Thursday, November 15, 2007

Ron Paul and the Gold Standard

Ron Paul Attracts Passionate Fans

As an economics geek/part-time college professor, I have to admit that I am often alone in my enthusiasm when I talk to people about the possibility of returning to a gold standard, should the unlikely event of a Ron Paul presidency occur. Few people understand monetary economics, and of those who do, most think that we need to the Fed to "manage" how much our currency will erode each year.

It was interesting to see this exerpt:
Paul is Congress' most prominent advocate of returning to the gold standard, which the country abandoned in the 1930s. In its purest form it would mean that all paper currency in circulation could be redeemed for gold.

Supporters say the gold standard would curb inflation and boost confidence in the economy. But others say it would trigger severe recessions because the Federal Reserve could no longer manage the money supply in times of economic weakness.

For that matter, Paul would eliminate the Fed altogether as an impediment to free markets.

This makes me laugh. Limiting the Fed’s ability to manage the money supply will cause deep recessions? Ha! The Fed’s activities are what CAUSE economic chaos. Has anyone been paying attention to the sub-prime mortgage market these days?

The worst that can be said about returning to a gold standard would be that we might – might – experience some short term pains from the adjustment to a regime of sound money. But in the long run, sound money is the surest way to stable economic progress and prosperity.

One last thing:
Paul breezily talks of eliminating the personal income tax, saying it provides about 40 percent of federal revenues, which spending cuts could absorb. The government's funding level would approximate that of 2000, he says, although government statistics put the figure closer to 1995.
My question… Does anyone here think that government was too SMALL in 1995?

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