early interest in Graham's proposal:
Ben gave a copy of his plan to a friend of [NY Governor] Franklin D. Roosevelt. The friend sent word that it was receiving serious consideration in Washington. Nothing happened for two years. Then Louis Bean, economic adviser to Secretary of Agriculture Henry Wallace, visited Ben. The Commodity Credit Corporation had been formed to support farm prices and had acquired large quantities of farm products. Bean thought that Ben's plan might be used as a method of financing the food surpluses, with the added benefit of stimulating prices, in general, by increasing the quantity of money in circulation. (Kahn & Milne 1977)

Within days of US President Roosevelt's 1933 inauguration, Henry Wallace carried the Agricultural Adjustment Act through Congress with the objective of balancing supply and demand for farm commodities so that prices would support an acceptable level of income for farmers. However Graham was very disappointed that his plan was not incorporated into the Act. Instead, the Agriculture Department imposed a new tax on value-added of secondary processors as a way to raise funds for purchasing major commodities for a national storage program. But this Act also authorized the Agriculture Department to pay farmers directly to take land out of production, and even to pay them to destroy crops and livestock, in a series of desperate measures to prop up prices that violated the intrinsic value fundamentals of Graham's proposal. The interest, and yet evident failure of US government decision-makers to implement the structure of his proposal compelled Graham to press forward with an entire book on the topic:
Ben continued to work on the plan, compiling a sizable statistical base to lend credence to its practicality. Finally he was satisfied, publishing in 1937 the book Storage and Stability. ... Bernard Baruch discussed the plan most enthusiastically, and Ben provided him with a set of galley proofs so that Baruch could speed these to President Roosevelt. (Kahn & Milne 1977)

During this period Graham also exchanged several letters with John Maynard Keynes, but the two had very different ideas about how large-scale commodity storage should be financed. The plan advocated by Keynes shared an aspect of Edison's warehousing plan of 1922, wherein the countries of the British Commonwealth would make government-subsidized warehouses available for commodity stockpiles. But in Keynes' plan the commodities would remain entirely in the ownership of the depositors in an open market (Keynes 1938). This approach was not unique, indeed it became central to commodities management in many countries through the Second World War.

The centrepiece of Graham's proposal went beyond storage to direct monetization of commodity-reserves units in currency as Ford and Edison advocated. In Graham's view, the only genuine liquid assets are inventories of generic commodities, because these are immediately useful in material economic life. Purely monetary instruments such as cash, securities and receivables are artificial constructs of the financial system which, according to Graham, “have no support in concrete realities and which depend for their validity on the persistence of a fundamentally irrational mass psychology” (Graham 1937: 10-11). Cash itself is only as liquid as its purchasing power. This is why, in Graham's plan, inventories of useful commodities are, in substantive fact, the most liquid of assets, and therefore the logical basis for a currency (Mehrling 2007). Graham explains:
In an oversimplified phrase, we may say that we are placing the farmer and other raw materials producers in the same category as the owners of gold mines, by according the same monetary status to basic commodities as a group that has long been conferred on gold. But this extension of the coinage privilege is not proposed as a favor, or as a relief measure, or as a convenient means of stimulating business by creating more purchasing power. It is based on the considered principle that the primary raw materials are really primary throughout the economic sphere. Not only do all the material things of life begin and develop with them; but the complex and delicately interrelated organization of business receives its first impetus and its controlling tone from this area. The economic flow has a definite entropy, or permanent direction, from raw materials outward. Thus our identification of the monetary medium with raw materials as a group is merely a logical synthesis of the two primary elements out of which our elaborate economic fabric is constructed. (Graham 1937: 229)

