Market cap is simply the value of outstanding shares of a company as set by per share trading price. It has absolutely no direct relationship to the true value of a company. But it's difficult to see the per share trading price not being influenced by the market's consideration of the company's inherent value.

Outstanding shares of a company can change any day based on funding desires of the company.

But none of that has anything to do with the value of a monetary unit.

So its more like determining the market capitalization of a company by multiplying the number of its shares by the most recent transaction of its stock? The actual worth of a company could be more or less than its market cap. Or am I misunderstanding you?

When the Federal Reserve was created, there was a requirement of a gold reserve equal to 40 percent of the dollars in existence. That reserve requirement eventually went to zero (There is a chapter devoted to the Federal Reserve in my novel, The Golden Pinnacle, which may be the most interesting way I know of to acquaint one's self with the case against central banking. See post above for links). The problem with any legislation attempting to link the number of dollars with any sort of benchmark like GDP is that the legislation can be changed, and the government calculates the benchmark. One thing we know from history is that whenever the government controls the money, they depreciate it, because they have every incentive to do so. Monetary depreciation is a hidden, never-voted on tax. The government gets to spend the money first, before the depreciation is manifested throughout the economy, registering in higher, inflated prices. Also, monetary depreciation devalues debts, and since governments are almost always debtors, they benefit at the expense of their creditors. The monetary mechanism should be taken out of the hands of government completely, and private market money, probably bank notes backed by precious metals, would take its place. As Daniel Durand, hero of The Golden Pinnacle said: "Honest recognition that a deposit is a loan and privately issued money back by gold would be true innovations."

If you haven't got my book, The Golden Pinnacle, I would urge you to do so. It has a chapter, Fool's Gold, in which the hero, Daniel Durand, testifies against the Federal Reserve Act. He lays out the case against central banking and warns of its consequences. It is available as a book from Amazon and on Kindle and Nook. The links are:

book: http://www.amazon.com/The-Golden-Pinnacl...

Kindle: http://www.amazon.com/The-Golden-Pinnacl...

Nook: http://www.barnesandnoble.com/s/The-Gold...

But they do create numbers out of thin air, and they pick and choose what measures go into the GDP in order to predetermine and justify desired policy and actions.

The free market is the best determiner of the value and supply/demand of a monetary unit, whatever that monetary unit is carried by. The argument for gold and silver is the comparative scarcity and human's long and historic love of it. Other commodities are also usable, i.e. barrel of oil, etc though those are more subject to variability

Can you think of any base statistic--government or otherwise that might be "truthful" enough to serve as viable basis for the purpose? The Fed shouldn't be allowed to just keep creating more and more dollars out of thin air. How are they valuated? its like floundering around after a ship wreck trying to find something that floats. I would think the GDP would be better than nothing. They can't just create goods and services out of thin air can they?

The GDP is as phony a measure as unemployment.

I believe the fastest way to neuter the Fed would be to eliminate the legal tender laws. I have written on this before http://hallingblog.com/understanding-the...

Can you think if a better way to decentralize the power? Looters respond to power and wealth. The banking and credit system must be recreated with no central power that can (through credit creation or lack thereof) manipulate and destroy private enterprise and government.
We 'financial conservatives' always want to force borrowers to repay their debts to banks. However, it never was the banks' money that was loaned. It was created from nothing. The banks have no more right to it than the borrowers. The economy was overheated by foolish lending by banks. If it had been their own money at risk that foolish lending would never have occurred. The borrowers did contract with banks for the debt so they are partially at fault, but the banks running the system are even more at fault and are morally corrupt by enforcing borrowers to repay money that bankers never had nor earned. This system of piracy must be destroyed and the executives who manage it punished severely as an example. Con men are always attracted to this scheme. This system of piracy by lenders has been repeated throughout history, and it will continue to happen unless people are continually reminded via education what happens whenever there are no controls to prevent it.

Ron Paul introduced a bill to allow competing currencies - not exactly what I would suggest.

Agreed, the best thing for humanity would be multiple competing currencies. With current technology there is no reason to concentrate economic power in bankster looters. Currency exchange can be easy and electronic. Multiple private rating agencies can be watchdogs on valuation, which could be asset/earnings based. Perhaps SoCal has an entertainment basis, NoCal technology basis, FL tourism, and DC no basis (no value) at all.

I'll go with the US, just because I'm a patriot.

The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.

Vladimir Lenin

I take China.

No, it would add to the amusement.

Would it be wrong to start a pool?

Pop up some popcorn and stay tuned!

The race isn't over. China artificially pumps up its currency, our economy is wobbling, Japan isn't much better...who cracks first?

When Reagan was president the dollar was worth 250 yen (briefly.) Today 103. Down 59% versus the Japanese yen. If it wasn't the primary currency used for oil trading, how bad would it be?

That means we've won the race to the bottom with Japan to depreciate our currency.