Posted on 01/04/2011 9:49:48 AM PST by Toddsterpatriot
In the new Congress, Ron Paul (R-Texas) will head the House committee that oversees the Federal Reserve. Thanks to the title of his book, we know he wants to end the Fed and paper money. But what will he replace it with? The short answer: metal-based currencies.
I recently participated in a hour-long radio debate on the Progressive Radio Network's Freedom News Hour with two Paul supporters who wanted to take me up on the challenge of being proven wrong in my disagreements with seven of Paul's points about the Fed. I really enjoyed this debate and learned some important things.
Of these, none is more significant than what my debate partners believe Paul would do if he could end the Fed. According to them, Paul isn't ready to go directly back to the gold standard. Instead, he wants to keep the dollar and add three more currencies. Those would be based on gold, silver and copper.
(Excerpt) Read more at dailyfinance.com ...
That'll be $22, 22.90 in copper, 22.16 in silver or 22.47 in gold.
I guess the Americans who can't add or subtract now will have no problem converting between 4 different currencies.
Bad idea ping!
..but this price is only good for the next five minutes... oops, the price changed, it is now 22.60 in copper, 22.59 in silver and 40.78 in gold... oh wait, South Africa just dumped a bunch of gold into the system, the prices changed again.. I guess we'll need a 'Federal Commodity Reserve' to stabilize the prices and prevent outside influence from effecting our currency because our overall infrastructure is no longer based on mining and producing these materials.
Quick, change all the price tags in the store.
A dungeons and dragons currency system! Gary Gygax would be so proud!
Unsurprisingly, Paul's supporters appear to be just as crazy as he is.
Fiat money under the Federal reserve has been considerably more stable than the gold backed dollar of the 1800's.
Yes, you read that right! The fiat dollar has not been as good of a long term store of value. So if you're goal is to hoard wealth in your wall or mattress for 100 years, then metal will serve you much better.
But if your goal is currency stability, so that the business engines of wealth creation can perform well, the fiat dollar has significantly outperformed gold.
Goldbugs point to the dollar having lost 70% of it's value in 80 years. But did you know the gold backed dollar did that in just 3 years? The gold backed dollar saw inflation as much as 25% in a single year, and years with deflation almost as bad.
Since the great depression, we've had almost no deflation. And inflation has been relatively moderate most years, far better than gold's performance.
Of course with the Fiat dollar, the year to year changes are always going in the same direction, a slow march of inflation. That does mean the dollar is not a good long term store of wealth. But it's far better than gold for year to year business decisions and economic stability.
-—But did you know the gold backed dollar did that in just 3 years?-—
Which three years?
[ A dungeons and dragons currency system! Gary Gygax would be so proud! ]
So are banking transactions going to require the mastery of 20 sided dice?
1862 to 1864. The CPI increased 14.2% in 1862, 24.8% in 1863 and 25.1% in 1864. In total the CPI went from 8.54 in 1861 to 15.23 in 1864 an inflation of 78%.
Source = Measuringworth.com
We would be better off backing our currency off of the Megawatt Hour.
That would mean that opening a Nuclear power plant would be like mining gold, and energy is always useful.
What’s the difference? It’s now 3.15 in gallons of gasoline.
From Article 1, Section 8:
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
Therefore all Congress has to do is exercise it's lawful authority to regulate the value of any coinage. For instance Congress could legally declare that a one dollar bill is legally exchangeable for 1/1000th of an ounce of gold or 1/25th ounce of silver at any Federally chartered bank.
This would be far more in line with the wishes of the Founding Fathers than this idiotic paper money shell game they're running now.
You do believe in the Constitution, don't you Toddster?
Gold’s value changes very little. It’s the fluctuations in the paper value that cause the variances spoken of in the article.
Proof? The value of an ounce of gold in 1900 would buy you a decent suit. The same is true today. The same argument goes for most fungible commodities: their cost in real terms has remained the same or has dropped over time.
It’s paper money is dropping in value that makes inflation possible. Get rid of fiat currency, and inflation could not exist.
How ‘bout just a commodity based currency?
Just use a big ‘basket’ of commodities from bread to iron to determine the value of the dollar?
You're obviously mistaken. Again.
Therefore all Congress has to do is exercise it's lawful authority to regulate the value of any coinage.
Yes, they could certainly do that. It's a bad idea, but they can do it.
You do believe in the Constitution
I do. I also believe Ron Paul is a clown.
Of course it can. Check out the results of Alexander the Great dumping two centuries of accumulated Persian taxation into the market all at once, or the results of the Spanish exploitation of the mines of Mexico and Peru. Both being changes between the relative values of gold and "stuff."
In a gold based currency, the value of a unit of gold is determined by the value of "all the stuff" divided by the number of of units of gold. If the amount of gold in the market grows faster than the amount of "stuff," gold will lose in value, or to put it another way, inflation occurs.
Conversely, if the amount of "stuff" grows faster than the amount of gold, deflation occurs as the gold becomes more valuable per unit.
All going to a gold standard does is take the determination of whether or not inflation (or deflation) occurs out of the hands of bankers and bureaucrats. This may be a very good thing.
Unfortunately, whether inflation occurs or not is then in the hands of miners and scientists. Anybody want to bet the entire world's economy that somebody can't develop a method to cheaply extract gold from seawater or convert lead to gold?
So, how functional will it be for you to buy something with your 1 oz gold coin?
How about a hotdog that costs $1 ? Will you just buy 1400 of them? You could hand out the other 1399 to your Paultard friends.
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