Economic: Monetary Policy: What does "Sound Money" mean?

[Jamesiv1]

On the official website, it mentions several places that RP wants to get us back to "Sound Money".

What does that mean? What's his plan?

I've seen videos, etc. that say getting back to a gold standard would be a bad thing, because it's very easy to monopolize.

I've seen videos that talk about the early colonists as well as Honest Abe Lincoln simply printing their own money (and it was very successful).

Has Ron outlined anywhere exactly what he has in mind?

James

 

[Travlyr]

Sound Money "rings" when dropped on a hard surface. It is symbolic of a valuable commodity that can be used for trade. 100% redeemable currency would be like the "Silver Certificate" of the past where you could, if you wanted to, take your $1 silver certificate to the bank and exchange it for a real silver dollar.

Read, "Gold, Peace, and Prosperity" by Ron Paul and "The Mystery of Banking" by Murray N. Rothbard to learn more.

 

[ctiger2]

On the official website, it mentions several places that RP wants to get us back to "Sound Money".

What does that mean? What's his plan?

I've seen videos, etc. that say getting back to a gold standard would be a bad thing, because it's very easy to monopolize.

I've seen videos that talk about the early colonists as well as Honest Abe Lincoln simply printing their own money (and it was very successful).

Has Ron outlined anywhere exactly what he has in mind?

James

It's simply a monetary policy where the money keeps consistent purchasing power over time.

 

[Jamesiv1]

Sound Money "rings" when dropped on a hard surface. It is symbolic of a valuable commodity that can be used for trade. 100% redeemable currency would be like the "Silver Certificate" of the past where you could, if you wanted to, take your $1 silver certificate to the bank and exchange it for a real silver dollar.

Read, "Gold, Peace, and Prosperity" by Ron Paul and "The Mystery of Banking" by Murray N. Rothbard to learn more.

Sounds good in theory, but that implies we've got some hard stuff of value (gold or silver). Do we?

My understanding is that nearly all the gold that used to be in Fort Knox is now overseas or in private hands. So.... what would we use? Do the US hold much silver?

Thanks for the links to the books - appreciate it.

 

[Travlyr]

Sounds good in theory, but that implies we've got some hard stuff of value (gold or silver). Do we?

My understanding is that nearly all the gold that used to be in Fort Knox is now overseas or in private hands. So.... what would we use? Do the US hold much silver?

Thanks for the links to the books - appreciate it.

It does sound good in theory, and it is good in fact because it is honest. Money is a medium of exchange. Food can be money. If you catch more fish than you can eat, then you might trade some of them for vegetables or grain. Now that is primitive barter exchange that is very difficult, but all the commodities exchanged have real value. High quality fresh food is valuable... especially if you are hungry. But food will spoil so it is a low quality money.

High quality money is sought. High quality money will not rot, burn, disintegrate, or disappear. That is why gold, silver, copper, and other metals climbed to the top of the money chain. High quality money has the following characteristics:

• Desirable
• Durable
• Divisible
• Portable
• Scarce

Paper money and electronic money fail the durability and scarcity test, so they can vanish. Precious Metals and other commodities maintain their value over time and never go away... they just change hands. That is why PM's were used for thousands of years up until 1971.

 

[Fletch8]

On the official website, it mentions several places that RP wants to get us back to "Sound Money".

What does that mean? What's his plan?

I've seen videos, etc. that say getting back to a gold standard would be a bad thing, because it's very easy to monopolize.

I've seen videos that talk about the early colonists as well as Honest Abe Lincoln simply printing their own money (and it was very successful).

Has Ron outlined anywhere exactly what he has in mind?

James

Hey James,

Watch the movie Money Masters for a great history lesson. I do not agree with the author's solutions in the end, but the history lesson is priceless and it indeed covers Lincoln. If you watch it, come back and tell the forum what you think.

Sound money is money which does not lose its store of value. If you put away sound money when young, it would still buy the same things when you are old. Central banking gives us unsound fiat currency known today as the US dollar. It is not a store of value as its purchasing power goes down every year.

