Congressman Paul is right to oppose the ‘bailout’ and to call for the abolitio of the Federal Reserve. Keep on, Ron. I know that I have got your back.

Unfortunately, this power was given away to the non-governmental financial elite in 1913, with the Federal Reserve Act, when then President Woodrow Wilson allegedly said afterward, “I have ruined my country.”

No, I don’t think Rothbard agreed that bills of credit from gold bankers would win a free competition for money. As I understand Rothbard’s position, he would command a 100% reserve standard of gold bankers, but gold banking never operated this way, and I don’t expect gold banking, without a Rothbardian command, to operate this way.

Gold bankers without a Rothbardian King commanding 100% reserves will issue bills of credit redeemable in gold exceeding their reserves, particularly if the credit is secured by valuable assets other than gold. If I bank $100,000 worth of gold, I may choose to issue $200,000 in bills of credit redeemable in gold secured by two houses worth $100,000 apiece, because I can always claim the houses and sell them for gold to meet the demands of holders of my bills of credit. The Proudhonists (the original “anarchists”) wanted banks issuing credit secured only by valuable labor, precisely because they saw an established, titular “nobility” practically monopolizing gold.

But the real issue is taxes and other lawful debts. Precisely, how does Paul propose to distinguish lawful “dollars”, for the payment of debts including taxes, from unlawful “dollars”? “The market will decide” doesn’t address this question.

I also have a problem with Paul and other “hard money” advocates saying that the Constitution requires only gold and silver as a legal tender. The Constitution clearly doesn’t say this. It only limits the States this way. It clearly does not limit Congress similarly. Whether it should have limited Congress this way is a separate issue, but I don’t believe it should have.

Isn’t Paul’s position to simply legalize competing currencies, rather than mandate a govt. gold standard? Didn’t Rothbard, and doesn’t Paul, argue that gold will eventually win out in the market and as Paul said in the interview simply “overtake” (I think that was it) paper money?

I’m confused, because it sounds to me like y’all agree.

But …

Although I also admire Lew Rockwell and Murray Rothbard, Rothbard’s theory of money is incredibly flawed, and his idea of a gold standard is too.

If I want to be paid in gold, I can arrange that now. I can have my pay check sent directly to a gold dealer for the purchase of bullion at the market price. Of course, if my paycheck has a fixed dollar value, I would purchase differing amounts of gold each day, because the price of gold varies.

When Paul discusses “being paid in gold”, he’s discussing a different arrangement, because he’s really discussing the terms of my employment contract. He means that I negotiate a wage in terms of units of gold, rather than in monetary terms reflecting ever changing market prices.

I can do that now too. When I approach an employer, rather than ask for $30/hour, I ask for a gram of gold per hour. Of course, I then ask my employer to double my wage in dollars when the price of gold doubles, even if the market price of his goods and services vary relative to the price of gold, and I also accept a falling wage in dollars when the price of gold falls. Prices do vary in free markets. Prices are supposed to vary in free markets.

I can also ask for five bushels of corn per hour, or I can ask for a wage that automatically rises or falls with the price of corn. A corn farmer might find this wage very agreeable, but other employers presumably would not.

That said, I agree with Paul that our monetary system is incredibly statist and thus subject to the whims of politicians (including central bankers and corporatist executives); however, a gold standard is simply a fixed price of gold. The price is fixed by a state. A gold standard, per se, does not outlaw fractional reserve banking. It only requires creditors banking gold to exchange gold for bills of credit at the established price.

A gold standard effectively limits extensions of credit by gold bankers in a way that might stabilize prices more generally, if gold bankers monopolized extensions of credit; however, gold bankers need not (and should not) monopolize credit. Why should corn farmers not extend credit by lending bills of credit redeemable in corn for example?

Why should Walmart not extend credit in dollars redeemable in anything Walmart prices in dollars? More specifically, why can’t Walmart lend me Walmart gift cards requiring me only to return equivalent value in Walmart gift cards, plus interest, in the future?

Walmart could even time stamp its credit/debit cards and imprint each card with a catalog including current prices, so a card sold (or lent) today entitles me to today’s prices. This time stamping would effectively limit Walmart’s distribution of cards, including its extensions of credit. Or Walmart might charge a lower interest rate rather than time stamping this way. It could sell (or lend) both types of card at the same time.

I can’t support a statutorily fixed price of gold, much less a statutory monopoly on credit for gold bankers. I don’t support the “greenback” approach advocated by the following video either, but the makers of the video, while largely agreeing with Rockwell et al. about the dangers of central banking, understand that a gold standard is not the solution. A gold standard is not a free market in bills of credit.

http://video.google.com/videoplay?docid=-515319560256183936&ei=6ajfSKNlk-6oAoGFzboH&q=money+changers