The IKEA Coin

With Facebook launching the Libra, a privately issued coin backed by a basket of currencies, my old IKEA coin idea, which I floated a few years back, seems a good deal less wacky. The basic idea of the IKEA coin was that IKEA could issue a private currency backed by its inventory. Any large retailer could do this, so IKEA serves simply as an example.

The beauty of this would be that such a coin would be redeemable in IKEA products. This would be an advantage over irredeemable currencies such as state issued fiat. Furthermore, if IKEA was to expand its product offerings to include gold coins, the IKEA coin would be redeemable in gold. It could even be made directly convertible to gold if IKEA was to stock up on sufficient gold coins. Rather than a floating price relative to gold, the IKEA coin could be made equivalent to it, effectively reintroducing the gold standard.

If IKEA does this correctly, prices in IKEA coin will be very stable regardless of any price inflation going on in the rest of the economy. IKEA can in this way avoid much of the pain associated with weak currencies. Prices can be set in IKEA coin, and payment in other currencies will be made based on whatever the exchange rate happens to be when the customer arrives at the check out.

Once IKEA coin proves itself trustworthy, employees can be paid in it, and other stores will accept it. It will start circulating in the wider economy. The IKEA coin can in this way replace the currency of entire nations.

Now that Facebook has announced that it will issue its own private currency, it seems likely that other companies will do the same. This may well lead to a market driven race for domination, meaning that only the best and most convenient coins will survive. My guess is that if this happens, retailers like IKEA stand to win, certainly if they include gold and silver coins in their inventory.

Gold Sovereign

By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link