How to Return to the Gold Standard
Mrs. Greaves, FEE’s resident scholar, bases this proposal on the understanding and recommendations presented in the writings of Hans F. Sennholz, Henry Hazlitt, Percy L. Greaves, Jr., and Ludwig von Mises.
There is no reason, technically or economically, why the world today, even with its countless wide-ranging and complex commercial transactions, could not return to the gold standard and operate with gold money. The major obstacle is ideological.
Many people believe that it would be impossible to return to the gold standard—Never! There are just too many people in the world, they say, and the economy is too complex. Many others look on a return to the gold standard as an almost magical solution to today’s major problems—big government, the welfare state, and inflation. What is the truth of the matter?
Certainly if the United States went on a gold standard, it would have to carry out many reforms. The federal government would really have to stop inflating, balance its budget, and abandon welfare state programs. Most voters are not ready for such reforms. And politicians, pressured by voters and special interest groups for favors, hesitate to pass them. Thus the major stumbling block to monetary reform is ideological. If this basic obstacle could be overcome, however, a return to gold money would become a realistic possibility.
Let’s consider possible ways for transforming our present paper and credit monetary system, based on fractional reserve banking, into a gold standard. There may be better ways and worse ways. Unfortunately the science of economics cannot prescribe a correct, scientific or “right” way. It can only help us choose among alternatives by analyzing their various consequences. A review of monetary history will also be helpful.
Several methods have been suggested for returning to a gold standard. All gold standard advocates agree that the goal must be to re-introduce gold as money, while making it possible to continue honoring outstanding contracts. The principal point on which they differ is with respect to the price that should be set for gold and how any existing paper currency should be defined.
The question of re-adopting gold as money always arises because inflation has persisted for some time, prices of almost everything, including gold, have risen, and the savings of the people have been eroded. Some gold standard proponents want to return to the pre-inflation gold/money ratio. Others want to raise the gold price to some arbitrary figure and allow the monetary expansion to play “catch-up.” Still others say that the least disruptive way would be to discover the current market gold/money ratio and redefine the dollar on that basis.
Returning to Gold at an Artificially High Rate
Great Britain suspended specie payments in 1797 and inflated during the Napoleonic Wars. She finally returned to the gold standard in 1821, 24 years later. On the theory that it was only honorable to recognize debts made in British gold pounds at the old ratio, she re-established the 1797 gold/pound ratio. However, not all the debts outstanding in 1821 dated from before 1797. Many loans had been made in the interim. Persons who had borrowed relatively cheap inflated British pounds, then had to pay back their loans in higher-valued gold pounds. This worked a special hardship on tenants, farmers, merchants and others.
Britain abandoned the gold standard again in World War I. Before 1914, London had been the world’s financial center. When the war started in August, shipments to England of gold, silver, and goods from all over the world were immediately disrupted. The shortage of funds put London’s banks and stock exchange in crisis and they closed down for a few days. When they reopened, a debt moratorium was declared and the Bank Charter Act of 1844, fixing the gold/
pound ratio and tying the quantity of paper pounds issued to the gold bullion reserves, was suspended. As the war continued and the government’s costs increased, the government inflated more and more. By 1920, after the war was over, inflation had proceeded to such an extent that prices had tripled and the gold value of the British pound had fallen 10 percent on world markets, from US$4.86 to US$4.40.
Faced with a devalued pound that was worth less on the market than it had been, the British again chose, as they had after the Napoleonic wars, to try to return to gold at the pre-war, pre-inflation rate. On April 28, 1925, England went back on the gold standard at the artificially high rate for the pound of US$4.86. The immediate effect was to price British goods out of the world market. For instance, U.S. importers who had been paying US$4.40 to buy a British pound’s worth of British wool or coal, now had to pay about 10 percent more. England was heavily dependent on exports, especially of coal, to pay for imported food and raw materials for her factories. As the cost of her goods to foreign buyers went up, they could buy less and British exports declined. Her factories and mines were hard hit. To keep the factories and mines open and men working, money wages would have had to be adjusted downward. This drop in money wages would not necessarily have affected real wages for, with the return to gold, the pound was worth more. But the unionized workers resisted and refused to work for less. Many went on the dole. And many went out on strike. Prices and production were seriously disrupted. Finally, on September 20, 1931, England announced that she would again suspend gold payments and go off the gold standard. The consequences were disastrous. The British monetary experiment played an important role in bringing about and prolonging the world depression of the 1930s.
