To move the United States from the current Federal Reserve system to a gold standard would destroy our economy. First, it simply isn't possible - the US has about $11 billion in gold and about $760 billion in circulation. Those two dollar values above would have to meet in the middle, and since the US controls all the dollars and only a portion of the gold in the world, the dollar would change in value the most.
Let's say, for the sake of argument, however, that they would meet exactly in the middle. Now, the $20 bill in your pocket, while it is worth $20 of gold, can only buy what now costs $10. That nest egg you have for college? Oops, it will only pay for 2 years, rather than four. Overall, all the savings of every American would be worth significantly less. Your dollars would hardly buy anything overseas, so imported products would cost many times as much - $800 iPods, $15 bananas, check.
Besides, with our current system, how much damage does inflation really do? I realize Dr. Ron Paul claims that it is the most serious threat facing our nation, but honestly, is it? (IOW, don't link me to Ron Paul articles to "prove" to me that it is. Just cause he's popular doesn't mean he's right.) Let's check out the Consumer Price Index, specifically, the prices of white bread, eggs and ground beef. (I left out the prices of oil products (gas, heating oil) and seasonal products like oranges because they fluctuate for reasons other than inflation)
Over the past 10 years, the prices of these items rose by about 43%. Meanwhile, the price of gold (London Fix $/oz) rose from $337 to $743.5, a rise of more than 120%. The inflation rate from the FedRes harms people less than the deflation rate from the gold standard would. (That is, no one would buy anything made in America, because the dollar would be so expensive. Our economy would go into recession.)
Shifting to the gold standard wouldn't enforce good monetary policy - it would enforce poor-to-mediocre monetary policy. While it would eliminate the chance of really shitty monetary policy, it would also rule out the kind of monetary policy under which America has flourished for most of our lives.
Here's what you've got wrong. There would be less dollars in circulation. However, because of that, the value of each dollar would increase. Further more, the government could not endlessly print money, which it does now.
"Every man makes a god of his own desire."
-Virgil
Yeah, the value of each dollar would increase, which would kill the US economy, as I mention parenthetically above.
The value would increase and the amount would decrease. This would cancel eachother out and it would work out far better that our current system: This is the value of the dollar becuase we say so.
"Every man makes a god of his own desire."
-Virgil
Yeah, the value of each dollar would increase, which would kill the US economy, as I mention parenthetically above.
If you go with CPI, then yeah inflation looks low. But that's mostly just food and clothing. If you actually measure what real people have to spend money on, you'll realize inflation is way higher than 2%. Think about the big costs, housing, education, health care. Those aren't accounted for in CPI.
You don't have to scrape the whole federal reserve. You could just have a two currency system, that's what Ron Paul is suggesting. You can either pay and accept payments in gold, or federal reserve notes (dollars). Let the market decide. If people want gold, that will win out. If they want federal reserve notes, that will win out.
You obviously can't combine the two, because with gold, it's hard assets. With paper money, it's created out of thin air. So of course it isn't going to balance.
Also, it's unconstitutional, as only gold and silver are supposed to be legal tender to begin with. And personally I don't like the idea that the money supply is controlled by a privately held bank, who's owners are unknown, and accountable to nobody. Who meet only in secret, print money out of thin air, and are the cause of inflation and instability, not the ones who eliminate it. But hey, that's just me.
What a great idea!!
Let's have two pricing systems, and in order for anyone to buy anything, they'll need to convert between the current price of gold and USD.
Only gold and silver are supposed to be legal tender to begin with.
The Constitution gives Congress the power to "set the value of [money]" - since the prices of gold and silver cannot be artificially set, we come to the assumption that money can be made of other things.
The Constitution says
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; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
It says nothing about "setting the value". It says only gold and silver. Period. I have no idea where you got your interpretation. It shouldn't be a "conversion between gold and dollars". It should just be gold. But since we have these federal reserve notes, people can use that if they want.
