Revaluing the Economy: The Case for an Exergy-Backed Currency

Disclaimer: LLM-Supported Writing

Preface

In 2009, I wrote a two-part essay titled Revaluing the Economy: Money as Stored Energy. This essay explored the conceptual foundations of an energy-backed monetary system, providing an early vision for aligning economic value with real-world value. While the original publication is no longer available, the archived PDFs of Part 1 and Part 2 remain accessible.

Around the same time, I attended The First Draft of History conference in Washington, DC, a joint event hosted by the Aspen Institute and The Atlantic. At this conference, I posed a question to guest speaker Alan Greenspan (Chairman of the Federal Reserve) about what he foresaw as the next phase of currency beyond fiat, much as fiat had replaced gold. His response fell back on conventional wisdom, failing to engage with the premise of the question. Later, I asked Carol Browner, then Administrator of the EPA, about the role of energy storage as a critical infrastructure component to fully leverage intermittent renewable energy sources. While she acknowledged progress in the field, her response lacked recognition of just how pivotal energy storage would be — not only for the energy sector but also for rethinking monetary systems in a world increasingly defined by energy rather than traditional scarcity-based valuations.

The article that follows represents an enhanced and upgraded version of those original essays. The ideas within them now feel especially timely, as we stand at the threshold of profound economic and technological shifts. There is a growing appetite for radical change, and even the political will to enact it — though currently driven by actors whose priorities may not align with the public interest. Figures like Trump and Musk have harnessed this moment of transition, but their approaches remain constrained within existing paradigms. What if we rethought the system entirely? This article seeks to explore that possibility.

Beyond addressing the systemic weaknesses of fiat, an Exergy-Backed Currency (XBC) is even more crucial in light of the coming post-labor economy driven by the rise of Artificial General Intelligence (AGI) and eventually Artificial Superintelligence (ASI). As automation and machine intelligence render traditional employment structures obsolete, we must rethink the very foundations of economic exchange, value distribution, and human livelihood. If productivity is no longer tied to labor, then the financial system must reflect new metrics of economic contribution. By anchoring money to exergy — the fundamental capacity for work — we create a system where value is measured not by outdated labor dynamics but by the real energy and efficiency available to sustain human civilization and promote human flourishing in an age of intelligence and automation.

This piece presents a refined vision for an Exergy-Backed Currency (XBC) as a viable alternative to fiat, offering a sustainable and resilient monetary paradigm that aligns with the emerging realities of the 21st century.

The Limits of Fiat and the Need for a New Monetary Paradigm

The global economy runs on fiat currency — a system where money holds value because governments decree it so, rather than being anchored to any intrinsic resource. (The Latin word fiat is literally translated as “let it be done.”)

While this has enabled economic expansion and policy flexibility, it has also introduced systemic fragility: inflationary cycles, speculative distortions, and an ever-growing detachment from real-world productive capacity. Fiat’s limitless issuance fuels wealth inequality and financial crises while exacerbating environmental degradation by incentivizing short-term profit over long-term sustainability.

At the heart of this issue lies a fundamental disconnect: money, as it currently exists, is not tied to the real capacity of human civilization to do work. The issuance of currency is dictated by political and financial institutions rather than being constrained by physical and economic reality. This has led to economic bubbles, resource depletion, and financial instability.

The question we must now ask is: What should money actually measure?

A radical yet logical answer emerges: exergy — the portion of energy available to perform useful work before entropy dissipates it. Unlike fiat, which can be printed at will, exergy represents the real, tangible foundation of economic productivity. By linking currency issuance to exergy availability, an Exergy-Backed Currency (XBC) offers a monetary paradigm that aligns financial systems with the fundamental laws of physics and sustainability.

The Evolution of Money: From Commodities to Energy

Throughout history, money has evolved to reflect humanity’s economic needs:

• Barter Systems: Early societies exchanged goods and services directly, limited by the “double coincidence of wants.”
• Commodity Money: Gold, silver, and salt functioned as stable stores of value, tying economic exchange to tangible resources.
• Fiat Money: Governments decoupled money from physical assets, enabling rapid economic expansion — but also speculative instability.
• Exergy-Backed Currency: A new stage in monetary evolution, linking currency issuance to usable energy reserves to ensure economic stability and sustainability.

Each stage of monetary evolution has reflected humanity’s dominant economic structure. With AGI likely eliminating the necessity of labor as the basis for income, a currency system must evolve to reflect energy and resource productivity as the new foundation of value that allows all of humanity (not just a select few) to reap the benefits of millenia of ancestral toil — from slaves to entrepreneurs, from farmers to merchants, from artisans to tycoons.