Graham's currency proposal was intended to be more than a substitute for central bank notes. Like Ford and Edison, he intended it to be a reasonable replacement for the gold standard. He states: “We define the dollar as equivalent to the commodity unit, in the same way that it was formerly defined as equivalent to 23.22 grains of pure gold….It does not seem an exaggeration to say of the commodity-backed dollar that it will be essentially sounder than the gold dollar”(1937: 146). He states:
"The commodity-backed currency ... will constitute ‘sound money’ in the old-fashioned and conservative sense. In the conflict between ‘hard money’ and ‘soft money,’ ... we are definitely on the side of an automatic, self-generating and self-liquidating currency, free of management and political pressure. Our currency ... is opposed to the group comprising unsecured currency, government-bond-secured currency and all ‘secured’ currency where the intrinsic value of the security is definitely less than the money issued against it (Graham 1937: 146)."
In Graham's view, currency is less than genuine if it is said to be “secured” by gold certificates, but yet is not convertible into them, and especially when the certificates themselves are not actually convertible into gold. In any case, he deemed gold convertibility inadequate as a currency base because of its mainly speculative monetary value. According to Irving Kahn and Robert Milne:
“The plan's chief merit was in providing a link between the real world in which major commodities are used and the world of money creation. It also avoided the problem of trying to stabilize the price of a single commodity, because each commodity could fluctuate in price, becoming a larger or smaller component of the "market basket" reflecting supply and demand changes” (Kahn & Milne 1977).

Professor Perry Mehrling (2007) emphasises that Graham sought to align his proposal closely with core banking principles: that the currency must be both convertible and self-liquidating. The functional mechanism of Graham's currency operation is, according to Mehrling, a generalization and socialization of the "commercial bills" instrument. Everyone is familiar with postal money orders and bank drafts, and now in the digital era, the role played by PayPal and Google Checkout. These are examples of commercial bills: short term, trusted instruments authenticated by the issuer, that direct payment of a stated amount of money to a particular person, or to the bearer. Commercial bills of all types are said to be self-liquidating because upon delivery of the goods or services, a stated amount of cash redeems the bill, which then goes out of circulation. Mehrling points out that Graham's generalization is to create a special currency that is essentially a system of commercial bills representing a standard number of units of each of the 23 reserve commodities, backed by auditable warehouse receipts. Whereas normal commercial bills are used when something is sold in the private market and remains to be delivered, Graham applies this instrument to major exchange-traded commodities that have not been sold as such, but instead are kept off the market and delivered into registered warehouses.

For his part, Keynes' 1938 paper briefly mentions “an experimental purchase by the Bank of Sweden of certain stocks of commodities as a form or central banking reserves alternative to gold, a policy which could be made a means, if widely pursued, of flattening out the fluctuations of prices (Keynes 1938: 454)”. However the Swedish case did not amount to a generalized commodity-based currency. Graham mentions the work of British economist Paul Einzig (1936) who discussed “using basic commodities as part of the monetary reserve” (Graham 1937: 216). It was in this period also that Frederick Soddy (1934) was publishing ideas for energy-based money.

In his second book in 1944, Graham also credits the work of Jevons: “It is clear that Jevons had not developed in his mind the full implications of his own idea. He had not evisaged the apparatus by which actual convertability between currency and commodities would be effected” (Graham 1944: 70). Graham's own formulation of a tabular standard served as the data framework that guides the federated network of commodity-reserve banks in their purchase and sale of standard commodity bundles to maintain the average price of the standard commodity unit, while the relative prices amongst the commodities would vary.

As the currency based on commodities with intrinsic value is issued, an equivalent face value in fiat or gold-backed central bank currency is taken out of circulation. For this reason, Graham's plan would not increase the money supply, and is therefore not inflationary. It would steady the price level of the target commodities in a downturn by taking surplus commodities off the market, while increasing the purchasing power of primary producers by paying them in the new currency. Once issued, the commodity-reserve currency circulates as a medium of exchange in normal trade, or it can be saved. In an upturn, the currency is always redeemable in terms of the standard proportions of 23 commodities held in storage.

Graham therefore describes a counter-cyclical general mechanism under which the quantity of commodity-reserve money will automatically expand in a deflationary depression, and it will automatically contract as prices rise during expansion. The plan therefore limits inflation in boom times in two ways:
Commodity supplies from the reserves respond to an expansion in effective demand; and,
Since warehouse sales constitute direct demonetization, money supply contracts as currency units are redeemed for standard exchange-traded commodities.
Graham's approach would permit the expansion of credit, but only the growth of commodity reserves could expand the supply of money. This reverses the usual pro-cyclical approach of central banks. Mehrling observes:
"Graham appealed to orthodox banking principles, but ... completely reversed their supposed logical implications. So far as I can see, this line of argument is completely original to him, but there is clear indication that it was sparked by his reading of Berle and Pederson’s 1936 Liquid Claims and National Wealth" (Mehrling 2007).