Returning to Gold at an Artificially Low Rate
To consider returning to the gold standard in the United States at the long-since outgrown ratios of $20.67, $35.00, or even $42.42 per ounce of gold is obviously completely unrealistic. The U.S. dollar is now selling (mid-1995) at about $385 so that the value of the dollar has declined to approximately 1/385th of an ounce of gold. To re-value it at 1/20th, 1/35th or even 1/42nd of an ounce of gold would constitute an artificially high revaluation of the dollar and would undoubtedly lead to even more disastrous consequences than those resulting from the return to gold in Britain in 1925.
Realizing the problems England encountered in trying to establish an artificially high dollar/gold ratio, some gold standard advocates go to the opposite extreme and suggest an artificially low ratio. We are free, they maintain, to select any definition of the dollar we want. They then suggest dividing the quantity of gold mathematically by the total number of dollars in circulation, in commercial bank deposits, in checking accounts, and even in cashable savings accounts. By this method they arrive at several possible prices for the dollar, respectively $1,217/ounce, $2,000/ounce, $3,350/ounce, or even $7,500/ounce. Given the fact that an ounce of gold has been trading on the world market at about US$385, offering to pay any of these higher prices for a single ounce of gold would have an extremely inflationary influence. Prices would start to climb until they reflected the new dollar/gold ratio. For instance, anything that cost the equivalent of one gold ounce in today’s market would soon rise to $1,217, $2,000 or whatever.
An announcement that the U.S. planned to start paying something between $1,217 and $7,500 for an ounce of gold would immediately lead to the import of gold into this country at an unprecedented rate. It would spark a tremendous increase in gold mining, gold processing, and all related activities, to the detriment of all other production. To attempt to return to a gold standard at any such rate would be extremely disruptive of all prices and production. It would also destroy completely the value of all dollar savings and all outstanding contracts or commitments expressed in U.S. dollars. As practically all international production and trade depend on the dollar, this would bring business transactions to a halt worldwide.
Returning to Gold at the Market Rate
The goal of returning to a gold standard must be (1) to reintroduce gold and gold coins as money, without producing deflation and without causing the economy to go into shock, while permitting the fulfillment of outstanding contracts, including those of the U.S. government to its bondholders, and (2) to arrange for the transfer of gold from the government’s holdings into private hands, so that gold coins would be in circulation daily. As pointed out above, before this can happen, there must be a major ideological shift in the climate of opinion. The voters must be willing to be more self-reliant and accept personal responsibility for their actions. And the politicians must refrain from asking for more government spending at every turn. If this ideological stumbling block to establishing a gold standard could be overcome, if the people were willing to forgo welfare state spending and were determined to reform their monetary standard and introduce gold money once more in the United States, and if politicians would cooperate, then a shift from our paper and credit monetary system could be accomplished without radically disrupting the market, prices, and production.
Advocates of the gold standard should not be deterred by the three reasons given by critics who believe a gold standard could not work: that there isn’t enough gold to serve the needs of the world, with its increasing population and its expanding production and trade; that gold would be an unstable money; and that a gold standard would be expensive.
In the first place, there is no shortage of gold. The size of the world’s population, and the extent of production and trade are immaterial; any amount of money will always serve all society’s needs.[1] Actually, people don’t care about the number of dollars, francs, marks, pesos, or yen, they have in their wallets or bank accounts; what is important to them is purchasing power. And if prices are free and flexible, the available quantity of money, whatever that may be, will be spread around among would-be buyers and sellers who bid and compete with one another until all the goods and services being offered at any one time find buyers. In this way, the available quantity of money would adjust to provide the purchasing power needed to purchase all available goods and services at the prevailing competitive market prices.
