I love Ron Paul, if only because he's bringing the debate over the Gold Standard kicking and screaming back into American Politics. I hope he gains some political steam, because I bet Obama could give a great, "Cross of Gold" speech that would be fun to watch!
However, I was re-reading one of my favorite books today, F.A. Hayek's Individualism and Economic Order this evening, and one of the chapters is a 1943 Economic Journal article titled, "A Commodity Reserve Currency". In it, he advocates for a currency based, not on gold, but on a bundle of raw commodities, so that $1000 would equal "x units of sugar plus x units of iron plus x units of gold etc.", so that the prices of commodites could fluctuate together, but the price of the entire bundle remained constant - was the definition of money.
What ever happened to that thought? Is it a bad one?
We are better off letting the market decide.
To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process. Rabbi Lapin: "Let's make bricks!" Stephan Kinsella: "Say you and I both want to make a German chocolate cake."
Free Market Money?
Perhaps in the future we need to consider free market money, allowing consumers to decide about their money the way they decide about everything else. Hans Sennholz and Friedrich von Hayek argue for this system. And it existed at one time in our country.
In California, during the 1840s and 1850s, many privately minted gold coins circulated. The practice was outlawed in 1864, "but as late as 1914," points out Antony Sutton, "the U.S. Treasury was still trying to halt circulation of private gold pieces in San Francisco." Why were such coins still circulating? Because the private mints maintained higher standards than the government mint. Often, points out Dr. Sutton, they were one percent heavier than Federal issues, "to protect the user from metal loss by abrasion while the coin was in circulation." Private mints held to a higher standard because they were protected only by their reputation. They could not force consumers to take sub-standard money by the force of law, as government can.
The North financed the Civil War with hundreds of millions of dollars of irredeemable Greenback notes, and as a result, prices more than doubled from 1861 to 1865. During the Greenback inflation, people in California continued to use gold as their money. "In California, as in other states," points out Frank Taussig, "paper was legal tender " that is, people could be forced to accept it. Although there was no antipathy towards the Federal government, people believed strongly in gold. "Every debtor had the legal right to pay off his debts in depreciated paper. But if he did so, he was a marked man (the creditor was likely to post him publicly in the newspapers) and he was virtually boycotted. Throughout the period, paper was not used in California."
Just for the complete fools out there that really aren't paying attention.. does a Statist support a free market in money? I mean you hear him pronouce freemarket solutions, and he often falls back on the Constitution as a rhetorical tool - in an age of manufactured consent... but you never hear him denounce freemarket options, i.e those that are more radical. He never denounces them. That's the difference.
Perhaps we are "better off letting the market decide"... I wasn't arguing to the contrary.
I am wondering what "killed" the idea of changing the money supply from gold to a basket of goods?
Was there a specific argument, or did fiat currency, forgive the pun, "make" the argument moot?
Is there a reason gold is a better choice over a basket of goods?
Perhaps reading this topic might answer some of your questions:
http://mises.org/Community/forums/t/7390.aspx?PageIndex=1
Howdy!
Lysander Spooner proposed a realestate backed note in A New Banking System: The Needful Capital for Rebuilding the Burnt District. He makes the case that hard money is good, but can be further backed by land holdings. I am not in favour of his system for many reasons. One being that land is not the same everywhere. On commodity backing I lean towards an atomic energy redeemable note. Though after learning more about the nature of money, that would be recklessly inflated. I agree most with the government should have no say about the nature of money, as a stringent rule. I am for most of all for parrallelism(competing specie based on the market value, gold vs.copper vs. silver; say). It would be healthy to get rid of government names for money like pound, dollar, franc, yen, etc. A system of weights would be ideal. Under the U.S. Constitution the Government could insure against fraud by making sure standards of weight are held up, but go no further. Another problem with most commodities is that they are durable goods (they go bad over time), while metals tend to have a much longer life span. Most of all I want to say; a strong case could be made for how individual liberty, and money free from government can go hand in hand. Hopefully there I gave a few things to think about when pegging a currency. Though some peg is better than the illusion of one, or none at all.
Individualism Rocks
Scott Grizzard:what "killed" the idea of changing the money supply from gold to a basket of goods?
The fact that Hayek later argued for a free market in money.
Having a single, extremely valuable commodity is beneficial since it effectively prevents fraud/fractional reserves. Under, say, a steel monetary system, you would need huge amounts of steel to back up one or two dollars. Because of this, nobody would want to exchange their paper for steel, allowing the monetary supply to grow without comparable growth in steel. Having just gold prevents this.
Likewise, gold is not a perishable good like some other items (e.g. wheat and barley).
Political Atheists Blog
Conza88:Just for the complete fools out there that really aren't paying attention.. does a Statist support a free market in money? I mean you hear him pronouce freemarket solutions, and he often falls back on the Constitution as a rhetorical tool - in an age of manufactured consent... but you never hear him denounce freemarket options, i.e those that are more radical. He never denounces them. That's the difference.
What are you talking about?
If I wrote it more than a few weeks ago, I probably hate it by now.
he is saying that Ron Paul is an anarchist.
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
I. Ryan: Conza88:Just for the complete fools out there that really aren't paying attention.. does a Statist support a free market in money? I mean you hear him pronounce free market solutions, and he often falls back on the Constitution as a rhetorical tool - in an age of manufactured consent... but you never hear him denounce free market options, i.e those that are more radical. He never denounces them. That's the difference. What are you talking about?
Conza88:Just for the complete fools out there that really aren't paying attention.. does a Statist support a free market in money? I mean you hear him pronounce free market solutions, and he often falls back on the Constitution as a rhetorical tool - in an age of manufactured consent... but you never hear him denounce free market options, i.e those that are more radical. He never denounces them. That's the difference.
Ha, never mind me. It was a bit of a vent directed at those who call Ron a statist & do their best to completely dismiss the good he has done at spreading the message of Liberty - and above all else, increasing the no. of Austrian's / libertarians / anarcho-capitalists by promoting the Austrian School and LvMI.
nirgrahamUK:he is saying that Ron Paul is an anarchist.
Yeah, a secret one lol.. and if he was, I wouldn't want him to come out & announce it. That'd be completely stupid and Ron isn't stupid.
Washington Warp: Why Even Good People in the Beltway Can't Think Straight by Jeffery Tucker (25min): "DC culture has the effect of turning people into secret anarchists or secret totalitarians." I think it's clear which way Ron would lean. Hehe