Last night I had a dream that Ron Paul's campaign manager called me up to see if I would host a small gathering for Congressman Paul to talk to voters about his positions and reasoning. I said yes and within minutes he was at my door with a group of people he wanted to converse with. They asked me to act as secretary for the meeting, where I went through the list of topics they brought (essentially to argue about). After they were done Dr. Paul came over and put his arm on my shoulder to thank me, at that point I realized he was somewhere around 6'8" tall. These things were funny to me because he never struck me as affectionate towards strangers and I was pretty sure that he was not that tall on TV and videos.
Well, a friend recently loaned me "The Case for Gold" by Dr. Paul which I will start reading after I finish my current book. Before I read it I wanted to take a chance to document my overal feelings to see how my view of the gold standard may change.
I've always been a critic of our monetary system, but I've never been a large proponent of the gold standard as a solution, but thought it might be better than no standard at all. In my opinion, a monetary system has to be based on something tangible to be worth anything, but I've always said that it doesn't matter if it's based on precious metals or lima beans, since what really matters is who controls the supply and how you control them. Since the entire basis of paper money in our society is a means for the government to issue compensation for services without providing anything tangible in exchange (a government shouldn't own anything to give since it all belongs to the people), I've always supported currency minted and controlled directly by the government. Since we elect the individuals who control it, I've always believed this to be the best means for control and mitigation of corruption.
Many argue that corruption among elected officials is rampant and that we shouldn't trust them with this kind of authority. I agree that the corruption is rampant, but as far as I can see, they always have had and always will have authority over those systems, so I would like to pursue the system which at least gives us the best opportunity to see what they are doing and elect someone new. I have read some studies which indicate that gold stockpiles are controlled primarily by non-government entities, which seems like a reduction of control. On the other hand, however, I believe Dr. Paul may be advocating a system in which money is minted directly and the value is set as a backbone of something tangible. I'm not completely certain that this offers us more benefit than risk, but I'm open to consideration.
Here are some principle beliefs I already have regarding the financial system:
1. The Federal Reserve was only created to act as an executive credit card that could bypass a notoriously stingy congress.
2. Paying interest to the Federal Reserve as a private institution is pointless since we could do everything they do, but without the added cost of interest and with the added benefit of running it with elected officials.
3. The fractional reserve banking system is completely unfair and only makes higher profit for banks at the expense of greater, impractical debts for the people.
4. Attempting to control inflation with interest rates does not work.
5. Money is a representation of debt, in this case, money should circulate because the government prints it to pay for goods and services rendered. It is removed from circulation by taxes. This works kind of like an investment, where the money paid is reused exponential times so that when it is collected again through a tax, it should have served numerous people with beneficial exchanges before being collected as a tax. That being the case, even a high tax rate (which shouldn't be necessary in a balanced system) should reflect an equally high output of products.
6. In order to use government minted money as currency, it needs to be readily available to everyone. This means that annual spending (investment) should be very high, but that they should also succesfully balance debts using short terms. Instead of a system of unmitigated and substantial debt growth, it should be a system of frequent monetary rotation, but with controlled thought regarding our next moves.
Overall, I don't expect the book to change many of those views, but suspect it may offer suggestions for enhancing and governing them. I may not be the biggest proponent of the gold standard, but it is something I probably wouldn't oppose as an improvement. The current system seems to make everyone throw their hands up as if there is nothing we can do about it.