Ron Paul wants people to be able to pay for food with gold and silver. Get paid with that. Deposit that in the bank. No conversions. Right now, only paper is used as legal currency. It's Illegal to use gold and silver, and Ron Paul would just legalize it. And if the federal reserve notes are worth something, they have nothing to worry about. But if people realize they are just worthless pieces of paper, backed by nothing, maybe gold will win out.
I also love how you never responded to my comments about how you miscalculated inflation. I mean food prices might be going up 2% a year. But are the costs of houses/rent, college tuition, health insurance, you know, the "big" stuff, going up at only 2% a year?
"[Congress shall have the right] To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;"
To coin Money and to regulate the value of that money implies that Congress (or its appointed agent) has coined the money out of something the value of which can be regulated. If there is a free market for that good (e.g. gold) then its value, naturally, cannot be regulated. We must therefore assume that non-gold or silver money is constitutional. Also, the Supreme Court has ruled that the current post-Bretton Woods system of Fiat Currency is constitutional, and therefore, it is.
You can use gold as a currency if you want - its called a barter system. If the merchant accepts your payment, whether its in gold, iron skewers or chickens, the government doesn't care, as long as taxes are paid. Just no one *has* to accept gold.
Re: miscalculating inflation. If you can prove that prices of houses and rent are growing at a rate of greater than 2% nationwide due to inflation (not other externalities, such as foreclosures, etc) then I'll give you that point.
The Congress doesn't even regulate money anymore. It's all done through a private, secretive bank, the federal reserve. If you think using their government equipment to physically create the coins and dollar bills, we do that. But in terms of how much should be printed, and what percentage of interest it should lend it out as (a much more important responsibility), Congress does none of that.
You can barter with gold and silver, but try buying stamps at the post office with gold. Or trying paying your taxes, as a percentage of total gold you made. You can't. Even if you wanted to, you're still forced to use paper. I can't prove that housing prices going up faster than 2% are caused 100% by an increase in the money supply, since there are a lot of factors that affect prices. I just have a nagging feeling it is caused in large part by it, due to historical factors.
If you think about the costs of bread, or the cost of TV's, the prices go up relatively slowly. That's cause new technology lowers the cost of making them. But if you look at areas like land, or education, where new technology can't really make things cheaper, you have an explosion in price increases. I would say that if you took out the efficiencies in production of food and clothes that reduce prices/costs, CPI inflation would be extremely high.
From the creation of our country, to 1913, inflation basically caused prices to double in 140 years. Since the federal reserve, and paper money, prices have gone up about 20 times in 94 years. I can't prove exactly that it was paper money that did it, I mean I guess that could also be a coincidence.
Every time the Fed prints money, they are stealing from every person with a dollar in their pocket. The last time they printed money to bail out the sub prime market it cost every man, woman and child in the USA $166. I for one would like to see this criminal activity stopped. There will be a period of adjustment and there will be difficulties and hardships but in the end we will all be better off and our money will be stable.
It's not criminal - the government is doing it. Since it isn't illegal, it isn't criminal.
It's not unconstitutional - the Supreme Court has ruled that it is constitutional.
I bet you Clarence Thomas didn't uphold that belief, or did he?
Right. Clarence Thomas != Supreme Court.
It's the whole body that makes decisions, not just one individual justice. (Esp a dumbass like Justice Thomas)
Yeah, you hate Thomas because he is supports the Constitution, he doesn't distort it like the other morons on the board. The whole body doesnt ever make a decision, it's majority rule...kinda liked our fucked up system of government.
Ron Paul is not looking to "switch" to the gold standard. He is simply saying LEGALIZE gold and silver as money. Right now, gold and silver are not legal tender. You cannot make contracts denominated in them. Courts only enforce contracts denominated in FR $. Further, gold/silver are punished by the tax system because if you buy an oz of gold and then later sell it, you are taxed on any change in the price of it - even though the new "price" often does not buy the same basket of goods as you gave up to buy the gold in the first place.