Through the early 1940s several different bases were considered for currencies, including a return to the gold standard, some variations of Marshall's gold-silver symmetalism, fiat currency, and various tabular standards. Graham worked further to adapt the commodity-reserve proposal for use at the international level, and excerpts from his forthcoming World Commodities and World Currency (1944) were submitted by the US Committee for Economic Stability to the International Monetary and Financial Conference at Bretton Woods, New Hampshire, in July 1944, along with insightful supporting rationale for the monetary plan by Princeton University's Frank Graham (1942, 1944), and F.A. Hayek's overview A Commodity Reserve Currency (1943) . Through the pages of The Economic Journal in the same year, Keynes expressed interest by rejected the plan as too complex and not mature enough in its design to set up in the short time available:
"I have no quarrel with a tabular standard as being intrinsically more sensible than gold. My own sympathies have always fallen that way. I hope the world will come to some version of it some time. But the opinion I was expressing was on the level of comtemporary practical policy; and on that level I do not feel that this is the next urgent thing or that other measures should be risked or postponed for the sake of it. ... The right way to approach the tabular standard is to evolve a technique and to accustom men's minds to the idea through international buffer stocks. When we have thoroughly mastered the technique of these, which is sufficiently difficult without the further complications of the tabular standard and the oppositions and prejudices which this must overcome, it will be time enough to think again” (Keynes 1944: 429-430).

The Graham proposal did not advance at Bretton Woods. The reasons expanded upon briefly by Keynes included the practical matter that it was considered Keynes also mentioned political reasons: submitting national monetary policy to the discipline of an international standard was considered to infringe on sovereignty; and, the vested interests in gold were too powerful to be resisted.

Keynes had been proposing a different international currency unit to be called the bancor. He supposed that its nominal value should be fixed in terms of gold, and that national currencies should set their par values in terms of the bancor. New bancors would come into existence as overdrafts to cover imports, or in exchange for central bank gold deposits with the International Clearning Union. Gold would be a reserve in Keynes' plan, but the bancor would not be redeemable in gold (Bordo & Eichengreen 1993: 30). Nor could bancors ever be withdrawn from the system; they could only be transferred from one account to another. (Robinson 1943: 163)

The outcome of the Bretton Woods Conference was a politically imbalanced agreement that assigned to the US dollar the role that Keynes sought for the neutral bancor. It made other national currencies convertible into US dollars, and the dollar convertible into gold at a price managed by the US Federal Reserve. The International Monetary Fund (IMF) would depend upon reserves of national currencies established by member quota. The system that emerged therefore did not address commodity price stabilization, nor offer a broadly-based connection between money and commodities, nor did it conform with conservative banking principles of convertibility and self-liquidation. Graham and a network of colleagues persisted with the suggestion that the standard commodity unit would complement the new Bretton Woods mechanisms. Without some variant of this solution, he believed, gold-based money still lacked any intrinsic value definition in relation to the material economy:
To the fullest extent possible the monetary uses of gold should be conserved, and the limited currency values inherent in silver should not be rejected. But in addition to these, the world can use its basic durable commodities as monetary reserves. By doing so it can contribute mightily, and at a single stroke, to solving a host of major post-war problems: the promotion of wide expansion; the attainment of reasonable price-level stability; the establishing of useful and non-disruptive stockpiles; the creation of more adequate purchasing power in the hands of farmers and of raw-materials nations; and the facilitating of foreign trade, or trade-balance settlements, and of stable currency values. (Graham 1944: viii)

In an article two years after the Bretton Woods Agreements entitled Money as Pure Commodity, Graham further emphasized the importance of intrinsic value for the monetary system:
"The proposal for commodity reserve currency marks a new departure in the monetary field. Its object is not so much to give commodity value to money as to give monetary value to commodities. There should be a real advantage in having our money backed in part by basic commodities --"objects applicable to the purposes of life", for the generally bad history of unsecured and inconvertible paper money suggests that physical backing and convertibility are desirable attributes of money. But the novel monetary aspect of the commodity reserve idea is that it is designed to benefit the producers of raw materials by giving them as a group the economic advantages now enjoyed by producers of gold and silver; namely, an unlimited market at a level price for balanced production. As a derived effect, it is designed to protect the entire economy from the baleful results of recurrent wide fluctuations in the market price of basic commodities. (Graham 1947)"

