Skip to comments.What Ron Paul Wants: A Quartet of U.S. Currencies
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 ...
Those are two very great flaws, but I'd add another, the inflexibility on monetary policy relative to fiat money.
We were expanding fast as a nation territorial wise, but economically not so much..."The Long Depression is sometimes held to be the entire period from 187396."
Business and the market will eventually forecast and attempt to factor in future deflation or inflation. But deflation is insidious in that it incents people to hold capitol in currency instead of investing it. If you can make 3 or 4% by just holding on to dollars, why invest? Persistent deflation makes for an economy with a very inefficient use of capitol.
"Today's has the great flaw of debt piled upon debt until the current system comes apart because of???
But I don't see that as a limitation of the gold standard. There is nothing to stop congress from borrowing and promising that our children will pay the chinese back in gold. No monetary system will stop congress from borrowing. Only a determined citizenry can do that.
But they are bailing water right now, not fixing the holes. Congress is supposed to do that, and they haven't.
Exactly on Congress. But I don't see the Fed as really bailing water yet because of congressional spending. The FED has kept inflation down, telling me they aren't bailing due to congressional spending.
And while QE does raise inflation fears, I see QE as more a response to current unemployment situation. And I don't see the current unemployment as a result of congressional borrowing, but rather as the result of unwise trade policies, a failure to prepare for the oil price shock, and a failure to regulate derivatives and abusive credit practices.
The gold standard doesn't prevent any of this anyway because it doesn't count for 1.Changes in supply within the market, 2.People's perception of the value, & 3.Government manipulation of the value through controlling the production cycle. Having the currency based on a fixed point like this is even riskier as only one commodity needs to be manipulated to crash an economy.
Imagine a scenario where we have our currency based on gold, and ten years down the future, a South African mine hits a major vein and dumps 500 tons into our market. It would, over night, greatly devalue our currency. Or worse, what if there were a mining disaster in Peru and the courts there immediately froze all mining, with other countries following. Even a temporary freeze would impact the supply and affect value. The result of course would be the government comes in and manipulates the value by printing the 'gold notes' on credit to protect(sic) our economy.. and we have the federal reserve cycle all over again.
So if inflation, deflation, recessions and depressions must happen, why switch to a gold or metals standard? What possible advantage could it have? The only advantage I see is to the largest gold producer which is the Chinese and maybe the currency traders like Soros.
Dunno. How would the gold conversion work?
Gold, beyond a few industrial application, has value only in the mind. Its pretty and its rare but it has almost no utility.
That’s why I was thinking a commodity should be used instead.
I agree, I think a commodity based currency is very risky. And I see Ron Paul's 4 currency scenario as only slightly better. I still see the current Federal Reserve scenario as the best model I've seen.
It won't reign in congressional spending, but commodity based currencies wouldn't do that anyway. And we'd just legislatively pop off any commodity based currency at the first crisis anyway.
Which is why we had to leave the gold standard in times of crisis.
But I don't see the Fed as really bailing water yet because of congressional spending. The FED has kept inflation down, telling me they aren't bailing due to congressional spending.
That may well be true. I really don't know enough about the subject to argue against it.
I think that it is almost that simple. And that hard.
I think the term balanced budget implies to a lot of people not spending more than we take in. But really it implies you just have a plan on where you're going to get the money.
In other words, tax revenue forecast 10% + projected massive borrowings 90% = projected massive spending 100% is technically a "balanced budget".
We always need a balanced budget. But we need more than that. We need spending restraint and fiscal responsibility in the good times, so that we have means in the bad times.
I would never want to tie congress's hands from borrowing in case we have a war and we need to. I think a lot of people want a gold standard because they think it would stop congress from overspending. But only electing people of good character is going to do that.
