Excellent Video with Ron Paul and his Economic Ideas

[TheEvilDetector]

http://www.youtube.com/watch?v=bCLQhwphq48

[LibertyEagle]

This was very good. However, I'm still confused. I always thought that Dr. Paul thought we should reinstitute the gold standard. However, recently I have heard him say that there were problems with it and that he wasn't saying to go back to it, but to allow competition for money in the marketplace.

Did I understand him correctly?

What were the problems? Not enough gold?

[TheEvilDetector]

From: http://www.bullnotbull.com/archive/gold-standard-2.html

"Lee Rogers: Absolutely. Now, how do you think we should restore our monetary system to something more honest? Do you believe we should go back to a gold & silver standard as was proposed by the founding Fathers of this country? Or do you think we should just go to printing US notes instead of them being printed by a private Federal Reserve? What do you think we should do in order to restore an honest monetary system?

Ron Paul: Well, we should just go to the Constitution and look for our guidance. It says only gold and silver can be legal tender. When they debated this at the Constitutional Convention, they debated paper. They had [already] had the runaway fiat currency experience of the Continental dollar, and they didn't want that to happen [again], so they said there will be no "emitting bills of credit" -- which is paper money. So we'd have to go back to gold and silver coins.

But I don't like the notion that we have to return to exactly what we had in the 19th century, because there were some shortcomings. We had bi-metalism, so the government went and fixed the ratio of gold to silver. And markets don't [like that]. Governments can't set a market price. So you should either turn it over completely to the marketplace and let private money evolve, and use gold and silver, or if the government was to be involved, they should issue a currency and define it as a weight of gold or a weight of silver, but not fix the ratio. That to me would be a better standard than we had in the 19th Century. "

[LibertyEagle]

or if the government was to be involved, they should issue a currency and define it as a weight of gold or a weight of silver, but not fix the ratio.

Ok, he seems to be saying that we would equate a dollar to a certain amount of gold and silver. I don't get the "fix the ratio" part though. What is he talking about here?

[TheEvilDetector]

I guess it means making certain amount of gold equal to a certain amount of silver, rather than them being independant of each other.

Read this: http://www.dani2989.com/gold/goldsirverratio180027092004gb.htm

It should help make things more clear.


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I think that initially silver dollar and gold dollar would be equivalent, eventually they would not due to difference in availability in the raw gold and silver around the world.

This may lead to confusion for there may be 2 prices for items. Overall it is better than the fiat system right now.

There may even be more different kind of dollars around due to different metals that could back them.

Of course, people can if they choose to, do all their transactions in just one type of currency to avoid confusion (since its legal tender).

The recommended ratio (non-enforceable of course) of one commodity money to another would be publicised by congress monetary committee daily (in the interest of a stable economy ie. no inflation or deflation).

The banks would certainly switch peoples notes and coins around for them into any type of commodity money they want, people could have separate gold, silver or other metal accounts, such as platinum at the bank.

The banks would have 100% backed account balances and if they wanted to loan money out to make extra profits they would be limited on drawing from a pool of term deposits (ie. those moneys the depositor pledges not to touch for a given amount of time in return for certain rate of interest). That way 100% backing is maintained.

So apart from earning the interest difference between loan and term deposit rates the other way the bank could make money is by levying account keeping fees as well as some other fees such as transaction fees or dishonour fees etc.



100% honest system, fair to the poor, middle and the rich.

Thats basically how I see this competing commodity money system working.

[LibertyEagle]

Oh, ok. Thanks.