The variety of objections to the concept of a commodity-reserve currency were described in a detailed paper by Milton Friedman (1951). He explained that the currency system proposed by Graham would be too complicated and expensive to administer, too open to political interest, and in any case, unlikely to achieve greater price stability than the simpler gold or fiat solutions. Instead Friedman highlighted the “strong emotional appeal” and “widespread popular support” that brought favor to gold as the culturally most pragmatic base for currency. This is not to say that Friedman did not find the functional aspects of the concept attractive. Three decades later Friedman himself proposed the use of the tabular standard for financial futures targeting, using price indices to cover the entire array of goods without requiring direct convertibility:
“The goal of a monetary system that provides assurance against fluctuations in purchasing power is ancient. One frequently suggested and repeatedly rediscovered proposal is to attain that result by linking the currency unit to a price index. That device was proposed in the nineteenth century by W. Stanley Jevons and by Alfred Marshall, who named it a tabular standard. It has been repeatedly rediscovered. In Marshall's version it required no governmental action except the issuance of a price index number, something which has of course become widely prevalent. ... Despite the theoretical attractiveness of this idea and the absence of any effective hindrance to its adoption, it has never become popular. ... The recent explosion in financial futures markets offers a very different possible road to the achievement of the equivalent of a tabular standard through private market actions. This possibility is highly speculative-little more than a gleam in one economist's eye.” (Friedman 1984: 165-166)

In the 1960s, however, Nicholas Kaldor, Jan Tinbergen and Albert Hart (Kaldor 1964) directly pursued and extended the commodity-reserve tabular standard for currency in their joint proposal to the United Nations Conference on Trade and Development (UNCTAD). They suggested an alternative type of commodity-based bancor, merging Keynes' policy concept of a neutral global reserve currency with Graham's intrinsic value mechanism based on commodity reserves. This generated support within UNCTAD, and considerable discussion in the pages of academic journals. But their more elaborate scheme failed to attract significant commitment amongst monetary economists or financial executives. (Since that time, many authors (eg. Streeten 1982: 3) have confused the Kaldor-Tinbergen-Hart composite commodity currency proposal for a bancor based on Graham's model for commodity reserves with Keynes' composite currency bancor mechanism based ultimately on gold. As pointed out earlier, however, Keynes opposed the Graham proposal at Bretton Woods.) In the late 1960s when the IMF found it necessary to create the special-purpose currency referred to as "Special Drawing Rights" (SDRs), this system was based on a basket of major currencies similarly to Keynes' original “bancor” proposal, not on the alternative commodity-reserve bancor described by Kaldor and colleagues.

The international gold-based US dollar standard adopted at Bretton Woods began to falter in the 1960s, and was unilaterally abandoned by the American government on 15 August, 1971. In a retrospective upon Graham's death in 1976, Columbia University economist Albert Hart expressed disappointment that there was not yet a functional commodity-reserve currency proposal approaching implementation, and that few policy-makers had really understood its essentials (Hart 1976). Nor did the more fundamental idea to associate the price of money with the material things of life find fertile ground in applied or academic economics through the 1980s and 1990s. Increasingly, the very intent of the commodity-reserve concept for counter-cyclical moderation was being opposed by a new generation of academic and public sector economists who idealized the unfettered market (Targetti 1992: 315), but yet who were willing to grant central and commercial banks quasi-public authority to create and manage national money supplies based upon virtual units of credit obligation issued by central banks, extended many times over by commercial banks through a fractional-reserve rule.

