Issue: Economic: What is Dr. Paul's plan to move to sound money?

[coplinger]

What steps would Dr. Paul take to move from our current financial system to one based on sound, non-fiat money? How much constitutional authority does the president have to take these steps? Will legislation have to be enacted? Are there constitutional amendments involved? What does this mean for the future of personal debt, ie. mortgages, credit cards, etc? Is the plan to end fractional reserve banking altogether?

I understand the problems with our current system & the advantages of sound money, I am just unsure about how we get from here to there & what 'there' will look like once we're there.

[NMCB3]

My take on it is he plans to let commodity based money compete along side the Federal reserve notes. Trying to switch all at once would be a disaster. Letting sound money compete with worthless notes is the best way. Which money would you rather hold?

Edit to add; there is no need for an amendment. Although I think some legislation along the way would probably be necessary.

[MsDoodahs]

AHA!

Read this.

http://www.mises.org/money/2s7.asp

(I yielded in a very heated argument on sound money a few months ago because I didn't have THIS in my arsenal. Won't happen again!)

[qednick]

Didn't JFK actually manage to get United Sates Notes produced? Which were then withdrawn from circulation after his assasination? If so, how did JFK get it introduced?

[Brian Papke]

Right, then over time you phase out the Reserve Notes and thats when the real currency starts to gain a foothold

[Gee]

Gresham's Law, or "bad money drives out good", applies when the "good" and "bad" currency is of the same type. In other words, if silver dollars exist in today's world, no one will spend them. They are worth more, despite their price at $1, so its better to spend paper money which is worth the exact same (by law), and horde the silver (which has more real value). This happened a lot when people still used specie coins, in places such as Rome. As the government reduced the specie amount in the denarius (a coin), people stopped spending the older, more valuable coins, and instead used the newer, debased ones.

However, if the silver dollar is allowed to be priced as they should, it will have a proper exchange rate with a paper dollar, and will enter circulation again. So hard money, in today's world, could enter circulation, provided it had no laws or taxes and as fair exchange rate.

Edit: Wikipedia says: "Bad money is money that has a substantial difference between its commodity value and its market value, where market value is lower than exchange value".

[MsDoodahs]

Gee, that is the very part that I was missing!

(I should read more at Mises.org )

[qednick]

Actually, thinking about it... I think it's already authorized in the constitution so I don't know if it would need any further congressional approval. I believe the object of issuing United States Notes (as opposed to Federal Reserve Notes) is that they are issued by the government - not a privately owned bank such as the Federal Reserve.

[Mattsa]

I'm still not convinced that a return to a Gold Standard is the absolute answer

There just isn't enough gold in the world to support the level of economic activity that exists. 1oz of gold would become fantastically valuable! Maybe a silver backed currency is more realistic

And where is the USA going to get hold of all the gold to back its currency? A lot of it has been sold. Nobody even knows how much there is. There hasn't been an audit of gold reserves for decades. Some people even think Fort Knox is empty! Has all the gold has all been stolen by the banking system!?????

[NMCB3]

I'm still not convinced that a return to a Gold Standard is the absolute answer

There just isn't enough gold in the world to support the level of economic activity that exists. 1oz of gold would become fantastically valuable! Maybe a silver backed currency is more realistic

And where is the USA going to get hold of all the gold to back its currency? A lot of it has been sold. Nobody even knows how much there is. There hasn't been an audit of gold reserves for decades. Some people even think Fort Knox is empty! Has all the gold has all been stolen by the banking system!?????

Gold and Silver is what is authorized by the Constitution. The free market would work out all the details if the government would just step out of the way. High Gold and Silver prices would just mean more incentive to mine for it.

A Good book to read is "What has the Government Done to Our Money. The case for a 100% Gold Dollar" By Murry Rothbard. All your questions will be answered there.

[billv]

I'd actually thought about how cool it would be to use a private currency. You'd trade your dollars for these notes and your dollars go to purchase real assets which back the currency. My brother and I discussed this once. It's not legal right now to coin your own money is it? Which seems very anti-freedom as I should be able to accept whatever form of currency I wish to facilitate market transactions.

