Ron Paul

Ron Paul: Allow Gold and Silver to Compete As Money, Fed Will Eliminate Itself

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He's now chair of the House subcommittee responsible for domestic monetary policy–but that doesn't mean Ron Paul now has the power to abolish the Federal Reserve. Anyway, he tells NPR that he thinks positive action in that direction might not be necessary:

 "What I'm really asking for is competition, to get rid of the monopoly power of the Fed, because they don't have legitimate power to do what they do."

Paul says he wants to abolish the current legal tender laws and allow Americans to use gold and silver as currency….

"You can't have inflation without somebody artificially creating money and credit out of thin air." He blames the Fed for creating inflation by adding too much paper money to the economy….

Paul adds that he may not have to do anything himself to bring the Fed down. "I believe that the Fed will eventually end itself, because they're working on a monetary system that is not viable."

As Paul critics will point out, if you and a debtor/creditor want to use gold or silver as money between you, you are not legally forbidden from doing so. However, existing tax rules regarding the exchange of hard metals give it a legal competitive disadvantage compared to paper federal reserve notes–as does paper's status as legal tender. Details on Ron Paul's Free Competition in Currency Act that would change this situation.

My Reason feature on Ron Paul's role in the still burgeoning anti-Federal Reserve movement from November 2009.

NEXT: Chris Christie Commutes Brian Aitken's Sentence

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  1. if you and a debtor/creditor want to use gold or silver as money between you, you are not legally forbidden from doing so.

    Under current legal tender laws, US courts will not enforce gold payment clauses in contracts.

    -jcr

    1. Not to mention that any time gold “appreciates” (read: USDs depreciate), despite the fact that your purchasing power hasn’t changed, you still have to pay taxes on your “gains.” Not to mention sales taxes in transferring between currency and commodities.

      1. It is no accident that the Income Tax was established at the same time as the Federal Reserve Banking System. They knew they were going to expand the money/credit supply and that people would turn to other things to preserve their purchasing power.

        1. Its also no accident unprecedented prosperity ensued (x 1929–34 when the Fed wrongly tightened) until 2008.

          1. Its also no accident unprecedented prosperity ensued (x 1929–34 when the Fed wrongly tightened) until 2008.

            Every thief, con artist, and politician has always thought they could put their victims’ wealth to better use – doesn’t keep it from being theft. The ancient Chinese did wonders for their civilization with the imperial power of fiat money – just another way to squeeze a few more grains of rice out of the peasants and leave them with little or nothing.

            1. Well then keep your “wealth” to yourself then brother.

              The FDIC can handle the show bait up to $250,000.

              1. Well then keep your “wealth” to yourself then brother.

                I attempt to do so, hotshot. Unfortunately my “brothers” and their elected thieves seem to have other ideas.

          2. In short, shrike, the ends do not justify the means.

            1. I’m with you. I’ll stay to 12 EST (midnight).

              No need for obfuscation like “ends/means”.

              1. No need for obfuscation like “ends/means”.

                Or right vs wrong either, apparently. The only tards around here, shrike, are the moral retards, such as yourself.

                1. I have no idea.columbia sportswear outlet – Discount columbia sportswear jackets,columbia clothing,parkas,coats,etc! Buy cheap columbia sportswear from our factory outlet!”

          3. THe years you picked are a little biased towards skewing the data. You start in an economic valley and end at an economic peak. You also leave out the two biggest Fed-Fuck-ups. If you look at economic growth from 1866 to 1913 (the end of the civil war to the formation of the fed after the recession of 1907-08), and compare it to economic growth from 1913 to 2009, you’ll see that the per capita income in the former grew at a slightly slower rate (about 85% at fast) and experienced a population growth rate 76% higher. The unskilled wage pretty much grew at the same pace too. Mind you, this was in the complete absence of any deficit spending, inflation, social safety nets, or counter cyclical monetary/fiscal policies of any kind. Government debt as a percentage of GDP wasn’t 1 third of the debt level of the government of the 20th century. There was no large number of government jobs.

            I’m sorry, but there is no actual evidence that the central bank has made life better for anybody.

            http://www.measuringworth.com/…..POPULATION

              1. Links don’t work. Sorry. Go visit meauring worth. Search for it in google. It is a tremendously useful source of historical economic data ranging back to the 1800’s in the us and uk.

