Did you see Ron Paul's suggestion on how to end harmful Fed impacts without abolishing the Federal Reserve?
http://****cnn.com/2009/OPINION/10/30/ron.paul.fed/
"While I would like nothing more than to see the Federal Reserve abolished, it is not absolutely necessary to do so with direct legislation.
The Fed’s influence comes about because of its monopolization of the creation of money. If we could abolish the government monopoly on the creation of money, the Federal Reserve would be forced to clean up its act or go out of business. Economists know that monopolies lead to reduced output and higher prices, a suboptimal allocation of resources. This applies as well to the market for circulating currency as it does to markets for any other good.
In the previous Congress I introduced legislation that would eliminate the three major barriers to competition in currency and break the Fed’s stranglehold on money.
The first barrier: Legal tender laws, which Congress does not have the Constitutional authority to enact. Historically, legal tender laws have been used by governments to force their citizens to accept debased and devalued currency…
The second barrier: laws that prohibit the operation of private mints. Certain sections of U.S. code classified as anti-counterfeiting statutes were in fact intended to shut down private mints that had been operating in California. There is no reason to ban private companies from minting gold and silver coins to compete with the dollar.
All currencies are based on trust, trust that the issuing authority will not debase the currency. If it becomes known that the issuer of a particular currency is minting underweight coins, people will stop accepting that currency and that company will go out of business. If someone else attempts to counterfeit that currency and pass those coins, there are sufficient counterfeiting laws on the books to prosecute those counterfeiters.
Under a system of competing currencies, it would be to the advantage of stores to accept as many currencies as they could, in order to attract a wide range of customers. Stores that only accepted one currency would see their customer base shrink. The use of credit cards could simplify things just as it does today when Americans travel to Europe. They pay in euros with their credit card, and their card company bills in dollars. The market will find a solution to any problems that might arise.
The final barrier to competing currencies: Laws that assess capital gains and sales taxes on gold and silver coins. Under federal law, coins are considered collectibles, and are liable for capital gains taxes. These taxes actually tax monetary debasement. The purchasing power of gold may remain relatively constant, but as the nominal dollar value increases because of a weak dollar, the federal government considers this an increase in wealth and assesses taxes.
Thus, the more the dollar is debased, the more capital gains taxes must be paid on holdings of gold and other precious metals. For individuals who may wish to use gold and silver in everyday transactions, this can quickly become a complicated and costly burden.
The long-term strength of the dollar will only be weakened by maintaining the Fed’s monopoly on our monetary system. Our foreign creditors are already moving to dethrone the dollar as the world’s currency.
The prospect of American citizens also turning away from the dollar toward alternate currencies should provide an impetus to the U.S. government to regain control of the dollar and halt its downward spiral. Restoring soundness to the dollar will remove the government’s ability and incentive to inflate the currency, and provide stability to the financial system. With a sound currency, everyone is better off, not just those who control the monetary system.
There are more details, statements of reasons, and discussion of why the current system is a problem in the article at the link.
What do you think?
Josh, how substantive of you.
ci, see above. Mints created coins in our history all the time and were freely traded as gold nuggets were in the gold rush, until legal tender laws. As ‘comex accepted’ bullion trades on the reputation of the mint, so would money.
john a, I have a counter for each point you raised but that divide boils down to whether you trust companies more than government and I do, seeing how special interests use government to write laws for companies NOW. I think they should not be ‘persons’ and the govt should be too small to raid us for corporations, and should police and prosecute fraud.
mommanuke, actually, that is a somewhat less aggressive partial solution that has been discussed - pegging the dollar to a value range for gold. I don’t like it as much, but it is better than what we have.
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I pretty much agree with all of it, but I don’t think it will make a difference in the long run. I think we went over the top a long time ago and the downhill slide is going too fast to stop now.
I think one way might be to freeze the value of the dollar as of today, allowing it to grown in value but not to drop below a certain level. Although this would cause inflation here in the short term, it would increase confidence in the dollar abroad and make it less likely that the international creditors would call in their notes.
But monetary theory is really complicated, so I don’t know whether that would work or not.
I think Ron Paul is a complete idiot. An introductory text on economics could tell you that . . .
If the government doesn’t control the supply/creation of money, then who would?
Ron Paul is the only one in the government with his head on straight. The doctor knows whats up. I voted for him! By the way ci the government doesn’t control the fed, they are a PRIVATE international banking clan. They have they same counterfeiting operation going in Europe, the soon to be world bank! The federal reserve is not federal nor is it a reserve!
Ron paul has some good points but the problem with the economy is the need for regulations. Corporations have no morals so they do whatever they can to make money even if it means to lie cheat and steal. The loan market is a good example of this. Once congress in 2000 deregulated the loan market it became a gamble with America losing. Every market that have been deregulated has gone belly up. Free market system works fine as long as there are check and balances to keep corporations honest. Without the check and balances we get a unbalance market that causes a recession.