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 Which were then withdrawn from circulation after his assasination?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 :o )

 

[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]

Gold versus fiat

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]

Taxes Under a Private Currency System

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.