                1. The purpose of his piece by the way was to lead the reader to this even better one:

                  http://www.city-journal.org/2010/20_3_social-science.html

            1. Good stuff Mr. TK, I’m reminded of an amusing quip ending a piece written by Robert Murphy yesterday:

              Before closing, I should mention that Karl Smith seems like a perfectly nice guy, and his debate with Manzi is very cordial. Yet his self-described “defense of economics” (by which he means mainstream macroeconomics) doesn’t recognize that the empirical record is entirely consistent with those models being horrible.

              Let me put it in other words: The Austrian critique of artificially low interest rates is that they fuel an unsustainable boom, sowing the seeds for an eventual crash. Yes, after a particular collapse, it’s possible for the central bank to do it all again. This might appear to give a “soft landing,” and indeed people might laud the ‘Maestro’ for his deft manipulation of the federal-funds rate.

              But tinkering with electronic bank reserves doesn’t expand the actual supply of capital goods. Eventually, the inflationary chickens will come home to roost. The ultimate bankruptcy of monetary pump priming ? of flooding the credit markets with money printed out of thin air ? occurs when short-term interest rates hit zero, and can go no further.

              Now it’s true, Smith and others can say, “Well, once we hit the zero bound, there are other tools the Fed can use ? it’s not out of ammunition!” In response, the Austrians humbly suggest that the central bank stop shooting the economy.

              What would it take for the interventionists to admit that they’re making things worse?

            2. There was no large number of government jobs.

              The government jobs that did exist consisted of enforcing high tarriffs and enforcing one of the largest property transfers in history.

              Which is to say, comparing the two eras is *highly* suspect.

              1. I agree. Comparing the two eras is highly difficult. However, I would argue that their was arguably less government intervention in the 1800’s. Of course, it is difficult to measure such things. My point was that there is no evidence that a federal reserve, fiat currency, and a social spending government have led to any Renaissance of productivity.

          4. It’s no coincidence that unprecedented prosperity was in full swing at the time and this was the best and subtlest way to seize it without causing unrest…

          5. “Unprecedented prosperity ensued…”

            You mean like the perpetuation of the business cycle through the Federal Reserve’s manipulation of interest rates and tampering with reserve requirements? Oh wait, no, that’s not prosperity, and you’re just a Hayekian concern troll.

        2. Look at all the things we can purchase cheaply now which didn’t even exist as ideas a century ago. The richest men in the world in 1913 couldn’t have bought with their entire fortunes the generic statins and blood pressure-lowering drugs, now costing literally pocket change for a month’s supply per individual, which have revolutionized the health and life expectancy of middle-aged to elderly people in the early 21st century. That trend sheds more light on what “purchasing power” means than this magical thinking about gold.

          1. The richest man in the world in 1813 could not have “flown”, or used electric lights to see at night, or instantly communicate with people in distant cities, or travel faster than 20mph, or sit in an air conditioned room, or listen to a recorded sound or performance, or wear a rubber rain coat nor boots, or buy standardized products of any sort, or drink clean water that was not first boiled, or trust that his doctor would heal him, or shoot heroin.

            Monetary policy has nothing to do with technological advancements.

            1. Then why all the propaganda about how fiat money impoverishes us?

              1. Is more money the same thing as more wealth?

                When more fiat dollars are created, yet still eventually chase goods and services that don’t grow as quickly, definitionally we have monetary inflation (no matter how Washington is currently measuring it).

                Gold isn’t magical. But setting a basis for currency that is more solid than a central banker’s whim sounds pretty good to me.

              2. Because fiat money impoverishes us. The fact that technology mitigates the damage is irrelevant.

                1. You’re an idiot. The Fed met Commercial Paper loans in the depth for MacDonalds to meet payroll in 2007-08 — and earned profit returned to the Treasury.

                  Need cite? Fine.

                  1. I recall it having to be pointed out to you that paper was still strong in Sept. 2008 when Bernanke was pleading a damn lie that it wasn’t and he had no room to maneuver when he had plenty to get his precious TARP, so why you would go there should be quite an interesting spectacle for you to try to explain away.

                  2. @shriek-You’re an idiot. The Fed met Commercial Paper loans in the depth for MacDonalds to meet payroll in 2007-08

                    Yes, clearly a group of businesses that requires $4-5 trillion (or 7-8 trillion but wtf) in credit (from an exogenous source like the federal reserve) to meet a current liability like payroll is completely healthy.