In this sort of system, all three - gold, silver, Fed notes (and probably a fourth - US Treasury notes) - would legally circulate as money. Most likely, people would "save" in gold/silver and "consume"/"spend" in FR notes or UST notes. It is not one or the other. That "one or the other" mindset is what allowed banks to establish a monopoly over money in the post-Civil War period - up to the point where they turned that monopoly into notes that they themselves produce in 1913 with the Federal Reserve.
And yes inflation is the most serious financial problem this country faces. The day that Social Security and Medicare go cash-flow negative (roughly 2017); then the govt is going to have to monetize our national debt (and the 60 trillion of SS/MC liabilities). IOW, they will be presented with IOU's from the "trust fund" - and since retirees can't eat IOU's (or T-Bonds), the Treasury/Fed will print currency. That is called inflation - and as it gets worse, it will feed the cost-of-living adjustments to SS which will force yet more monetization etc. That is the recipe for the death spiral called hyperinflation.
In a very real sense, by restoring gold/silver as an additional legal currency, RP is looking to save the states when this happens - rather than have them dragged into the Bolivia that our federal govt is going to become.
You, the author of this post, don't even begin to understand the extent and dynamics of the problem at hand. A recession is the LAST of our worries!
Have you even heard of a "petrodollar". Do you know what that means? How about "Dollar Hegemony"? How about "world reserve currency" and "runaway national debt"? Is any of this ringing a bell?
My suggestion to you is to watch a video called "The Money Masters". It's available on Google Video. It will be the most important history lesson you'll ever receive about the history of the money changers and banking.
These are the people who start all our wars. These are the people who fund BOTH sides in large scale conflicts, profiting off death and destruction. And we have opened the door and allowed them into our midst to print our currency from thin air?
Please, if this is "progressive", then let me back in the freaking womb.
Watch 'The Money Masters".
A healthy economy will have some small ups and downs, but nothing like we've had since the time of American imperial activities and the Federal Reserve control of the system in 1913!
Just look at what's occurred since then... In the last century alone we had 2 World Wars, a Great Depression, and the virtual destruction of our separate but equal branches of government. Our congress no longer declares wars, our presidents just usurp that authority with fear while congress stands mute, and then our wars go unending. The Korean War is STILL going on. There has never been a formal end and our troops are still stationed there just like they are in 160 other nations in the world, and our taxes are going to pay for this? Why are they not being invested in infrastructure, security, and entrepreneurship here in this country?
Just watch the film and get educated. (And no, a university education doesn't necessarily qualify you anymore as that's just indoctrination into Wilsonian thought that will see the eventual destruction of our national sovereignty.)
You'll WISH for a recession at that point.
Ron Paul is not some idiot who just came along with a tin-foil hat. He has served on the House Banking Committee, the Gold Commission, currently serves on the House Financial Services Committee as vice-chairman of the Oversight and Investigations subcommittee, the International Relations committee, and the Joint Economic Committee. He is a student of Austrian free market economics as championed by Ludwig von Mises. He has had many lively debates with Federal Reserve officials and has even maintained friendships with some of them despite their differences in economic philosophy. He only got into politics because of his chagrin at the error Nixon made in removing the last connections to the gold standard that the United States had. The man has an educated idea of what he's talking about economically, unlike any other candidate for President that I can think of.
Remember this quote: "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.” That's Alan Greenspan, before he became head of the Fed. Either Greenspan was completely wrong or essentially being in control of the nation's money supply made him a little less likely to speak his mind.
Ron Paul is for a sound economic policy, not economic suicide. He believes that a free-market commodity-based standard such as a gold/silver or some sort of a hybrid standard is preferable fiscally and Constitutionally. If there is a correction needed in the market, bailing out Wall Street with fiat dollars is only delaying it and probably worsening it when it happens. Also, such bailouts are not helping the average American of the lower and middle class. Go on YouTube and watch Ben Bernanke nervously fumble and avoid every time Ron Paul asks him a detailed question. He knows all is not well.