Under the new debt-based fiat system, liquidity became little more than a market lubricant, and money was not intended to represent any intrinsic meaning relative to the material basis of life. Indicators such as M0 (cash in circulation), M1 (equal to M0 plus demand deposits), and M2 (being M1 plus savings deposits) have been taken as reflecting business and consumer liquidity. However M3 (M2 plus large time deposits, institutional money-market funds, short-term repurchase agreements, and other monetary assets) came to be considered a superfluous measure in a fiat currency world. In March 2006 the U.S. Federal Reserve stopped publishing data for M3, as well as the totals for large-denomination time deposits, repurchase agreements (RPs), and Eurodollars. The Fed issued a very brief statement to explain why:
“M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years. Consequently, the Board judged that the costs of collecting the underlying data and publishing M3 outweigh the benefits (United States Federal Reserve. 2006a; 2006b).”
Like the abandonment of the gold standard in 1971, this unilateral move had global significance because of the primary role of the US dollar in international trade. Numerous other central banks followed suit, but not everyone agreed that M3 was useless. An editorial in The Economist magazine observed at the time:
“Financial deregulation and innovation made the money supply harder to interpret, let alone control. As the link between money and prices seemingly broke down, central banks scrapped money targets and instead focused on inflation directly. Or as Gerald Bouey, a former governor of the Bank of Canada, once said, 'We didn't abandon the monetary aggregates, they abandoned us.' Today, America's Federal Reserve barely glances at money. Indeed, from this week it will stop publishing M3, its broadest measure of money. ... It is true that the two Ms move in step for much of
the time, but there have been big divergences. During the late 1990s equity bubble, for example, M3
grew faster; over the past year, M3 has grown nearly twice as fast as M2. So it looks odd to claim that M3 does not tell us anything different. The Fed is really saying that it doesn't believe money matters. (The Economist 2006)."
Various statisticians have continue to provide competent estimates of US M3 (Williams 2009; Bart 2009). Their figures illustrate that by the first quarter of 2008, whereas the annual growth rate in M1 was about 0.5 per cent, and M2 was 7 per cent, the rate of growth in M3 had reached 17 per cent.

Graham and F.A. Hayek both warned that a pure fiat currency system untethered to physical assets would allow for limitless issuing of currency units by government and the financial institutions, each of which are inevitably susceptible to pressures from all sorts of organized interests. But even they might have been surprised to witness the eventual hyper-extension of pseudo-liquidity enabled through the “derivatives” market in the 1998-2008 decade, a form of money that is outside even the orbit of M3 and beyond the scrutiny of public accountability. Lacking any connection whatsoever with intrinsic value, derivatives are complex algorithm-based financial contracts for future payments, wherein the amounts eventually to be paid out are contingent upon a set of synthetic indicators, such as interest rates, stock prices or currency values. Value and risk assessment for derivatives investment has relied heavily on David X. Li's Gaussian copula function (2000), but observing unwarranted market faith in his work, Mr. Li himself cautioned in 2005: "The most dangerous part is when people believe everything coming out of it. (Whitehouse 2005)” Warren Buffet was calling out the “mayday” distress signal as early as 2003:
"Charlie and I are of one mind in how we feel about derivatives and the trading activities that go with them: We view them as time bombs, both for the parties that deal in them and the economic system. ... The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Knowledge of how dangerous they are has already permeated the electricity and gas businesses, in which the eruption of major troubles caused the use of derivatives to diminish dramatically. Elsewhere, however, the derivatives business continues to expand unchecked. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. ... We try to be alert to any sort of megacatastrophe risk, and that posture may make us unduly apprehensive about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal. (Buffett 2003: 13-15)”

The phrase "point of no return" comes from aviation. It refers to the point on an aircraft's journey when there is insufficient fuel to reverse direction and return to the place of origin. Metaphorically it describes the point in any sequence of events when it is no longer possible to reverse course or stop the process. The world's most senior monetary and investment authorities had difficulty responding to early warnings that this unfetterred global financial market was expanding without proper regulatory support structures. By 2008, three quarters of global liquidity was in the derivatives market, which had ballooned in nominal size to more than 800 per cent of global Gross Domestic Product (Bank for International Settlements 2008). “Group-think” confidence in Li's algorithm and its variants meant that "ratings agencies like Moody's—or anybody wanting to model the risk of a tranche—no longer needed to puzzle over the underlying securities. All they needed was that correlation number, and out would come a rating telling them how safe or risky the tranche was. (Salmon 2009)”. This badly engineered machine began falling from the sky in late 2007, and central banks worldwide have been responding by hurriedly typing into their computers additional trillions of currency units based upon nothing more than inter-generational credit, while political leaders and business executives do their best to keep the material economic engine running on vapor. By 2009, many governments resorted to selling massive IOUs to their central banks, a method referred to as “quantitative easing” that had previously been considered extreme. A summary of current US monetary strategy is provided in a recent speech by James Bullard, President of the Federal Reserve Bank of St. Louis:
“By expanding the monetary base at an appropriate rate, the Fed... can signal that it intends to avoid the risk of further deflation and the possibility of a deflation trap. ...the Fed’s balance sheet has grown at an astounding rate since September of last year, and the monetary base has more than doubled. But the new, temporary, lender-of-last-resort programs are blurring the meaning of this picture. A temporary increase in the monetary base, by itself, would not normally be considered inflationary. The increase would have to be expected to be sustained in the future in order to have an impact. Much, but not all, of the recent increase in the balance sheet can reasonably be viewed as temporary. The outright purchases of agency debt and MBS are likely to be more persistent, however, and it is these purchases that may provide enough expansion in the monetary base to offset the risk of further disinflation and possible deflation. The quantitative effects of policy actions in this new environment are more uncertain than normal, but nevertheless these less-conventional policies can have every bit as powerful an impact on the economy as changes in the intended federal funds rate (Bullard 2009).”