That is one major concern I have that goldbugs are in denial of. It is too easily influenced by outside forces. The problem with promotion of the Gold Standard is it attempting to treat a cancer by giving someone a bath. Also, too many people believe that the fundamental issue we have with our economy is the Federal Reserve manipulating prices and are under the false notion that Gold can't be manipulated. You usually see misnomers like 'the price of a suit always cost one gold ounce no matter where the dollar is'. That is actually pretty false. Right now, the price of one ounce of gold could buy a high end bespoke suit while in 1899 it would by an every man Sears suit. For that example to be true, gold would only be $200/ounce now.
(I also believe a LOT of those pushing this are highly invested in Gold and are hoping for investment returns- Ron Paul had to disclose in the last election he had a lot of investments in Gold Mines).
The issue is basic economics, spending more than you produce. It is also Constitutional, with the government going well beyond its authorized purpose. The government is not a revenue producing entity so anything it spends must either have a specific governmental function (like defense) or in limited cases, infrastructure capital purpose. Everything else is like burning money.
In times of crisis, I would much rather my currency be based on oil or grain. Gold only has a perception value and in times of true crisis, could be worth nothing if no one found value in it.
In other words, if the SHTF, you can’t eat gold, you can’t shoot gold, and you can’t burn gold.
We also produce very little gold, so in times of crisis, we can be held hostage by external forces.
In the old days, walk in with an ounce of gold, walk out with $20. Walk in with $20, walk out with an ounce of gold.
Who is going to accept 20 different commodities (or store the commodities to exchange for the $20) when you want to get your $20?
Sounds a little clunky.
That prohibition is from Article 1, Section 9. The prohibition on Congress issuing paper money is found in Article 1, Section 8.
A major reason why gold is considered stable is because it isn't really used for anything else. It doesn't tarnish in its purest state, nor corrode. Put it in a fire, and it comes out gold. It does have its place as a store of wealth, but not as currency in an economy of scale anymore.
Its very clunky. But so is gold. I don’t have much use for an ounce of gold, other than its easier to carry than $1400 worth of cheeseburgers.
In any case, even if we used a gold standard, we’ll likely never handle the metal. Same thing for commodities.
All things considered, I guess it work something like a money market account. You have “shares” (dollars) of the commodity basket. If the quantity of that commodity basket goes up, so does the value of the shares.
To read later.
That’s a pretty good thought. My thoughts regarding tying it to a different set of commodities is that if you have a real SHTF situation, commodities like grain and oil would be directly bartered, increasing demand and thus, pulling up the price of the currency tied to it. It could actually result in a faster stabilization in one of these situations.
Are you imagining things again?
In 1933 we had circulating-----
Currency is about $917 billion. M1 is about $1824 billion. M2 about $8834 billion.
most money is created out of thin air by the Federal Reserve and supplied to banks electronically
Actually, most money is created out of deposits by banks when people take out loans.
So then currency and coinage is roughly 10% of M2. So much US currency circulates outside of America that this 10% is off too
So much US currency circulates outside of America that this 10% is off too
The 10% is not off. If you want to talk about how much of the money supply in the US is currency, the percentage is lower. I've seen estimates that between one-half and two-thirds of our paper money is held outside the US.
Where exactly in Article 1, Section 8 of the US Constitution is the specific, enumerated power for Congress to print or authorize the printing of paper money?
You do believe in the principles of “enumerated powers” as set forth by our Founding Fathers dont you Todd?
Where exactly in Article 1, Section 8 of the US Constitution is the proof for your original claim?
So when I deposit 100 dollars someone else borrows that 100 dollars and that creates money?
So what happens when I take the 100 I deposited out of the bank?
Did the bank have excess reserves of more than $100?
No. It only had my 100 dollars.
Then it couldn’t loan $100 in the first place. Only $90, with the 10% reserve requirement.
So if they loan out 90 and I come in and try to withdraw my 100 what happens?
They can borrow $100 in the Fed Funds market or they can sell the loan.
But I want my 100 now.
The Fed isn’t going away, so the hypotheses concerning alternate currencies are not relevant to anything.
As soon as you prove your original claim.