In the second place, gold would be a much more stable money than most paper currencies. The purchasing power of government- or bank-issued paper currency may fluctuate wildly, as the quantity is expanded or contracted in response to the “needs” of business and/or political pressures, causing prices to rise or fall sharply. Under a gold standard, there would be some slight cash-induced price increases when the quantity of gold used as money rose, as more gold was mined, refined, and processed; and there would be some slight cash-induced price declines as the quantity of gold used as money fell, when gold was withdrawn from the market to be devoted to industry, dentistry, or jewelry. However, under a gold standard, price changes due to such shifts in the quantity of money would be relatively minor and easy to anticipate, and the purchasing power per unit of gold would be more stable than under an unpredictable paper currency standard.
In the third place, although it would cost more to introduce gold into circulation than a paper currency that requires no backing, in the long run a gold standard is not at all expensive as compared to paper. Again and again throughout history, paper moneys have proven to be extremely wasteful and expensive; they have distorted economic calculation, destroyed people’s savings, and wiped out their investments. Yale economist William Graham Sumner (1840-1910), writing long before the world had experienced the disastrous inflations of this century, estimated that “our attempts to win [cheap money] have all failed, and they have cost us, in each generation, more than a purely specie currency would have cost, if each generation had had to buy it anew.”[2]
Once it is agreed that the introduction of a market gold money standard is the goal, here are the steps to take:
First: All inflation must be stopped as of a certain date. That means calling a halt also to all expansion of credit through the Federal Reserve and the commercial banks.
Second: Permit gold to be actively bought, sold, traded, imported, exported. To prevent the U.S. government from exerting undue influence, it should stay out of the market for the time being.
Third: Oscillations in the price of gold would diminish in time and the “price” would tend to stabilize. At that point a new dollar-to-gold ratio could be established and a new legal parity decreed. No one can know what the new dollar-to-gold ratio would be. However, it is likely that it would stabilize a little above the then-current world price of gold, whatever that might be.[3]
Fourth: Once a new legal ratio is established and the dollar is newly defined in terms of gold, the U.S. government and the U.S. Mints may enter the market, buying and selling gold and dollars at the new parity, and minting and selling gold coins of specified weights and fineness. Gold might well circulate side by side with other moneys, as it did during the fiat money inflation time of the French Revolution, so that parallel moneys would develop, easing the transition to gold.[4]
Fifth: The U.S. Mint should mint gold coins of certain agreed-upon fineness and of various weights—say one-tenth of an ounce, one-quarter, one-half, and one ounce, etc.—and stand ready to sell these gold coins for dollars at the established parity and to buy any gold offered for minting.[5] As old legal tender dollars were turned in for gold, they should be retired, so that gold coins would gradually begin to appear in circulation.
Sixth: The financing of the U.S. government must be divorced completely from the monetary system. Government must be prevented from spending any more than it collects in taxes or borrows from private lenders. Under no condition may the government sell any more bonds to the Federal Reserve to be turned into money and credit; monetization of the U.S. government’s debt must cease! A 100 percent reserve must be held in the banks for all future deposits, i.e., for all deposits not already in existence on the first day of the reform.