You're being very strict in your interpretation of how a gold standard, for example, would be implemented. Such a change would not be overnight but a gradual weaning off of the current system; also what you're not realizing is that the value of gold has gone up so much mainly because the value of the dollar has gone down. This has hurt American buying power and enriched the likes of foreign importers who stand to benefit from the economic troubles of the U.S. For example, people now shop more at places like WalMart which rely extensively on cheap, high-volume imported goods, because the American goods cost too much for Americans now. I don't even need to get into the implications of that cycle. If we stop printing money out of thin air to finance unnecessary foreign wars and stop borrowing billions from countries like China, we might be able to save this country from the severe troubles it's created for itself. There is a way to do this... and it's not by more taxation through inflation.
PS: If nothing else, we should AT LEAST kick the Federal Reserve back into that hole from whence they came and restore the authority of the U.S. Treasury to be the sole printer and regulator of our national currency.
There is no excuse we should be paying interest on every dollar for a private bank to print our money. Even if they still want to back it with nothing more than the good promises of the U.S. Government, it would be better than having the Fed running things. The Fed, with it's Wall Street centric actions, actions that care not for the average American, helps create artificial bubbles that ensnare investors and take their life savings and home equity by entrapping them into loans or investments that are unsound.
That's all the Great Depression was. One giant credit bubble that, when burst, consolidated wealth into the hands of the few with all the gold. The same occurred in 1980 when gold hit $800 an ounce. The same is happening now.
THINK about it. It is NOT "progressive" to want to keep the Federal Reserve around because they "keep us from recession", when the reality of what they do is far worse than a recession. They are sapping the wealth of a nation off like a giant leech, and apologists like you should be ashamed.
Even if you're not for a gold standard, you should AT LEAST be for returning the printing of money to the jurisdiction of the Dept. of Treasury with strict congressional oversight.
First off, your basing an inflation index off of agricultural items, items that are price fixed by the government. Secondly, grocery items are low down the marginal purchase list for consumers. The big increases in inflation don't come from these items, but rather for the luxury goods higher up the marginal totem pole.
Secondly, the price of gold has been skyrocketing because of fiat currency inflation. Its absurd plain and simple to call the gold standard inflationary because people buy it when fiat is inflating.
Just open up an economic history book and examine inflation rates from the gold standard era. You might have noticed that between 1880 - 1917 there was something like 1% inflation. Thats right, 1%. Once again, 1%.
And even the British Empire managed to conduct all its business with a legal inflationary limit of 1 percent.
We were on the Gold Standard from 1789 until 1973.
For 184 years inflation was held in check. Single family incomes were the norm.
What happened?? We left the gold standard and inflation went through the roof.
Two income families have become the norm. Inflation averaged .5% with a gold standard....4.6% without (2 % is a recalculated number).
We have been off the Gold standard for 34 years...how's it going?
Big market swings, record national debt, and more inflation....hmmm.
What has also come after we got rid of the gold standard? Incredible economic growth. And that's certainly no coincidence. If I know that my $1000 won't buy the same basket of goods in a year that it will now, then what will I do with it? Invest it. Fueling economic growth.
Inflation seems like it hasn't done too much harm. And market swings? What was the stock market doing before? Not growing as fast as it is know, even adjusted for inflation. Seems like the current monetary system is doing us well.
You're completely wrong! The economy has been devasted these last 35 years. The Republic is facing total collapse:
http://www.youtube.com/watch?v=KGpY2hw7ao8
This is not some fear-mongering fringe theory, this is according to the comptroller general of the United States, i.e. the government's top accountant.
Right now, social security obligations, at $60 trillion, are far out pacing what the American government is going to be able to afford, so millions of Americans are going to be left with nothing when they retire. There is a growing debt that requires massive cuts to both military presence abroad and domestic spending. There is a gradual decline in the wealth of the middle class.
Ron Paul correctly predicted that going off the gold standard would be mean economic disaster for the US, and it was Nixon's decision to take the US off the gold standard that spurred him to run for office.