This is nothing new. Check out this quote:

"The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.

...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

-- Thomas Jefferson

Powerful statements Tom is telling us. Mises is the founder of the Austrian School of Economics and here are some of his quotes you may find of interest:

Credit expansion and inflationary increase of the quantity of money frustrate the common mans attempts to save and to accumulate reserves for less propitious days. -Mises

The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy. -Mises

There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." -Ludwig Von Mises

Inflation and credit expansion, the preferred methods of present day government openhandedness, do not add anything to the amount of resources available. They make some people more prosperous, but only to the extent that they make others poorer. -Mises

Keynesians hate gold since it limits their printing. Keynes thought us common people were stupid sheep to be sheared(perhaps he was correct in an evil sort of way):

"By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." - John Maynard Keynes

Once you see the film money masters, you should have a good start on what sound money is and what is going on even if it is starts off a little bit of a cheezy educational film. Ron Paul wants to let gold and silver be legal tender along side with Federal Reserve notes(i.e.our dollar). He believes people would choose the gold or gold notes over the depreciating fiat dollar and the dollar would simply, to use a Newt type phrase, the fiat Federal Reserve Note would "wither on the vine". Kennedy almost did something like this with Executive Order 11110, but was not as lucky as Andrew Jackson(see m.m. film)

Fletch

PS Also see This Time is Different and the Crash Course

PSS More very powerful quotes on money:

“Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.” – Sir Josiah Stamp, Director of the Bank of England (appointed 1928). Reputed to be the 2nd wealthiest man in England at that time.

“The powers of financial capitalism had a far-reaching plan, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole… Their secret is that they have annexed from governments, monarchies, and republics the power to create the world’s money…” .- Prof. Carroll Quigley renowned, late Georgetown macro-historian (mentioned by former President Clinton in his first nomination acceptance speech), author of Tragedy and Hope. “He [Carroll Quigley] was one of the last great macro-historians who traced the development of civilization…with an awesome capability.” – Dr. Peter F. Krogh, Dean of the School of Foreign Service (Georgetown)

 

[playpianoking]

I too have questions about the sound money idea. Those that argue in favor of the FED slowly adding new currency to have moderate inflation of 2% per year entice people to consume rather than sit back and watch their money lose value. They argue that a steady amount of gold with an exponentially increasing population allow deflation, which causes only savings and not spending because you will always have more value later in time. And with this, how would loans work since the person giving the loan already will gain value, and new currency is not added into circulation to allow the loan to be paid back?

 

[Golden Rule]

While there are some valid points of concern over the gold standard (@playpianoking), the system we have now is pretty ridiculous. Sorry about the double negative, but you cannot have nothing backing a medium of exchange. When my money devalues while in a savings account, something is not right. It isn't stable. Maybe we could stop printing money until we get inflation under control...again I'm not sure how much physical gold we actually have and whether we have enough to support all US dollars.

 

[Return2Sanity]

It is important to remember that up until Nixon closed the gold window in 1971, our money was backed by gold. Every currency has to be backed by something. Right now, we have a fiat currency which means our currency is backed only by our faith that the government will be fiscally responsible and will control its spending.
That fact is starting to worry a lot of people.

Under a gold standard, we would use paper money, same as now, but it would be redeemable for gold, if you wanted it. The government doesn't need to have enough gold on hand at the beginning because new gold would be attracted into the system. People could deposit it into banks same as they do with cash.

Loans would happen in exactly the same way as they do now, but could be repaid with either dollars or gold. For the average person, not much would change, except that the Federal Reserve could not create inflation at will, so our dollars would hold their value over time. For more information, I would recommend Nathan Lewis' book called Gold: The Once and Future Money.
He answers the question about whether a population increase causes deflation under a gold standard here:
www.forbes.com/2011/07/22/gold-standard-deflationary.html
The short answer is that historical evidence does not show any of these deflationary effects.