If past economic systems have been built upon scarce and rivalrous resources, XBC is a step toward a non-extractive economic model built upon abundance and positive sum relations, one that values sustainability and natural resource efficiency over artificial financial engineering and human labor efficiency.

Mechanisms of an Exergy-Backed Monetary System

1. Currency Issuance: Money Tied to Exergy Availability

In an XBC system, currency is issued based on the measured availability of exergy across industries. This prevents excessive money supply expansion and ensures economic growth is rooted in actual productive capacity.

• When exergy availability increases (due to efficiency improvements or new energy sources), currency issuance expands.
• When exergy availability declines (due to resource depletion or inefficiencies), monetary supply contracts to prevent inflationary overheating.

Unlike fiat, which allows unchecked speculation and artificial expansion, an exergy-based system maintains a self-regulating economic equilibrium that reflects real-world productivity.

2. Distributed Energy Generation & Net Metering: Democratizing Wealth

This model creates unique and important economic incentives. Current fiat systems concentrate wealth in financial institutions and centralized utilities. An exergy-backed system disrupts this by rewarding distributed energy generation and net metering.

• Decentralized Energy Ownership: Households and communities that generate renewable energy (via solar panels, wind turbines, or small hydro) receive XBC for their net exergy contribution.
• Net Metering in Monetary Policy: Excess energy fed into the grid increases local liquidity, ensuring financial empowerment at a grassroots level.

3. The Sustainability Coefficient (SC): A “Karat” System for Energy Valuation

Of course, these incentives must be regulated to ensure they capture the real “cost” that is often externalized. To prevent an “energy rush” that prioritizes destructive resource extraction, XBC implements a Sustainability Coefficient (SC):

• SC 1.0–0.8: Renewable energy (solar, wind, hydro, fusion)
• SC 0.8–0.6: Hybrid energy (biomass, geothermal, nuclear with safe waste disposal)
• SC 0.6–0.4: Transitional fossil fuels (natural gas, high-efficiency coal)
• SC 0.4–0.2: Carbon-intensive fossil fuels (traditional coal, oil)
• SC < 0.2: High-pollution extractive methods (tar sands, deforestation-based biofuels)

By weighting monetary issuance toward sustainable energy, XBC actively discourages environmental degradation while incentivizing clean energy adoption.

4. Exergy-Backed Energy Storage: The Incentive to Solve Intermittency

Importantly, XBC also explicitly ties economic incentives to energy storage development, both in furtherance of, and because of the above sustainability coefficient model:

• Stored exergy increases monetary issuance, making investment in battery technology (e.g., lithium-ion, solid-state, flow batteries) financially attractive for distributed markets (e.g., at-home).
• Hydrogen and Gravity Storage Markets: By backing exergy reserves, XBC makes long-term large-scale storage solutions viable economic assets (e.g., hydro).
• Demand-Response Integration: Households and industries managing energy peaks and troughs receive financial incentives through dynamic XBC pricing.

This ensures that financial growth aligns with long-term energy resilience, solving intermittency without relying on extractive, short-term fossil fuel subsidies.

A Vision for the Future: Toward a Post-Scarcity Economy

With the rise of renewable energy and eventual fusion breakthroughs, an exergy-backed system transitions from scarcity-driven economics to a regenerative, abundance-based model. This paradigm shift enables:

• Universal High Income (UHI) pegged to exergy, ensuring economic security and human flourishing as opposed to current proposals for UBI (Universal Basic Income) which can often trigger fears of unintentionally creating a dystopian all-consuming welfare state.
• Decentralized energy ownership, empowering individuals and communities rather than monopolies.
• An economy that measures real human progress, where prosperity is tied to sustainable and automatable productivity rather than speculative financial expansion (e.g,. Wall Street as legalized and professionalized gambling).

By integrating AI-driven automation into an exergy-based economy, we create a financial model that remains robust in the face of rapid technological shifts. An exergy-backed currency is uniquely positioned to handle a post-labor society by ensuring that economic security and human flourishing are linked to energy availability rather than jobs that no longer exist. In this way, XBC not only solves the problems of fiat but also offers a forward-looking framework for navigating the most profound economic transformation in history.

Conclusion: A Monetary Framework for the 21st Century

The Exergy-Backed Currency (XBC) represents more than an alternative to fiat — it offers a foundational shift in how we define and measure economic value in a way that aligns with actual human values. By aligning money with the real capacity to do work, we can create a resilient, self-regulating financial system that ensures economic security and promotes human flourishing, while ensuring environmental sustainability.