Many doubt that the US Federal Reserve and other central banks will be able to reverse the process that has been set in motion, and conclude that money and markets around the world are due for an overhaul. Possibly our own generation deserves the same reprimand as R.M. Hutchins delivered in his 1933 Commencement Address at University of Chicago:
"The gadgeteers and data collectors, masquerading as scientists, have threatened to become the supreme chieftains of the scholarly world.... As the Renaissance could accuse the Middle Ages of being rich in principles and poor in facts, we are now entitled to inquire whether we are not rich in facts and poor in principles." (Hutchins 1933, In Rosen 1979: 3)

The global macroeconomic trajectory of the past decade has shaken the confidence of some in debt-based fiat money, and has led to new global interest in linking the value of money to physical assets (e.g. Zencey 2009). From some quarters there are calls for a return to some form of gold standard, but these are countered by concerns that a gold base extended with a fractional reserve rule simply masks fiat money with a gold veneer, while a fully convertible gold system is too restrictive.

The commodity reserve currency concept was re-introduced to the top levels of international monetary discussions in March 2009 by Zhou Xiaochuan, Governor of the People's Bank of China. In a major address entitled “Reform the International Monetary System” Zhou stated:
“The desirable goal of reforming the international monetary system, therefore, is to create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies. Though the super-sovereign reserve currency has long since been proposed, yet no substantive progress has been achieved to date. Back in the 1940s ...[it was] already proposed to introduce an international currency unit ... based on the value of 30 representative commodities. Unfortunately, the proposal was not accepted. The collapse of the Bretton Woods system ... indicates that the ...[commodities] approach may have been more farsighted. (Zhou 2009)”
Zhou's speech misattributed the composite commodity standard to Keynes, when the statement should have cited Graham, Hayek and F. Graham, if not also Edison before them, and Kaldor, Tinbergen and Hart after. It should be understood, however, that Zhou's interest in the commodities money concept itself has a long and autonomous history in ancient China's Ever-Normal Granary to which Graham pointed. Indeed, the State Reserve Bureau (SRB) created in 1953 under the Ministry of Land and Resources remains active today "adjusting the market, coping with emergencies and guaranteeing security of resource supplies" (MoneyNews 2006). The “Parity Deposit Unit” (PDU) was introduced in June 1949 by the new People’s Bank of China to denominate retail bank deposits and bonds in relation to four basic commodities: rice, wheat flour, cotton cloth and coal. And it has long been common for producers in China to obtain bank loans mortgaged against commodity reserves, and for the state to subsize storage costs (Alibaba Group 2009).

With the benefit of hindsight, it is time to consider afresh how we might align money with intrinsic value, to respect core banking principles, to concern ourselves with sustainable commodity supply, demand and pricing, and to harness market forces in the public interest. Professionals in economics, finance and banking ought to read the intrinsic value currency proposals, reflect on them, and participate in re-fashioning some variants of them suitable to our life and times, and through at least the next half century. There is more than one legitimate pathway forward, and as Walter Pitkin remarked in the midst of the Great Depression years:
"There are a few right ways of doing anything (some say there is only one, but that is not true); and there are a million easy ways of doing each thing wrongly"(Pitkin 1935: 16).

In each case, we need to understand the problems that require resolution, and consider what criteria are needed for sound money and coherent monetary systems going forward.