                  3. “You’re an idiot. The Fed met Commercial Paper loans in the depth for MacDonalds to meet payroll in 2007-08 — and earned profit returned to the Treasury.”

                    And they lent the money when nobody else would. THus they are still fucking up the time preference by making it appear that their is a large amount of capital building when it is really being consumed.

              3. have you not noticed the yawning delta between the hyper-rich and the rest of us?

                1. Which means precisely jack squat.

          2. you are correct Mark Plus.

            Paultards are trapped in the past. The Austrians lust for productivity in their secret heart of hearts.

            1. Austrian economists would have faded away long ago without patronage from American businessmen. Ludwig von Mises in the U.S. would have had to seek a real job in the garment business or something if Lawrence Fertig hadn’t bribed New York University to give Mises an office and pretend he had a position there, salary paid by Fertig, as a visiting professor.

              Even now Austrian economists have pretend-jobs in academia and think tanks paid for by the Koch brothers, because the real market for economists rejects them. And Austrian economists have to give their publications away like Jehovah’s Witnesses or something, again because nobody wants to pay money for their work. By contrast, the non-Austrian economists who write those Freakonomics books don’t seem to have that problem.

              The private command economy which keeps Austrian economics in business makes an interesting contrast with the fact that two other sources of libertarian thinking, Ayn Rand and Robert Heinlein, never had to give their writings away; market forces made them authentically popular.

              1. Austrians = Jehovahs Witnesses?

                Mostly in their literature! Good pickup.

              2. Wow, this isn’t serious it? Are you trolling? Do you have any legitimate criticism against the Austrian method, or are you just going to make vague ad homenim attacks?

                Just look up Peter Schiff, who used his understanding of Austrian economics to predict the 2008 economics collapse when “mainstream” economists were clueless.

                1. Been here for years!

                  Do you have a legit question?

                  1. Yeah, what the fuck is your problem with the English language?

              3. And Austrian economists have to give their publications away like Jehovah’s Witnesses or something

                Yeah? So how come I had to pay money for my copy of Human Action back in the 60’s – as did everyone else?

                1. You were duped -like all superstition swillers.

              4. Austrian economists would have faded away long ago without patronage from American businessmen.

                Absolutely.

                The only real job for an economist in america is either
                1)a propogandist for corporate welfare

                2)a propogandist for government expansion.

                Any “economist” that advocates free markets is clearly a failed salesman, no better than your average buggywhip maker, UN peace advocate or progressive HR rep.

              5. Funny how all those mainstream economists missed the housing bubble (aside from the ones who were actively cheering it on).

              6. Even now Austrian economists have pretend-jobs in academia and think tanks paid for by the Koch brothers,

                Wrong. Rothbard left Cato and formed the von Mises institute because of disagreements with Charles Koch.

                Next.

                1. Oh, and BTW,

                  ***DRINK***

                  Fucking trolls come here and try to tell us our own history. Asshole.

              7. Right. Nobody bought The Road to Serfdom when it first came out.

                Except for about 200,000 people. In 1944.

                And the left totally ignored him. Except for when they didn’t, such as his famous debate with Keynes.

                1. Exactly. I’ve never understood the import of this “Austrian economists would have faded away long ago without patronage from American businessmen.” argument that bubbles up from time to time.

                  Somebody still has to be, you know, READING those books for the ideas to survive.

              8. sings:

                Are you Megan,
                Are you Megan,
                Are you Megan McArdle?

                1. “Shrike” would be a perfect handle for McArdle.

          3. People could travel much faster than 20 mph before the internal combustion engine. It’s just that the landing was never particularly pleasant or survivable.

        3. They knew

          You betcha – them 19th century guys really believed in the long run.

          1. If you are quoting me, juris, both the Income Tax and the Federal Reserve were done in the 20th century. Yes, I am aware there was an income tax instituted under Lincoln during the 1860s to pay for the Civil War. And I am also aware there was another instituted in the late 1800s – but it was declared unconstitutional. The sixteenth amendment (in 1913?) is what authorized the Federal Income Tax we’ve enjoyed for the last 90 odd years.

    2. Nothing is stopping two parties from agreeing to do their transaction in gold. Nothing is stopping anybody from abstaining from business with another for reneging on a gold deal.

      1. The government’s income tax is, Suki. Such transactions are considered to be barter by the IRS and all gains are taxable. Gains are to be measured in US dollars for tax purposes.

