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Message:: [QUOTE="justafarmer, post: 713476, member: 3926"]In my post where I said "Commodity based money backed by fiat currency - sounds sorta like modified fractional banking to me. " I meant - "modified fractional currency" - my bad. The money supply of each form of currency would have to be maintained at a specific ratio something like (1 to 1) so citizens will easily move from one form of currency to the other. Each time the Libertad's value is increased - the fiat money supply would have to be increased accordingly. Else you'll have hoarding of one of the currencies. To make matters worse - since there is no downside banks would intuitively hold the majority of their reserves in the commodity based currency. As the pegged value of these reserves increase the banks will extend fiat currency credit accordingly. Once the commodity based currency reached it's high water mark any movement down in the price of the commodity on the world market would devalue the country's currency exponetially.[/QUOTE]