Thoughts on a Return to Gold
What would it take, what would it look like, and why do we need to return to sound money in this country? It certainly won’t come from the Federal government, as this return would drain the life’s blood out of the vast majority of federal programs, embarrass the government in the eyes of foreign governments and creditors, and relegate the feds to such mundane and unsatisfying jobs as maintaining courts and national defense. The transition from paper fiat money to sound money is inevitable, just read the history of all paper fiat monies throughout history, it’s just a matter of how hard the landing is on the return and who ends up taking the bath.
Dr. Edwin Vieira has teamed up with a few state legislatures to craft a series of bills that would allow the states to set up a parallel monetary system, based on their Constitutional right to make gold and silver coins legal tender within each state, that would help to wean people off of their dependence on the Fed’s green funny money. The plan calls for states to begin collecting income taxes from large corporations based within their borders (in my home state of Virginia, think Tobacco companies) in gold, thereby creating a reserve fund of gold that the state can then begin to pay out to those who request it from the state. With electronic accounting of gold, and the ability to weigh and separate gold down to less than 1/1000th of a gram (at today’s prices, that is less than $0.05), it would then be feasible for citizens to carry a “gold” debit card, and for stores to begin pricing their goods in both Federal Reserve Notes and gold. A website describing the attempt in New Hampshire is here, and a committee hearing in Montana is here.
Michael Rozeff, a retired Professor of Finance living in East Amherst, New York, has developed the concept of the “Zero Discount Value” (here and here) of gold, which he arrives at by calculating “the total number of currency notes issued divided by the total number of oz. of gold held as an asset against that note issue.” In this way he intends to show not only the depreciation of the dollar, but also what the dollar would look like if the government were to start redeeming in gold. It is an interesting read.
Finally, Former Congressman, and Reagan’s OMB director, David A. Stockman spoke at the New York Historical Society on May 8th. He begins:
“It took 200 years to build and perfect the classic gold standard system; then it was destroyed in about seven weeks when the Guns of August 1914 thundered across Europe; and now I am allotted seven minutes to resurrect it. Fortunately, Churchill’s defense of democracy also applies to the daunting task at hand: To wit, the classic gold standard is the worst possible monetary system – except for all of the alternative inflation-generating, savings-destroying, debt-breeding, bubble-emitting and boom and bust-prone systems which have been tried in the 100 years since its demise. Hence, we offer six present day monetary vices which are curable by gold…”
Theodore Phalan is an economics student at George Mason University and a previous Sound Money essay contest winner.
Image by Arvind Balaraman / FreeDigitalPhotos.net.