Seventh: Outstanding U.S. government bonds held by non-U.S. government entities, must be fulfilled as promised.[6]
Eighth: To avoid deflation, there should not be any contraction of the quantity of money currently in existence. Thus prices and outstanding debts would not be adversely affected. U.S. government bonds held by the Federal Reserve as “backing” for Federal Reserve notes may be retained, but should not be used as the basis for further issues of notes and/or credit. No bank may be permitted to expand the total amount of its deposits subject to check or the balance of such deposits of any individual customers, whether private citizen or the U.S. Treasury, otherwise than by receiving cash deposits in gold, legal tender banknotes from the public or by receiving a check payable by another bank subject to the same limitations.[7]
Ninth: The funds collected over the years from employees and employers, ostensibly for Social Security, were spent as collected for the government’s general purposes. Thus the U.S. government bonds held as a bookkeeping ploy in the so-called Social Security Trust Fund are mere window-dressing. These U.S. bonds may be canceled. To keep its “promises” to those who have been led to expect “Social Security” benefits in their old age, arrangements could be made to phase out the program by a number of devices, including payments from the general tax fund to current retirees, to the soon-to-be-retired and, on a gradually declining basis, to others in the system—down to, say, ages 40-45 years. The program could then be closed down. No more Social Security “benefits” would be paid out and no more taxes would be collected for “Social Security.” People would have to become personally responsible for planning for their own old age and retirement. Without “Social Security” taxes to pay, they would be better able to save. Moreover, given a sound gold standard, they would be confident that their savings would not be wiped out by inflation.
After the Reform
For U.S. monetary reform to be carried out it is essential that the U.S. government balance its budget and refrain from spending more than it collects from taxes and borrows from willing lenders. The prerequisite for this, as noted above, is a change in ideology. Once the public and the politicians were determined to cut government spending, reform would become a realistic possibility.
When the United States is again on a gold standard, the old legal-tender paper money could continue to circulate until worn out when it would be returned and replaced by gold coins. New issues of paper notes would not be designated “legal tender.” But they should be strictly limited, always fully convertible into gold, and issued only against 100 percent gold. Gold coins would also be in daily circulation; should they start to disappear from the market, this would serve as a warning that the government was violating its strictures and starting once more to inflate.
Those who think that a gold standard would place such rigid limits on the market that money lending would no longer be possible should be reminded that what fully convertible money precludes is not moneylending per se. Individuals and banks would, of course, still be able to lend, but no more than the sums savers had accumulated and were willing to make available. What the gold standard prevents is the involuntary lending by savers, who are deprived in the process of some of the value of their savings, without having any choice in the matter. Fully convertible money under the gold standard prevents more than one claim to the same money from being created; while the borrower spends the money borrowed, the savers forgo spending until the borrower pays it back.
Under the gold standard, banks would have to return to their original two functions: serving as money warehouses and as money lenders, or intermediaries between savers and would-be borrowers. These two functions—money-warehousing and money-lending—should be kept entirely separate. But that will not preclude a great deal of flexibility in the field of banking. With today’s modern developments, computerized record-keeping, electronic money transfers, creative ideas about arranging credit transactions, credit cards, ATM machines, and so forth, lending and borrowing, the transfer of funds and money clearings could continue to take place rapidly and smoothly under the gold standard and free banking, even as they do now. However, under a market gold standard people need no longer fear the ever-impending threat of inflation, price distortions, economic miscalculations, and serious malinvestments. []
1. “No Shortage of Gold,” Hans F. Sennholz, The Freeman, September 1973, pp. 516-522; “How Much Money,” Bettina Bien Greaves, The Freeman, March 1994, pp. 131-134.
2. “History of Banking in the U.S.,” The Journal of Commerce and Commercial Bulletin, 1896, p. 472.
3. The present, mid-1995, price is in the neighborhood of US$385.
4. Louis Adolphe Thiers, History of the French Revolution, 7th ed. Brussels, 1838, Vol. V, p. 171; Henry Hazlitt, The Inflation Crisis, and How to Resolve It, Arlington House, 1978, pp. 176-178, 187-188.
5. In 1986, the U.S. government began to mint one-ounce 91.67 percent pure gold Eagles, which were labeled “Fifty Dollars” but were sold at a mark-up over the then-current world gold price. If it continued to mint such one ounce coins, however, it would seem preferable to label them in ounces rather than dollars.
6. Daniel J. Pilla, “Should We Cancel the National Debt?” in The Freeman, November 1995, pp. 684-688.
7. Ludwig von Mises, The Theory of Money and Credit, Yale, 1953, pp. 448-452; Liberty Fund, 1981, pp. 490-495.
Comment by David Snyder on 14 February 2009:
I strongly advocate a return to the gold standard.Since getting off it,inflation has made the dollar worth about a dime in comparison to its worth when the gold standard was used.