[Mattsa]

Gold and Silver is what is authorized by the Constitution. The free market would work out all the details if the government would just step out of the way. High Gold and Silver prices would just mean more incentive to mine for it.

A Good book to read is "What has the Government Done to Our Money. The case for a 100% Gold Dollar" By Murry Rothbard. All your questions will be answered there.

The problem with mining gold is it is very very destructive for the environment

There are all manner of toxins produced as a byproduct of gold mining

And when you have exhausted your own reserves..................you can always invade another country and steal theirs, a bit like the Spanish stealing all the gold from the Incas.

The problem with gold is........the supply is finite. There ain't much of the stuff around!

[NMCB3]

I'd actually thought about how cool it would be to use a private currency. You'd trade your dollars for these notes and your dollars go to purchase real assets which back the currency. My brother and I discussed this once. It's not legal right now to coin your own money is it? Which seems very anti-freedom as I should be able to accept whatever form of currency I wish to facilitate market transactions.

Your right, in the early republic many forms of money were used. If the commodity unit is say silver, its value is by weight, so many different forms would do. Other valuable metals (gold for example) would trade at a certain rate with silver. This is how it has been done for much of human history. Whether the money was gold, silver, sea shells,nails or what ever. Fiat money is generally only good for governments (they can inflate and spend beyond their means) and special interest groups like bankers and defense contractors who have first access to the new money.

[MsDoodahs]

Is that called the Cantillon effect?

[NMCB3]

The problem with mining gold is it is very very destructive for the environment

There are all manner of toxins produced as a byproduct of gold mining

And when you have exhausted your own reserves..................you can always invade another country and steal theirs, a bit like the Spanish stealing all the gold from the Incas.

The problem with gold is........the supply is finite. There ain't much of the stuff around!

There is literally tons of gold around. I live in Alaska, and we are about to open up the biggest gold mine in the world. (thats on top of all the other monster gold mines around here) Other countries have lots of gold as well. Gold can be mined responsibly just as oil can be drilled for responsibly. I'm for the environment as mush as the next guy, but these hard-core enviro`s are strangling the freedom right out of us. You don`t have freedom if you don`t have property rights.

[Mattsa]

There is literally tons of gold around. I live in Alaska, and we are about to open up the biggest gold mine in the world. (thats on top of all the other monster gold mines around here) Other countries have lots of gold as well. Gold can be mined responsibly just as oil can be drilled for responsibly. I'm for the environment as mush as the next guy, but these hard-core enviro`s are strangling the freedom right out of us. You don`t have freedom if you don`t have property rights.

Yeah. I'm very very suspicious of the whole global warming thing.

They are using it as a way to raise taxes and create new legislation to curb our freedom

[Gee]

If the free market would be allowed to operate with regards to currency, what sort of backing to use would be moot, in my opinion. The market would provide a solution. However, that would take a lot of time to take effect... Cash registers, financial software, checks, and many other things in America are all set up for the dollar. Though I'm sure future currencies will all be electronic, it would still be a huge undertaking for stores to accept alternate currencies. I think it would probably only happen if the dollar was hyperinflated.

[Exponent]

Just a curiousity, how would taxes work within a system allowing private currencies? Would each taxing entity (city, state, whatever) have to decide each year what currencies they personally will accept, and how much each currency is worth to them? Would government taxing entities just be other entities in the free market system of determining worth? Or would they be more likely to accept money of one single type, at a rate that they deem appropriate, and require that tax payers convert enough of their personal funds to that currency (at whatever rate they can find, based on the free market) to pay their taxes?

Sounds somewhat messy. Then again, taxes right now are already messy, and I could a simplification of the tax system more than offsetting the above complications. And maybe it wouldn't be as complicated or messy as I'm imagining.

[ratsbew]

There is literally tons of gold around. I live in Alaska, and we are about to open up the biggest gold mine in the world. (thats on top of all the other monster gold mines around here) Other countries have lots of gold as well. Gold can be mined responsibly just as oil can be drilled for responsibly. I'm for the environment as mush as the next guy, but these hard-core enviro`s are strangling the freedom right out of us. You don`t have freedom if you don`t have property rights.

