Gold, Peace, and Prosperity: The Birth of a New Currency
by Randy Radic
Recently by Ron Paul: Got Hemp?
Gold, Peace, and Prosperity is the title of Ron Paul's essay for a modern gold standard. According to Paul, such a standard would end the relentless boom-bust cycle, and maintain the value of King Dollar. However, King Dollar would have to be founded on a monetary standard that eschews government tampering.
Paul begins his treatise by pointing out that Congress alone is responsible for inflation, and Congress alone can stop it. Which means that the old scapegoats — OPEC, greedy CEOs, labor unions — are not the real cause of inflation. To support his contention, Paul relates a story told by Marco Polo in his travels through China. As Paul states, Abuse of paper money led to the expulsion of the Mongol dynasty from China.
The same thing happened when the Continental Congress began issuing paper money during the Revolutionary War. Initially, one Continental paper dollar was worth one gold dollar. After a while, it took 1000 Continental dollars to equal one gold dollar. In other words, it literally took a wheelbarrow full of money to buy a loaf of bread.
Paul provides a short history of our monetary decline. During the 19th Century, the U.S. operated on a gold standard. The economy was strong and healthy during that time. Then in 1913, the Federal Reserve Act established the central banking system. That was the beginning of the end.
Paul asserts the Federal Reserve Act made America's entry into World War I possible. It was accomplished by inflation. And the end result of inflation was the 1921 depression. Further inflationary tactics caused and perpetuated the Great Depression of the 1930s.
In 1934, the Gold Reserve Act outlawed private ownership of gold, prohibited the use of 'gold clause' contracts, and abolished the gold coin standard. In effect, the U.S. went on the gold bullion standard. Paul points out that, contrary to Paul Samuelson's declaration that the Federal Reserve System was formed in the face of strong banker opposition, the exact opposite was in fact true. The biggest banks in the country were all for the new system because it promoted inflation that benefits bankers and big corporations.
Bretton Woods — in 1944 — supposedly established a new gold exchange standard. In Paul's opinion, Bretton Woods was nothing more than an international Federal Reserve System. And of course, it didn't do anything but cause more inflation. Then on August 15, 1971, President Nixon closed the 'gold window.' This was the beginning of managed fiat currency.
May 13, 2010
Dr. Ron Paul is a Republican member of Congress from Texas.
Copyright © 2010 Silver Monthly