Comment by Truth and Liberty on 16 February 2009:
Great article. I strongly support the plan of action you suggest here, but I am not sure about whether defining the dollar at the market price is the way to go. Two big problems with that:
1. The Fed / government does not have enough gold to redeem all the outstanding Federal Reserve Notes if it does so at the market price.
2. People would demand gold instead of dollars, so they would want gold instead of bank deposits. The banks don’t have enough gold or Federal Reserve Notes to redeem all bank deposits.
I think the effect would be catastrophic in this case. I think I prefer the Rothbard plan to return at an artificially low rate. Yes, there would be a sudden and huge inflation, but at least there would not be a banking or currency collapse, because the banks would immediately have 100% gold reserves for their outstanding deposits.
Comment by James Crippa on 10 March 2009:
Dear Ms. Greaves:
I too advocate a return to the gold standard since only gold can guarantee and back the world’s economic value.
I advocate that the United Nations who represent all sovereign nations adopt a program that would lead to every national State implementing a gold buyback program. Therefore all 145 million kilos of gold ever mined would be held by the various States that could lead to the creation of a one world nation.
Gold is the big secret and only precious available to obtain an economically stable world economy and guarantees stability by not allowing deflationary or inflationary market conditions to prevail.
If the State held all 145 million kilos of gold it could set whatever price per gram it desired and I suggest that when implementing a gold buyback program it sets a price per kilo that reflects the totality of salaries of the world’s workforce namely, global GNP. To give an example, if the world’s workforce is 45% of the world’s population and all the world’s workforce were to earn an annual equitable salary of $200,000 then that would equate to a price per kilo of gold of $4.5 million compared to the current $28 thousand.
A gold buyback program is definitely worth while since open market demand and supply transactions could never reach the immediate results that a gold buyback program attains. In addition we could all earn a respectable salary without falls in economic value and I present this one world nation and its workforce structure at http://www.myspace.com/partyrules
Just to finish the example above, the $200,000 equitable salary for 45% of the world’s population would equate to a global GNP of $651 trillion compared to the current and decreasing global stock market capitalization of $42 trillion. This would allow all of us a huge leap in quality of life compared to the actual.
Please advise me what next steps would you take in advocating such a global gold buyback effort since I do agree we would finally get to level zero sane state of the economy and restore our sanity and permanent economic stability.
Sincerely,
RJC
Comment by mo on 10 July 2009:
If people are worried about the reintroduction of gold as currency, how about this option? Let the US Government start printing its new money partially using 24k gold leaf in its design (approximating the amount to the face value of the paper note i.e., today’s current $1 value of gold leaf goes to Washingtons and today’s current $100 value of gold goes to Benjamins)…the leafing could be incorporated into the security strips, it would be durable and would always equate to the face value. We would continue to use either the non-gold paper money or the gold infused paper money until the natural life cycle of the non-gold paper currency led it back to the US Government for its destruction.
Viola! We are no longer Keynesians.
(Granted this option is incredibly idealistic and somewhat facetious)
Comment by HSP on 26 October 2009:
Whoever moderates this please write me an email so I can get more information. The fractional reserve system has completley destroyed our way of life, and has led the nation into poverty, debt and no escape. The Federal Reserve, as a PRIVATE CORPORATION, has been loaning the US currency to our Gov’t at interst. (FOR PROFIT). Gold has retained its value for over Three thousand years. Dollars, Lira, Pesos and so forth have come and gone. In Rome in the year 1 A.D. you could purchase a toga, sandals, wreath hat etc for one ounce of gold (look it up). Today in Rome, you can buy a tailored suit, shoes and belt for, you guessed it, one ounce of gold (look it up). 2,000 years, same purchasing power. Meanwhile, who here reading this, thinks that if you take a $100 bill, put it into a savings account, leave it for one year to collect interest, and then spend it one year from now that it will still be the same value? You and I both know it won’t because it will have lost purchasing power. We are talking about one year. Think back to the value of your parents’ nickels in 1920. the dollar is losing 90% of its value every single generation right now. As a 30 year old American, this is NOT the country you should be leaving me.