Part 2: Why Graham's Proposal Did Not Prevail

There are several reasons that Graham's proposal for a currency based on commodity reserves was not adopted at the Bretton Woods Conference or afterwards, despite a considerable volume of published literature on the concept from the 1930s through the 1970s. While his idea has continued to inspire occassional papers, for the most part it has been relegated to a back shelf in the archives of monetary economic theory. Following is a summary of a dozen issues highlighted at the time in published literature by Keynes and Friedman, with some additional problems raised in the present author's informal discussions with S. El Serafy and J. Waugh. It offers a representative, but not a complete list of issues that must be resolved or answered in any pragmatic reformulation of the Graham's currency proposal. In any case, a genuine effort to reformulate Graham's concept for 21st century requirements must begin by addressing the shortcomings of the original plan, whether real or perceived.
2.1 Flexibility. The commodity-reserve system as originally proposed was too rigid from an economic policy perspective, according to Keynes (1944), who insisted that monetary authorities must retain a sufficient degree of flexibility to manage within a well-structured monetary system. "The immediate task", explained Keynes in 1944, "is to discover some orderly, yet elastic method of linking national currencies to an international currency, whatever the type of international currency may be (Keynes 1944).”

2.2 Organizational Prerequisites. The development of governance systems together with management regulations and standards for large buffer stocks must logically precede the introduction of any realistic commodity-based tabular standard for currency. Inadequate governance and management can lead to unintended consequences, leaving producers room to game the commodity-reserve and therefore the currency system, for example, by deliberately overproducing commodities that the state would then be obliged to purchase. (Keynes 1944) The information requirements to manage an international network of commodity reserves strictly enough to support a trusted composite commodity currency unit, are excessive. Standardized auditable records would have to be maintained by thousands of registered warehouse personnel under diverse national and state/provincial jurisdictions. The formal administration and auditing program would be enormous. Annual warehouse testing and certification would be required against common quality parameters, and even the process of arriving at equivalent testing and certification criteria appropriate to different climates would be a challenge.

2.3 Sovereignty. Keynes objected to the international version of Graham's currency proposal, insisting that domestic prices and wages are "a matter of internal policy and politics" that cannot be submitted to an international authority. "We must solve it in our own domestic way, feeling that we are free men, free to be wise or foolish." (Keynes 1943, 1944) National sovereignty must be respected in monetary affairs.

2.4 Comprehesiveness. A commodity-reserve currency system necessarily includes just a small, unrepresentative proportion of an economy's output, because it is limited to commodities that can be easily "standardized, traded in broadly based markets, supplied under reasonably competitive conditions, and be physically and economically storable" (Friedman 1951: 230-231). With such a limited scope, the commodity-reserve standard cannot be expected to yield stable commodity prices across the board . Graham states that “the commodities which will actually enter into the physical units will be limited to the grades tenderable under the standard commodity contracts of the various commodity exchanges” (1937: 281). This approach is challenged when competitive innovation in the agrofood sector emphasizes qualitative differences amongst alternative cultivars and production methods. Moreover, since the 1996 introduction of proprietary genetic modification and crossbreeding processes under patents, which Graham could not have anticipated in his own day, each patented genetic strain is considered a unique commodity in jurisdictions where this class of process patents is recognized. An international, national or regional commodity reserve becomes hopelessly complicated by the legal requirement to document the pedigree of each shipment to the reserve, the logistical requirement to store distinct strains separately, the procedural requirement to obtain the patent-holder's contractual approval for each re-sale from the reserve, and the information requirement to monitor compliance with all of these.

2.5 Free Market Neutrality. Inequality in the natural distribution of resources that are included in the monetary system can have destabilizing impacts on international trade. Friedman also notes the potential for disruptions if a government holding a significant proportion of in-ground resources or produced commodities were to impose trade controls. He believes: "The commodity-reserve scheme could operate internationally and produce stable exchange rates if, and only if, the various countries were willing to permit complete free trade in the commodities in the bundle and to submit their internal monetary and economic policies to its discipline. (Friedman 1951: 231) "

2.6 Sectoral Equivalency. Any commodity reserve system exists to manage supplies and prices against a set of priorities or objectives related to industry and society. Former World Bank economist Salah El Serafy has commented that when the additional step is taken to directly link the money supply to the reserves, the choice of which commodities to include or exclude becomes more critical and controversial in terms of impacts due to the higher level of control to be imposed on particular commodity sectors. The Graham proposal would have hade differential impacts on various sectors. (El Serafy 2009)