        So if you traded, say, $400 worth labor for an ounce of gold back when Clinton was prez and now you find that you can trade your ounce of gold for a $1000 worth of labor – even though it’s likely the same number of hours of the same kind of labor – the IRS will consider that a gain because the dollar amount or market value is higher.

        1. ” fair” market value in dollars is higher – not market value in terms of gold. Neither party has actually had a gain – it’s just that the dollar amount has increased.

          1. Let us know if you win that argument in tax “court”.

            1. Uh, that was my point – it’s an argument that one won’t win in “tax court.”

          2. “..the dollar amount has increased.”

            And, of course, the dollar value has decreased. But debasing is fine, because worthless currency helps exports. Current account deficits are important. Capital account surpluses are meaningless. 😉

            Also debasing currency allows Uncle Sam to repay debt with devalued dollars. Everyone wins. Except dollar holders.

            1. Except dollar holders.

              And the ones who receive or spend those dollars last.

        2. So, the government refuses payment in gold. BFD. I suspect they also refuse payment in salt, used tires, diamonds and coal. Convert some of your gold into dollars and pay your bill.

          1. Convert some of your gold into dollars and pay your bill.

            But if one does that, one will be taxed on the increased dollar amount, even though there has been no real increase in wealth. It just amounts to a tax on preserving one’s wealth or purchasing power. In other words, one gets robbed either by the Fed or the government. You can’t be so dense as to not understand that.

    3. Under current legal tender laws, US courts will not enforce gold payment clauses in contracts.

      I doubt this. It would make the entire gold futures market null and void.

  2. Run Ron Paul!

    1. Still humored by the Paultards!

      Carry on!

      1. Paul is great until he starts talking about gold.

      2. As opposed to what? The Krugmantards? The Obamatards?

        You see, anyone can have ~tard attached to the end of his or her name — Shriketard.

        Who are the Shriketards but your mommy and daddy. I’d enjoy to meet them to see what pieces of work they must be.

        You know, Shriketard, apples far near to the tree.

      3. Don’t worry, scrote. There are plenty of ‘tards out there living really kick-ass lives. My first wife was ‘tarded. She’s a pilot now.

  3. This story can be summed up in one sentence:

    The gov’t does not allow competition.

    1. What is the Euro then? Competition has always been here.

      Except in the vacant brain cells of goldbugs… wait til the Fed tightens to 1% (who knows when?) gold will tumble 25%.

      1. What is this supposed to mean?

        1. It is simple.

          When the Fed increases interest rates gold (as a hedge) will fall hard.

          When? No one really knows (x maybe the Time MoY from last year).

        2. It is simple.

          When the Fed increases interest rates gold (as a hedge) will fall hard.

          When? No one really knows (x maybe the Time MoY from last year).

          1. Assuming that the economy improves. If the American economy takes a dive, treasuries become less valued, dollars become less valued, and the FED continues in increase the money supply through QE2, QE3, QE4, etc… then gold’s price in USD will skyrocket.

            1. Yes – you are correct —- after all those lurid assumptions that will never transpire.

              1. So printing trillions of dollars will not lessen the value of the dollar? And the federal government’s $1+ trillion deficit and $14 trillion debt can be paid simply by “buying” treasury bonds with printed dollars?

                We’re as close to economic recovery as we were in 1931.

                1. Would that be true?

                  The Fed balance sheet says the “printing” only pushed M1 up by $400 billion from 2008 to 2010.

                  (source St Louis Fed)

                    1. The Fed balance sheet says the “printing” only pushed M1 up by $400 billion from 2008 to 2010.

                      But,

                      M0 Exploded starting in 2008
                      http://research.stlouisfed.org…..ange]=5yrs

                      As did excess reserves
                      http://research.stlouisfed.org…..range]=1yr

                      It is unmistakable that enormous inflation potential is built into the current monetary base. That that potential is still unrealized does not negate it, any more than the unrealized potential of an explosive proves that it is benign.

                    2. +1000

                      Fuck Shrike.

                  1. The “printing” is certainly doing a nice job of pushing up commodity prices. Why make crappy little low- return loans when one speculate in the commodities markets?

                2. But haven’t you heard, Ellipse? Debt is wealth! Liabilities are assets! Of course, a Feral Reserve Note is not really the liability OR asset it is often claimed to be, since it isn’t redeemable for anything by the Fed, but we aren’t supposed to notice that.