Comment by Kyle on 2 August 2010:
Absolutely 100% right. It always starts with not being able to fund a war. They start “printing money” and it’s like paving the road to hell. In the end we all suffer.
I didn’t understand the bit about letting gold trade in the free market for a little while for the “price to settle.” Why not just peg a dollar to current market price per oz., whatever that may be, and keep it fixed there? Maybe the ratio would be wrong, like there are actually $5,000/1 oz. in circulation or whatever, but it would be a start.
Ron Paul is the only politician strongly advocating the gold standard and abolish the Fed, but we live in a world of fools and our election process is flawed. Throughout history billions of people have had their lives ruined and even taken by those in power. Tragically the US government is no exception. Philosophically, I need to accept this reality, not spend every day worrying about it, because it’s bigger than me, and try to get enjoyment while the gettin’s good. It’s comforting to know there are some others who see the flames of the fire growing around us.
Comment by Kyle on 2 August 2010:
I guess we could go stand in front of the Capital Building with Gold Standard picket signs or something shouting “Gold Standard!”
I mean it would be a start.
Comment by Kyle on 2 August 2010:
Oh, but we might get killed. Seriously.
Comment by Kyle on 2 August 2010:
So let’s see, they’re probably just going to create money to pay off that $13T debt and pay for their operating deficit. The excess dollars cause devaluation of the dollar and we enter hyperinflation. Anybody who’s stored their value in real assets like property or gold might be ok I think. I keep hearing about deflation, but this is the scenario I thought more likely. How else are they going to pay it off? You can’t raise taxes that much, people will go out of business or revolt. People can’t even find jobs as it is.
Let’s say they just said “sorry not paying” to every citizen owed money by the Feds. That could probably happen. People would lose fortunes and nobody would ever lend to the government again. People relying on Social Security would become homeless. Money Market savings would be wiped out. It’s hard to say really, I’m not an economist, but I think I should probably find out.
Pingback by It's the Federal Reserve....stooopid! - Politics and Other Controversies -Democrats, Republicans, Libertarians, Conservatives, Liberals, Third Parties, Left-Wing, Right-Wing, Congress, President - Page 2 - City-Data Forum on 14 September 2010:
[...] Originally Posted by jetgraphics Precious metal coin is no solution, sad to say. Most people are unaware that under American law, people have the power to create their own money. Even Congress lacks that power. The "other" Solution: private promissory notes. A common example is a coupon for a free item or service. Fine print on said coupon will state 1/20 of a cent cash value – regardless of the actual value. If people awoke to their legal power to create their own medium of exchange, denominated in that which they can do or produce, they would side step the money drought. Such a private money system would only work within small communities where the issuers and traders are known for their "creditworthiness" (history of honorable behavior). Those who are not trustworthy – they have to deal in cash… whatever that will be. However, banks might become "coupon clearinghouses" where they'd discount private notes, and exchange them for widely circulating bank notes. As long as usury is not allowed, such discounting won't be a problem. How to Return to the Gold Standard | The Freeman | Ideas On Liberty [...]
Pingback by Monetary Policy for a Transformed America. | Franksummers3ba's Blog on 22 September 2010:
[...] I do not advocate the Spartan approach or the very different return to the gold standard. However, some do advocate it today. “There is no reason, technically or economically, why the world today, even with its countless wide-ranging and complex commercial transactions, could not return to the gold standard and operate with gold money. The major obstacle is ideological.” See the link: http://www.thefreemanonline.org/featured/how-to-return-to-the-gold-standard/# [...]