Yeah. I'm very very suspicious of the whole global warming thing.

They are using it as a way to raise taxes and create new legislation to curb our freedom

Yeah, I'm in the natural cycle group. I'm not a big fan of environmental regulation.

[qednick]

It doesn't matter what you use: gold, silver, seashells, goonibeads, etc. the free market will work itself out and balance in the end.

As for the environment: I'm on the fence on this because I'm sick of being lied to by the media.

[Bryan]

Just a curiousity, how would taxes work within a system allowing private currencies? Would each taxing entity (city, state, whatever) have to decide each year what currencies they personally will accept, and how much each currency is worth to them? Would government taxing entities just be other entities in the free market system of determining worth? Or would they be more likely to accept money of one single type, at a rate that they deem appropriate, and require that tax payers convert enough of their personal funds to that currency (at whatever rate they can find, based on the free market) to pay their taxes?

Sounds somewhat messy. Then again, taxes right now are already messy, and I could a simplification of the tax system more than offsetting the above complications. And maybe it wouldn't be as complicated or messy as I'm imagining.

Exponent, you're nailing the issue. The most important thing to consider on this is that the only reason why a money standard is necessary is for the forced payment of taxes which really isn't what freedom is about. So if forced taxation is eliminated it doesn't matter what backs up any particular currency because each individual has the liberty to not use it. Even then however, for practical reasons of trade it is advantageous to have some form of currency.

There are various debates and pros/cons of having a fiat currency (as we do now) vs. having one backed by a commodity (as we used to before Nixon closed the gold window in the '70s). Some argue that, if properly maintained a fiat currency can work quiet well, England had used the tally stick for over 700 years and it was nothing but a piece of wood. In the 1760s America used a fiat currency called Colonial Script which helped facilitate trade to make the colonies flourish. It worked well until the King decided that he wanted his taxes paid in gold. Some historians have argued that the American revolutionary war was not fought because the colonists did not want to pay any taxes, it was because gold was scares and it ended up costing too many goods to acquire. That actually highlights a potential issue with a commodity backed currency (such as gold or silver). If a currency uses a commodity where there is even a remote possibility of it being cornered then power and wealth get can get artificially and immorally controlled. In terms of "precious metals" silver is a much better bet due to its greater availability.

Excluding commercial applications of gold and silver (such as using gold to conduct electricity) I view the efforts of mining for gold and silver to be used for currency as a waste of human energy. Think about it, a bunch of people digging holes in the ground so they can have something they think is worthwhile. I personally have no need for gold or silver and in a free society I would not provide any goods or services for it or wish to acquire any currency backed by it, it's worthless to me, I would much rather have a currency backed with goods that I can use that have very long shelf lifes, use your imagination.

Then again, I wouldn't expect other people to not use gold and silver or a currency backed with it, this is after all what a free society is about. This then leads back to the question of, what should be standard? The answer is, there is nothing that could ever be made standard that would be fair to everyone. Recalling that the only reasons why we need a standard in the first place is for the forced payment of taxes it can be seen that the only real solution to the money problem and how to back it or not is to have no forced taxes which eliminates the need for a standard and works quite well in the promotion of a free society.

Please note, there is a huge difference between forced taxation (like an income tax) and paying for optional services such as the use of roads (which is a bit of a misnomer to call a tax). In a free society, one that we claim to uphold, there are always choices when it comes to money matters. Nobody ever said that freedom couldn't be messy at times, the alternative is forced conformity by an arbitrary authority.

Here is a piece Dr. Paul wrote on the subject:
Paper Money and Tyranny
http://www.house.gov/paul/congrec/co...3/cr090503.htm

[Bryan]

I'd actually thought about how cool it would be to use a private currency. You'd trade your dollars for these notes and your dollars go to purchase real assets which back the currency. My brother and I discussed this once. It's not legal right now to coin your own money is it? Which seems very anti-freedom as I should be able to accept whatever form of currency I wish to facilitate market transactions.