                  1. Trillions?

                    I think “ellipse” is full of shit.

                    I post here often – btw.

          2. When the Fed increases interest rates gold (as a hedge) will fall hard.

            I’m not using it as a hedge, so I should be fine, right?

          3. Shrike-It is simple.

            When the Fed increases interest rates gold (as a hedge) will fall hard.

            Didn’t work that way the last time interest rates rose for a decade.

            But It’ll be different this time, right?

      2. Aren’t “foreign exchange gains” on the Euro subject to capital gains taxation just like transactions in gold?

        Can you use Euros as legal tender to pay debts in the US?

        I’m thinking that the competitive disadvantage is just about the same.

        takinglibertyseriously.net

      3. What is the Euro then? Competition has always been here.

        Yeah, there’s always been more than one asshole around trying to pass his hot checks and worthless IOUs.

  4. JCR is corrrect – the FRN clearly states, “This note is legal tender for all debts, public and private.” Even though gold clauses are legal, they can only be enforced as the equivalent amount of FRNs. Not to mention which, would you really accept money as payment that you would have to pay 28% tax upon receiving and then pay tax AGAIN on the portion which is your profit?

  5. I wonder what Ron Paul will say if the Fed’s owners argue in court, and win a ruling in their favor, that the effort to sabotage the Fed amounts to a taking under the Fifth Amendment, and they deserve compensation for their losses.

    1. That’s fine. Once they’re no longer pretending to be quasi-governmental, we can simply sue them like any other company. I have no doubt that a lawyer could convince a jury that the Fed’s owners have damaged the U.S., through their mismanagement and ethically questionable behavior, at least as much as they are seeking in compensation.

    2. Maybe Paul will say to cut them a government check, payable in dollars, as compensation.

  6. I can’t get too excited about commodity-based money when the Hunts came this close to cornering the silver market. If Soros can manipulate any currency, and the Hunts came damn close to cornering the silver market, there is no reason to believe that commodities are free from monetary scheming. Diamond values are only sustained by deBeers stranglehold on the market.

    1. Opposed to the banking cartel that is the Federal Reserve System? The whole FED is a giant “monetary scheming” arrangement which benefits the rich, well connected, and public sector.

      I’m not saying that we *have* to have a gold standard, but why not let the free market decide our currency instead of a bunch of socialist central planners in Congress and at the FED?

      1. All your assumptions are wrong.

        1. Thanks for the point-by-point refutation.

      2. Why are 30 yr Treasuries yielding 5%?

        Why?

        Why?

        You state assumptions – no conclusions!

        1. Why are 30 yr Treasuries yielding 5%?

          Because they can’t move them at a lower rate of interest, of course. The only reason they sell them at that yield is because, of all the various currencies out there, the Dollar is still the pretty girl at the dance. She might not be in thirty years time though.

        2. Why are 30 yr Treasuries yielding 5%?

          Because they can’t move them at a lower rate of interest, of course. The only reason they can sell them at that yield is because, of all the various currencies out there, the Dollar is still the pretty girl at the dance. She might not be in thirty years time though.

        3. Why are 30 yr Treasuries yielding 5%?

          Why?

          Because the FED is buying those treasuries in quantities sufficient to create a 5% yield in the “private” market.

          Even you (shriek) are not a big enough dumbshit to invest money for thirty years at a 5% average yearly return.

    2. he Hunts came this close to cornering the silver market.

      That was only possible because silver had been de-monetized. If millions of people were using silver in daily transactions, cornering the silver market would be quite impossible.

      -jcr

    3. juris, I don’t think they actually got that close. When the price of silver jumped to record level, people started melting their spoons, jewelry, etc. A lot of “stored” silver started coming out of the woodwork.

      Trying to corner the market is a fool’s game.

  7. It might be overly ambitious (in terms of political capital), but I think other fiat currencies should get the same treatment as FRNs.

    If someone wants to charge for their services in Euros or Zimbabe money, that’s their prerogative. That said, at least for a decade or so, people ought to be required to draw attention to non-standard payments, since most people are going to assume that $1.49 means plain ol greenbacks.

  8. Ron Paul: Allow Gold and Silver to Compete As Money, Fed Will Eliminate Itself

    ‘ Simple Simon met a Pie Man going to the Fair ‘

    Too bad Ru Paul doesn’t remember why we got rid of Gold in the First Place.