Comment by Royce on 15 October 2010:
This well written article is still being read 15 years after it was written. Impressive. Too bad we didn’t listen in 1995. People who work and produce have everything to gain from a gold standard. It protects their savings. It limits governments-gone-wild. The able bodied who choose not to work and expect the rest of us to supply them with a check are the only ones who should fear the gold standard. Gold is honest money.
Comment by Steve on 28 November 2010:
I’m not some major economist, but I do know that our fiat money is the primary source of our inflation and instability because its value is totally arbitrary. Granted even the exchange standard of commodities with real value can be somewhat arbitrary in the beginning, but not as much, and eventually there would be enormous stability. One problem is having enough precious metal or other intrisincally valuable commodities to exchange for the old fiat money when the new system is introduced…doubtless there would be some grumbling about equity. Another is getting fiat monetary units out of the minds of the people and helping them to see the real value of gold, silver platinum, etc. in terms of weight, not dollars. That’s the way money originally worked, but it gradually evolved into representative money, then eventually fiat money. Some people like the fiat money because it produces the illusion that more money for everyone means a better economy. It’s just as crippling as deflation of the money supply because of the way it lowers the purchasing power of the dollar.
Pingback by Bachmann Also Takes Aim at Fed on 17 August 2011:
[...] article on how to return to the gold standard How to Return to the Gold Standard | The Freeman | Ideas On Liberty In your last sentence you concede that Congress does not have control, therefore it is not [...]
Comment by SamFox on 20 August 2011:
The article does not define the role of govt in a return to the GS.
I bring this up because I read this:
“The case for a free-market commodity money as provided by a genuine gold standard is simple yet decisive. It is based on the insight that the root cause of inflation in the modern world is the almost absolute monopoly over the supply of money which all national governments possess within their respective political jurisdictions. That such an arrangement necessarily produces inflation is not difficult to explain.
To begin with, almost all governments obtain the bulk of their revenues through taxation which, regardless of its particular form, ultimately involves — indeed, is definable as — a coerced levy upon the monetary incomes or assets of its citizens, i.e., the net taxpayers. However, whatever ethical or practical considerations may be brought forward to justify taxation, since it is essentially coercive, tax increases have always found little favor among the citizenry So, ever fearful of arousing popular unrest, governments naturally sought alternative means for augmenting their revenues from taxation. It was for this purpose that all national governments eventually secured for themselves a legal monopoly of issuing money, empowering them to inflate, i.e., to create new money, virtually at will. ”
Quote from: http://www.cato.org/pubs/pas/pa016.html
Myself I am new to this. so I have been looking around. The above link’s article is rather long, but I think worth studying.
Here is a list I found on returning to the gold standard.
http://tinyurl.com/3jvjjzg
To me this is VERY serious business! I think we should carefully consider eliminating the ‘Fed’ or at least putting it under the direct control of Congress & break the strangle hold of the private international bankers who presently own it. This means we must have an honest Constitutionally contained Congress & POTUS. Getting complicated already!
SamFox
Comment by LordMarcus on 6 November 2011:
hello.
i think there is a problem with geting real-gold coins into circulation. is just not rigth. also fixing a gold-dollar price is for any given period is still artifititial and still a distortion and should not be done.
my suggestion is this: issue a “new dollar” yes paper money, diferent desing and all. its face value represents a fixed mass of gold i.e. 100new$ = 1 gold gram (the gov is obliged to redeem the face value to any citizen in pure gold). and its legal tender. make it circulate alongside the old dollar and let the exchange rate bettew both run free. let it be legal tu put prices in both currencies. keep minting new$, stop mintin old$ and get then off circulation ASAP!
oppinion?
Comment by Blah on 31 January 2012:
You don’t need real gold coins to have a gold standard you could also use silver or copper or whatever if you wanted or a mix of different metals you simply say this paper currency is backed by a dollar of these metals that we actually have in a safe somewhere. If you want the gold or silver or copper we will give you the amount of whatever metal you want that is equal to the worth of your money meaning you have 100 dollars and you want to exchange it for one of the metals you specify the metal you want gold/silver etc. and they will give you 100 dollars worth of that metal!