Yes, it is legal. The Constitution authorizes Congress to print money but does not grant them a monopoly to do so. There has been an alternative currency in the US backed by silver since 1998 called the Liberty Dollar:
http://www.libertydollar.org

Unfortunately, the US Mint doesn't understand the Constitution and is now trying to end this freedom and shut-down Liberty Dollars. The US Mint is basing a lawsuit on the fact that "under the Constitution (Article I, section 8, clause 5), Congress has the exclusive power to coin money of the United States and to regulate its value." As stated here:
http://www.usmint.gov/consumer/index...ction=HotItems

However if we actually read the Constitution at Article I, section 8, clause 5 we see:

"The Congress shall have Power ... To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;"
http://www.usconstitution.net/const.html#A1Sec8

There is nothing at all that implies "exclusive power" so how in the world the US Mint can make this claim is beyond all belief.

[qednick]

Bryan, thanks for pointing out the Liberty Dollar thing - that's the first I'd heard of it and am grateful for you alerting me about it!!

Yup, it is possible to use almost anything. The Romans used to pay their soldiers with salt - hence the term "salary" that we use today - although that would be impractical nowadays though I like the silver idea personally.

[Gee]

Recalling that the only reasons why we need a standard in the first place is for the forced payment of taxes it can be seen that the only real solution to the money problem and how to back it or not is to have no forced taxes which eliminates the need for a standard and works quite well in the promotion of a free society.

I've always understood, and wikipedia's entry agrees with me, that our legal tender laws state that it is illegial not to accept the Fed's notes for payment of debts (to a creditor) and taxes. I am pretty sure these laws were passed when we went of the gold standard and some people refused to accept payment in fiat money.
Edit: Here it is:
http://www.treas.gov/education/faq/c...ender.shtml#q1

[Bryan]

Gold and Silver is what is authorized by the Constitution.

The way I'm reading it, the Constitution only prohibits the states from using anything other than gold or silver as currency.

Section 10 - Powers prohibited of States
"No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts"

Whereas, Section 8 - Powers of Congress states "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;" so they can use whatever they want- including seashells.

Is this not right?
http://www.usconstitution.net/const.html

[4Horsemen]

Didn't JFK actually manage to get United Sates Notes produced? Which were then withdrawn from circulation after his assasination? If so, how did JFK get it introduced?

By Presidential executive order. The order directed US Treasury to issue certificates backed by silver. It was supposed to compete with the Fed. Reserve note.

[4Horsemen]

I'm still not convinced that a return to a Gold Standard is the absolute answer

There just isn't enough gold in the world to support the level of economic activity that exists. 1oz of gold would become fantastically valuable! Maybe a silver backed currency is more realistic

And where is the USA going to get hold of all the gold to back its currency? A lot of it has been sold. Nobody even knows how much there is. There hasn't been an audit of gold reserves for decades. Some people even think Fort Knox is empty! Has all the gold has all been stolen by the banking system!?????

It's probably in Europe, World Bank, Bank of England etc. The international bankers control the value precious metals. They have been accused of holding down the value of gold for decades (wall-street), obviously they want fiat currency to be the standard for many reasons. Some experts think gold is worth 4-5 grand an oz. If it's true that Fort Knox is empty, then somebody is going to pay. I'm sure it's documented who had access to the vaults. A member of the Fed. reserve admitted that they deliberately caused the depression, it was denied for decades.

[NMCB3]

Section 10 - Powers prohibited of States
"No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts

It would seem that if the States can only accept Gold or Silver as payment for debts owed to them. Then Gold and Silver it is unless a constitutional change is made. In a state of anarchy whatever the market decides on would be money and there would be no state to worry about. We however operate under a constitutional republic.

[Mattsa]

http://www.house.gov/paul/congrec/co...3/cr090503.htm

An excellent article!

[AZJV]

http://video.google.com/videoplay?do...+masters&hl=en

Check out the above docuementary on the history of money, and the international bankers and the Federal Reserve. It is a must see video. Ron Paul is in this docuementary, and in fact, this is where i first became aware of him. This is a very good tutorial on fiat and commodity based money, as well as why the federal reserve needs to go away.

Also check out Jason Hommel who is a precious metal expert and a Ron Pual supporter.

http://www.silverstockreport.com/2007/230.html