    You know how u libertarians LOVE to shoot down the PIE analogy where there are 100 slices and two people take 98 slice and and the other 98 people are left to fight over two???

    We’ll the libertarian come-back is that the PIE gets Bigger. I’d like 2 c u try that with a finite amount of ANYTHING.

    1. You’re confusing money and wealth. Money is more akin to stocks for a company — if a company does well and holds more wealth, it’s represented by the stocks growing more valuable in trade, not by the number of stocks increasing. Now granted that you can’t do a stock split with precious metals, but you can split them up fairly finely, or trade in notes that can be exchanged for metal.

      But at any rate, the money “pie” is mostly just a symbol for the wealth “pie” (not entirely, as money with substantial innate value is also wealth), so after a lot of economic growth, having a smaller slice of the money pie might represent a larger slice of the wealth pie.

      1. your confusing the milk with the food.

        …sounds better in spanish.

        1. I realize you big macro thinkers look down your nose at silly ol’ micro, but you could use a review on the reason denominations were created in the first place.

          1. And when there were no denominations small enough, people made them, literally – as in pieces of eight.

        2. I have no idea what that means in either language.

        3. your confusing the milk with the food.

          A fish without a fin is just a tarted-up eel.

          Game, set and match to me, I believe.

        4. Confunde usted la leche y la comida? Nop. No es mejor en espa?ol.

    2. doesn’t remember why we got rid of Gold in the First Place.

      Dr. Paul is quite aware of why FDR stole all the gold in the country, and why the congress let him do it. The people never had a say in the matter.

      -jcr

    3. Why do you and shriek despise the English language?

    4. Re: Alice Bowie,

      Too bad Ru[sic] Paul doesn’t remember why we got rid of Gold in the First Place.

      “We” didn’t do anything, AB. It was the government that made the people go off the gold standard but not for any sound economic reason, but to steal people’s savings. In fact, the government got rid of the gold standard entirely in 1971 because the government could not meet its obligations to other countries, the reason then being simply DEFAULT – i.e. the government acting like a BUM.

      You know how u[sic] libertarians LOVE to shoot down the PIE analogy where there are 100 slices and two people take 98 slice and and the other 98 people are left to fight over two???

      Maybe because that pie analogy is not a good one – have you considered that possibility?

      We’ll the libertarian come-back is that the PIE gets Bigger. I’d like 2 c u [sic] try that with a finite amount of ANYTHING.

      Your lack of imagination, reason, or intellectual wherewithal does not ipso facto become a crisis in someone else’s hands, AB. In other words: That’s your problem.

      The pie means goods, not money supply. If you increase the pies, the price for each will drop as money becomes scarcer; if the money supply increases faster than the pies, you have inflation, which translates to higher prices. This is a very easy concept to understand.

  9. What we need to do is bring back the cross.

  10. Lol, putting Paul in that chair is like making Tommy Chong the head of the DEA.

    1. Only the best idea ever. If Obama was any kind of liberal he would have done that instead of putting a typical tight ass bureaucrat more fitting for a so-con president.

      There should be some advantages to a liberal holding that office. While their socialist policies rob your wallet, you would expect that they would make up for it in other areas, smoking pot on the court house steps with impunity, cops reduced to carrying bobby sticks, topless style trends, etc. But, hell fucking no, they find prohibitions and taboos from their own arbitrary value system to impose.

      1. I have to agree with this.

      2. We’re more likely to see that sort of thing from a (R) administration. The (D)’s are scared shitless of having the “soft on [fill in subject]” tag hung on them. This is why the most recent proposal for criminal justice reform Balko talked about came from the Republicans.

        1. BP don’t make excuses for the jerks. D or R will stick it to us without your cover.

          1. Explaining behavior and making excuses are two different things.

      3. topless style trends

        +1

  11. Gold as a currency is not necessarily the answer but COMPETING CURRENCIES is. Not to mention there is no moral justification for imprisoning those who want to trust in completing currencies enough to use them.

    1. Competing currencies only work if the value is not manipulated, and there are no legal tender laws.

      Gresham’s Law.

      1. And he wrote some of the finest legal thrillers of the 20th century. He was a smart guy.

      2. Gresham’s Law applies to government issued currency. Bad money only drives out good when the government mandates both are of equal value. In free banking scenarios, good money will instead drive out bad.