2.7 Predictability. Only a relatively small proportion of total production of the identified reserve commodities are added to or released from the reserves in any given period. Any countercyclical effects on the quantity of money would be scaled to the impacts of variations in output of the selected commodities (Friedman 1951: 231), potentially leading to greater monetary volatility. For example, agricultural production is dependent upon erratic forces determining growing conditions. In a situation where reserves are low, changes in the relative cost of production could aggravate price instability. Even a rise/decline in prices of complementary and competitive non-reserve commodities can lead to a substantial decrease/increase in the supply and price of reserve commodities, which would carry through as a decrease/increase in the stock of money (Friedman 1951: 231) Therefore pivotal monetary phenomena may not be forseeable.

2.8 Motivation. A commodity-reserve lacks the cultural foundation and relative transparency of gold that helps to protect a gold-reserve system against excessive manipulation. Friedman explains:
"A commodity currency can be a bulwark against political intervention and attain acceptance by many countries only if the popular support for it is sufficiently strong and widespread to make 'tinkering' with it politically dangerous, and to overcome differences in national interests and attitudes. Gold has had, and may still have, this kind of support. Commodity-reserve currency does not. (Friedman 1951: 231) "

Graham's commodity-reserve currency concept, being a somewhat complicated technical solution, would be less able to harness popular resistance to politically or economically motivated intervention that could compromise the monetary system's integrity, including the potential for indirect influence via activities that affect the cost of commodity storage (Friedman 1951: 231) . In 1944 Keynes commented that Grahams's original plan had no hope at all of competing against the overwhelming political influence of the gold interests leading up to Bretton Woods:
"This does not strike me as an opportune moment to attack the vested interests of gold holders and gold producers. Why waste one's breath on what the Governments of the United States, Russia, Western Europe and the British Commonwealth are bound to reject? (Keynes 1944) ”

2.9 Responsiveness. Once the currency is based on commodity reserves, the sunk cost of accumulating and maintaining the system is bound to impose an inertia on monetary decision-making. Stability might well be an intended goal, but it remains important to acknowledge the trade-off: monetary authorities forego the agility and technical efficiency that a fiat system provides to respond to changing economic circumstances (Friedman 1951: 231).

2.10 Physical Security. Providing physical security to the certified reserve warehouses is difficult and expensive, and would become absolutely critical when the reserves are backing the currency. Reserves must be guarded against thieves, vandals, and economic enemies, and in the case of agricultural commodities, infestation by rodents, insects, fungus, moulds, harmful bacteria, and humidity.

3. Building Upon Graham's Essential Concept

3. 1 A Call for Collaboration
Benjamin Graham grounded Value Investing (VI) upon the identification and trading of stocks in relation to changes in their intrinsic value. Few today are aware that he also dedicated himself to intrinsic value in macroeconomics to reduce uncertainty about the value of money in investment decisions. Part 1 of this paper briefly reviewed the origins and features of his commodity-reserve currency proposal to safeguard the intrinsic value of money through physical backing and convertibility. Part 2 explained why the plan he and others developed was not adopted. It remains in this paper to suggest a practical path forward based upon Graham's wise counsel, suitable to today's macroeconomic challenges. The present economic crisis is sufficiently profound and complex that the monetary work of Graham should be given urgent, open and thoughtful consideration.

If the central principle of the currency proposal floated by Graham is not to flounder again on the same shoals, then everyone on deck ought to be peering into the murky waters to report back potential channels through which it might be successfully steered. It is hoped that this paper stimulates reflection and discussion of Graham's essential purpose, and that it may also attract timely collaboration to develop, prototype and test a family of practical options inspired by his monetary work, and by those who inspired him. It may be acknowledged from the outset that any innovative monetary proposal will raise objections. A document from the Food and Agriculture Organization (addressing an entirely different context) expresses the riddle we face, and the open participatory approach required:
“Complex problems do not have fixed solutions because each solution brings its own problems, depending on the perception of the stakeholder and the boundaries of the system involved. Many methods have been developed to address these issues of complexity. Most of the methods are based on participatory approaches that take into account the perceptions of the different stakeholders at several levels of the system hierarchy in order to make interpretations, classifications and solutions acceptable.” (Food and Agriculture Organization 2001: Chapter 3)

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