 

[aspiringman]

Under a gold standard, we would use paper money, same as now, but it would be redeemable for gold, if you wanted it. The government doesn't need to have enough gold on hand at the beginning because new gold would be attracted into the system. People could deposit it into banks same as they do with cash.

Right! I agree with you!

 

[Travlyr]

Sound Money Liberates

"Money and banking must be separated from the State, just as Church and State are separated in the American tradition, just as the economy and the State should be separated. Vital to this necessary reform is the return to a money which is a useful product produced by the free market itself." - Murray N. Rothbard

Ron Paul's intent to return America to sound monetary policy is the fundamental reason that he is blacked out by media, gets virtually no endorsements from professional politicians, and is hated by wealthy elite. Sound money liberates people, strips power from government, and forces everyone to earn their living honestly. Indeed, everyone EXCEPT the privileged insiders win.

Sound Money Society: Imagine a small State of free people. The State is divided up among 100 people with each owning 640 acres of land. They meet once a month to discuss the state of the State and make necessary rules and adjustments, or they can send representatives. There are farmers, manufacturers, educators, miners, energy producers, restauranteurs, doctors, plumbers, electricians, bakers, a full functioning society with everyone freely exchanging the miner's coins, the farmer's food, the manufacturer's goods, valuable services, and so on. Everyone is honest so there is no need for prisons, judges, or bankers. Utopia is not the goal here as everyone must work to produce something of value to trade, yet it is a peaceful and prosperous society for people with purpose. Wealth just grows and grows for anyone willing to produce. No one goes hungry.

In reality, people are not honest because it is much easier to take from others than it is to produce goods for ourselves. Therefore, in sound money environments of the past, banks were needed to store the coins to keep the thieves from breaking into homes and/or committing highway robbery. Sheriffs, judges, and prisons became necessary to restrain the thieves.

The bankers became the thieves. Banks add nothing to wealth. The banker's initial task was to store money, but guarding a vault full of money is too tempting to resist taking some off the top. So, the bankers became the criminals with fractional reserve certificates and eventually irredeemable paper currency. When theft is justified and respected, then thieves can wear fancy suits and command dignity. When counterfeiting practices became "legal" (Federal Reserve Act of 1913) then that monopoly must be protected. Uniformed officers with guns (FBI) must seek and destroy all competition. Government oppression grows and grows.

The representatives of the State are so tempted because the Nobel Lie professes that rulers can better manage people than people can themselves. Plus it is quite profitable as long as special favors are given. For the most part, governments & banker's keep a record of everyone, their finances, their holdings, and their whereabouts. Sound money stops that.

So there is no way that the professional politicians, their media talking heads, or wealthy privileged elite will endorse Ron Paul for president. They would be surrendering their reign of power. Sound money liberates the people while limiting the government and putting their shills out-of-business.

That's what 'Sound Money' means.

 

[Diurdi]

Sound money could also just refer to a fiat currency that isn't being abused by senseless printing.

 

[Travlyr]

Sound money could also just refer to a fiat currency that isn't being abused by senseless printing.

It could, but who among us can resist the temptation to cheat when given the chance?

 

[KnowNothing]

It's strange. I always thought that people 100 yrs ago were a lot smarter. You'd think that they were well aware of the consequences of a central bank.

Those that put it together were obviously much smarter.

Anniversery coming up. Would be nice to see a debate solely on monetery policy and economics. But it'll be too late. . .

 

[Travlyr]

Yeah, the creation of the Federal Reserve System was cleverly orchestrated. German-born international banker Paul Warburg immigrated to America in 1902. By 1907 they created a bank panic and the NYSE dropped nearly 50%. In November 1910, Senator Nelson Aldrich, Paul Warburg, and others conspired to design the central bank to control America's money supply.

Five million dollars later and three years of shilling for control through Princeton, Harvard, and University of Chicago propaganda papers Woodrow Wilson signed the Federal Reserve Act of 1913 on December 23 with 1/3 of congress absent for Christmas break. Woodrow Wilson was a former President of Princeton University.