  12. Darn straight we need competing currencies. In this sesquicentennial time, is nobody going to call for a return to Confederate money?

    1. Re: MNG,

      In this sesquicentennial time, is nobody going to call for a return to Confederate money?

      Will you accept it in lieu of dollars or gold? Let me know!

  13. “You can’t have inflation without somebody artificially creating money and credit out of thin air.”

    While I agree with the with the idea of competing currencies, this is not entirely correct. When Spain brought over all the New World gold, it created pretty bad inflation. Also, the invention of the cyanide process created inflation in the US, as it suddenly made low grade ores viable to mine.

    1. It could be argued that both of those are examples of “somebody artificially creating money”.

      Not a great argument…but not horrible.

      1. But it wasn’t artificial, robc. In both cases, (and in Mr. Whipple’s case, which I’m, unfamiliar with) the real money supply was increased.

        The positive to this sort of inflation is that it has a natural “brake” – there is only so much low grade ore, or Incan gold to be stolen. It can’t go on perpetually, and it also doesn’t result in hyperinflation, just high inflation.

        Also, if there are multiple currencies, then people can switch in case of inflation in one or the other. My post wasn’t meant to be a refutation of tabular standards, rather just to point out that metallic money is not necessarily proof against inflation.

        1. I’d still take that over the unilateral whims of “independent” central bankers.

        2. Depends on the definition of “artificial”. But yeah, thats why I said it wasnt a great argument.

          I agree with your last 2 paragraphs anyway.

    2. There were also problems with the mining of silver in Mexico in the early 19th century, IIRC.

      1. Re: Mr. Whipple,

        There were also problems with the mining of silver in Mexico in the early 19th century, IIRC.

        The biggest problem that Mexico faced in the beginning of the 19th Century was the bloody civil war that started in 1810 and ended until 1821 with Mexico’s independence from Spain. Silver mining was the LEAST of people’s problems back then.

      2. If I recall correctly, silver was a lot more valuable before several very large deposits were found in the new world.

    3. Re: BakedPenguin,

      While I agree with the […] idea of competing currencies, this is not entirely correct. When Spain brought over all the New World gold, it created pretty bad inflation.

      It was only temporary, BP. It’s not like the Spaniards were creating gold with a multiplier factor of 9.

    4. That inflation was around 1%. If you are arguing that this would be worse than what we currently have, that’s pretty good shit you’re smoking there.

  14. When the Fed increases interest rates gold (as a hedge) will fall hard.

    When the Fed increases interest rates

    (1) Interest will increase across the board, for all borrowers. Unless the economy is much stronger it will tank.

    (2) The rollover risk of the federal government shortening the maturities on the debt will come home to roost, the interest payments by the feds will skyrocket, the deficit will follow, and the debt death spiral will be upon us.

    (3) The flood of new debt will itself drive up interest across the board, hammering the economy and the federal budget. The only way to get interest back under control will be more QE.

    (4) All of this will drive inflation. Gold isn’t a perfect hedge against inflation, but I don’t think it will do badly in dollar terms.

    So, I’m not pessimistic about gold. We are in a solvency and a liquidity trap, thanks to decades of deficit spending and easy money.

  15. As Paul critics will point out, if you and a debtor/creditor want to use gold or silver as money between you, you are not legally forbidden from doing so.

    Yes, you are forbidden – see Liberty Dollar case.

    However, existing tax rules regarding the exchange of hard metals give it a legal competitive disadvantage compared to paper federal reserve notes–as does paper’s status as legal tender.

    Is that supposed to be a criticism of Paul’s argument? Because it actually confirms his argument: That the government pretty much shackles the people from doing commerce in gold or silver.

  16. Of course even though FRNs are called legal tender it’s quite clear that they are unconstitutional.

    Article 1 sec. 8 give the Congress the power to “coin” money. A coin is a stamped piece of metal, not a printed piece of paper.

    Article 1 sec. 10 blatantly declares “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts”. I don’t know how it could be any clearer that any type of paper bills are unconstitutional.

    1. So if they just made 1, 5, 10, 20, 50, 100 dollar coins, they’d be okay?

      1. Re: DesigNate,

        So if they just made 1, 5, 10, 20, 50, 100 dollar coins, they’d be okay?

        Would you accept them as payment?