Since Nixon took the US off the gold standard in 1971, and ushered in an age of inflationary monetary policy, median wages in America have remained stagnant. For some demographics, like those between 25-34, median wages are lower now than they were 35 years ago in 1972. Household wealth for median wage earners is lower now than it was 27 years ago, back in 1980. That real wages are lower now than they were in a time before multi-GHz processors and the internet is outrageous. Since 1971, the gap between rich and poor has ballooned, and the US government has borrowed itself to the brink of bankruptcy through the mechanism of debt monetization.
The status quo candidates don't want to tackle these issues let alone mention them. They want to keep borrowing from the next generation so that they can promise things for the people (e.g. healthcare for everyone) and get elected today. This has been the modus operandis for politicians and this is why America is in such big trouble now.
America is facing total economic collapse due to status-quo candidates and the naive pseudo-intellectuals who blindly parrot their fallacies.
A couple more points:
1) Ron Paul does not want to go "back" to a gold standard. He wants to allow gold AND SILVER to compete legally with fiat currency as legal tender. This means an end to capital gains taxes for gold and silver, and an abolishment of legal tender laws that force people to accept fiat currency as payments for debts.
and what BrooklynZoo said earlier:
2) Ron Paul is not some idiot who just came along with a tin-foil hat. He has served on the House Banking Committee, the Gold Commission, currently serves on the House Financial Services Committee as vice-chairman of the Oversight and Investigations subcommittee, the International Relations committee, and the Joint Economic Committee. He is a student of Austrian free market economics as championed by Ludwig von Mises. He has had many lively debates with Federal Reserve officials and has even maintained friendships with some of them despite their differences in economic philosophy. He only got into politics because of his chagrin at the error Nixon made in removing the last connections to the gold standard that the United States had. The man has an educated idea of what he's talking about economically, unlike any other candidate for President that I can think of.
And who has gained from this "incredible economic growth"? The middle class, who now need two incomes to do what one could do? The working poor, who can't get ahead no matter what they do, and more then likely have little knowledge of the inflation tax or monetary policy? The government, which is 9 trillion in debt, not counting how they may or may not hedge the numbers reporting? Maybe paying 400 billion in yearly interest, often to foreign bonds and foreign governments, is a good thing? Is the winner the strength of our currency, which is falling internationally at an impressive rate, and is possibly going to be abandoned by some countries as international currency? Perhaps open government is the winner, as millions of Americans have no idea what causes inflation, how it works, or even that they are effectively being given a secret tax? Is responsible government winning, with politicians free to spend more and more money that isn't their own, and that doesn't even really exist? The average American is now worth NEGATIVE savings...so it seems to me that the "incredible economic growth" you are talking about has had two main winners: big corporations and the extremely wealthy, with the occasional middle class family breaking through. I know that all the families facing home foreclosure aren't winning, and that the ghettos aren't winning. Students aren't winning, as spireling education costs make the best education a struggle for more and more, and debt is following them decades after collage. The retirees aren't winning, as years of saving for their future is worth less and less, especially combined with soaring health care costs. For a progressive, you are awfully complecent about a tax that feeds on the poorest, least educated/informed of our society, then works through the middle class, and which leaves the wealthy and the corporations, who know how to handle inflation, almost entirely alone, certainly in terms of financial impact. I'm a conservative, and this tax on the poor bothers me far more then it does you. That's....confusing.
I think I'll chime in here.... I think we're confusing terms. Federal Reserve Notes (FRN) are not wealth. Gold (and precious metals) are true wealth. When we see the price of gold going up it's an illusion. The vaule of Gold (ie: real wealth) doesn't change. What you are witnessing is the value of the currency fall.
An ounce of gold today is the same as an ounce of gold back in 1913. The only difference is it is now "worth" $741± instead of $20±.
The difference in in the "value" is inflation. Your fiat currency is worth that much less. Or in other words, it takes much more of the worthless paper money to purchase real wealth.
I've stated this in other postings, but our FRN system has become, since we left the gold standard, the largest form of religion in the world. The almighty Dollar is only worth something because you and your fellow countrymen believe it is worth something.
The minute we loose "faith" in the Dollar it will collapse like a burnt out star. I fear we are already seeing that happening as we speak.