They were very clever.

 

[Acala]

By the way, just to be clear, Ron Paul advocates allowing people a CHOICE about the currency they use. He does not advocate FORCING a gold standard or any other particular kind of money. His position is that if you eliminate the laws that compel the use of Federal Reserve money, eliminate the laws that allow banks to act irresponsibly in credit creation, and eliminate tax laws that punish the use of other currencies, the market will pick the best money and use it.

 

[rpwi]

It is important to remember that up until Nixon closed the gold window in 1971, our money was backed by gold. Every currency has to be backed by something. Right now, we have a fiat currency which means our currency is backed only by our faith that the government will be fiscally responsible and will control its spending.
That fact is starting to worry a lot of people.

Under a gold standard, we would use paper money, same as now, but it would be redeemable for gold, if you wanted it. The government doesn't need to have enough gold on hand at the beginning because new gold would be attracted into the system. People could deposit it into banks same as they do with cash.

Loans would happen in exactly the same way as they do now, but could be repaid with either dollars or gold. For the average person, not much would change, except that the Federal Reserve could not create inflation at will, so our dollars would hold their value over time. For more information, I would recommend Nathan Lewis' book called Gold: The Once and Future Money.
He answers the question about whether a population increase causes deflation under a gold standard here:
www.forbes.com/2011/07/22/gold-standard-deflationary.html
The short answer is that historical evidence does not show any of these deflationary effects.

What's very important to point out is that the US government was never really on a true gold standard. If they had X in gold deposits...then the government had say 10X in claims on that gold (dollars). This is not a true gold standard...but I'm not sure we would want a true gold standard as there just isn't enough gold (well cheap gold anyways). For anybody interested in this subject, I highly recommend the book by Murray Rothbard, "What Has Government Done to our Money".

http://mises.org/money/4s0.asp (especially part 4)

I actually favor maintaining our fiat currency but taking it out of the hands of the Federal Reserve and unwind the roots the fed has in the banking system.

 

[Travlyr]

It makes no difference to me if people use fiat currency, as long as, I'm free to use the real stuff. Is that too much to ask from a free society? Don't jail me for using real money and growing industrial hemp. Simple requests.

 

[Seraphim]

Sound money is open to competition. End of story.

 

[Carson]

I see no reason why a currency of fiat like we have couldn't work if it was managed properly. This is what I've come up with to help explain fiat money but is sort of misleading as it is of a mismanaged fiat.

See the little bumps in this next chart during early times of war? That was other times we introduced fiat into a system which was basically sound and based on silver and gold. To me it shows what happens when you pretty much double the money supply by introducing fake money into the system. It then takes twice as much. For me I feel it loses its soundness. On the other hand if you had a really good year and produced a lot of inventory maybe with a system of fiat would need to be increased to keep the value of the dollar stable. In other words keep the line on the chart running flat. Something you can bank on. Something you could exchange for commodities now or ten years form now and still hold its value.

Fiat can be very dangerous though as you can see the fix the world is in from the manipulation. It could also have an advantage by not tying up a lot of wealth for the sake of trading.

This occurred to me as I looked into where the power was coming from to subvert the immigration laws of the world. I have since come to feel it is the root cause of the loss of control of the government, the borders and the war department. Not just here but globally.

I've heard that back in the civil war when they tried it many refused to except it. I think that may be the key to keeping it real. As a previous poster (Seraphim) mentioned is allowing competing currency. People should have say.

The way it is, no matter how much hard earned money you and your friends around the globe could come up with, others in and outside of our governments can fire up the fake money presses and get their way!


P. S.

Did they ever tell you that the stock market went up today because the value of the currency went down? When they increase the money supply, say ten times, it then take ten times as much. You may think your stocks have been going up and up but they've been running hand in hand with inflation. The same people inflating the currency now cut themselves in with a capital gains tax for around thirty percent of your stuff when in fact you've only broke even.