    2. Re: IceTrey,

      I don’t know how it could be any clearer that any type of paper bills are unconstitutional.

      Ice, if the MNG’s in the US can contrue the meaning of “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;” to mean making people buy health insurance, they can construe the above to mean “And ye shall use the Number of the Beast [FNRs] for all commercial transactions because Congress says.”

      1. “And ye shall use the Number of the Beast [FNRs] for all commercial transactions because Congress says.”

        Ten raised to the 666th power? Or maybe 999th power? Sounds like an idea Heinlein had in one of his last novels.

        Several weeks ago, in an unrelated thread, someone mentioned that in the bell curve of IQ test scores the majority of people fall between the two extremes of low and high intelligence. That majority is approximately 2/3 or 0.666666666666666 (to infinity.) Perhaps that’s the “Beast.”

  17. A few historical/Constitutional notes:

    Technically, Article 1 Section 8 doesn’t apply to the Fed, because the Fed is not the government. The Fed is following in the age-old tradition of banks issuing their own currency. This was widely practiced in the 19th century.

    The government still coins gold and silver currency. Of course, the reverse seignurage on these coins is absurdly, ridiculously prohibitive.

    I would even say that ye olde gold and silver certificates were Constitutional, as they were redeemable on demand for actual specie, and the feds (theoretically) had enough specie on reserve to redeem them all.

    But, once you get people to accept paper as the currency, a big psychological barrier is breached, and the next step to fiat currency is much more easily taken. Have the Fed issue “bank notes” as legal tender, and voila, there you go.

  18. I’m still not quite sure what Paul’s stance is on Free Banking. Would he allow a private bank engage in fractional reserves? The problem is not that the Fed engages in fractional reserve banking, the problem is that it is an enforced monopoly.

    p.s. There is no fraud here, as the depositor is fully aware that the bank is lending out his deposits. It’s why he gets interest.

    1. Re: Brandybuck,

      I’m still not quite sure what Paul’s stance is on Free Banking. Would he allow a private bank engage in fractional reserves?

      If he’s consistent, he would. However, he would also be in favor of courts enforcing contracts, which is what today’s Fractional Reserve Banking system counts on NOT happening, being given instead special protections and considerations (hence the Fed.)

      The problem is not that the Fed engages in fractional reserve banking, the problem is that it is an enforced monopoly.

      Exactly right. What RP has advocated is to open competition and strip the Fed from its monopoly status.

      There is no fraud here, as the depositor is fully aware that the bank is lending out his deposits. It’s why he gets interest.

      If the depositor is fully aware [does not mean fully MADE aware, as the bank is not a babysitter] of the risks that entail investing in a F.R. bank, then there’s no fraud.

      For libertarian philosophers like Walter Block, even with full awareness, FRB is inherently fraudulent. I do not subscribe to that; however, I do concur with WB that FRB should be subjected to the same market whims as anybody else, and man-up to their obligations if things go south on them.

    2. There is no fraud here, as the depositor is fully aware that the bank is lending out his deposits. It’s why he gets interest.

      That’s true, but only to a certain point. There is nothing wrong with fractional reserve banking per se – providing only time deposits are used (savings accounts, cds, etc.) It is the loaning out of demand deposits, such as checking accounts, that causes the problems, because it makes the same dollars available to more than one person at the same time. It’s a kind of reverse shell game wherein the one “pea” is said to be under all three shells. Obviously that isn’t possible.

    3. There is no fraud here, as the depositor is fully aware that the bank is lending out his deposits. It’s why he gets interest.

      That’s true, but only to a certain point. There is nothing wrong with fractional reserve banking per se – providing only time deposits are used (savings accounts, cds, etc.) It is the loaning out of demand deposits, such as checking accounts, that causes the problems, because it makes the same dollars available to more than one person at the same time. It’s a kind of reverse shell game wherein the one “pea” is said to be under all three shells. Obviously that isn’t possible.

  19. (Shit!) Sorry about the double post. I tried to void one of them when it hung the first time, and I thought I had succeeded. When I posted the next time it sent both.

  20. Legal tender means the creditor must accept dollars from the debtor. Why the fuck would the debtor want to pay back in gold?

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  22. You know this guy is powerful when none of the media commentators, liberal nor conservative, mention him as even a “potential” presidential candidate in 2012.

    That’s when you know someone is kicking ass and taking names. They are scared to death of this guy and I’m behind him 100 percent!

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