Gold-backed Currency

[_DoMiNo_]

Hey all,

I just finished watching the two-hour documentary "Secret of Oz", which went in-depth over the history of currency systems, and the establishment of centralized banks. I feel like I just took the red pill... we really are slaves to bankers. A few points were vehemently made, such as:

1) Banks cannot loan money they don't have (fractional reserve lending).
2) The government should not be allowed to borrow money.
3) The government should be completely sovereign, and issue it's own currency (like Lincoln did with the Greenbacks).
4) Money should not be backed by gold, as gold-backed currencies are how the bankers originally consolidated power over the people.
5) It's not what backs the currency, its who controls the quantity.

All of these make sense, but I'm on the fence about #4 - doesn't Ron Paul continually advocate a gold-backed currency? I'm sure that ending the fed and switching from a debt-based currency to a gold-based currency is definitely an improvement, but how would we prevent the bankers from manipulating the supply of gold? If they control the supply of gold, they control the quantity of money, and we are back at square one with inflation, recessions, depressions, booms and busts.

[rpwi]

Good question. I'm one of the Ron Paul supporters who is vehemently against any special government granted privilege status for gold, as I believe it would create a horrible artificial tyranny between those who have gold and those who do not.

Now as to the specifics of a Paul gold standard...it is not clear how this would work. It could be a peg...it could be a fractional based system in which other countries could redeem dollars for gold (pre-Nixon) or it could be a more local fractional based system in which individuals through banks could redeem deposits for gold (pre-FDR).

A 100% backed system would be too expensive...not enough gold out there.

A fractional system would have the same problems we have now...counterfeited deposits (whether from the Feds or from banks) will create inflation, debt, bank runs, or bailouts.

A pegged system would be horrendous. Many countries have experience pegging their currencies to dominant currencies (like the dollar) at an artificial rate. What happens though is that FOREX traders play games with them to churn the exchange rate to their benefit. Also to peg a currency, you will have to build up reserves to cover the peg. Buying that much gold would be hideously expensive.

Granted...I'm sure Paul would being the fact that he is for not exclusively gold, but other assets like silver as well...but exceptionally the problems are the same.

The best compromise solution IMO would be to still end the Fed...but turn over our fiat money supply to the Treasury department for administration. So no more bailing out banks...no more getting churned on the open market...no more inflation...fiat money would exist...but only in a more static and un-manipulated form.

[Cabal]

Ron Paul doesn't necessarily advocate gold-backed currency; though I suspect he'd prefer it to fiat currency. What he really advocates is competing currencies--i.e. he wants to let the market decide what currency is preferred. Though I believe he does prefer commodity-backed currency of some sort, I think the focus on gold-backed is largely a misrepresentation or oversimplification of his position.