Could someone here who knows economics explain Ron Paul's position on Gold? It's seems like if we forcefully tie down the dollar to gold, we will get mandatory deflation. Since inflation is too much money chasing too few goods, it seems like by limiting the amount of money in the money in the economy, we'd get deflation directly proportional to the growth of our GDP. How would we allow the money supply to grow with the economy?

Also, how would this take electronic money into account? All that unprinted money being borrowed, sitting in banks, ect. could hardly be backed up because it's created and destroyed with every interaction.

I'm afraid I don't really have a very good understanding about how all of this stuff works, so I'd appreciate some expertise here.

Money tied to a particular standard doesn't have to be one dollar per x ounces of gold. If the money supply needs to grow, then the amount of gold that one dollar represents can be changed (though not on a whim).

Electronic money is still money just like a debit card is still money. Money traded online or electronically still has "dollars" somewhere to back it up. It has only changed forms.

A gold standard kinda makes sense, because on a standard, you can actually exchange your paper money for a specified amount of that precious metal. Now, the US dollar only has a value because the US government says it does.

That's the only way I could think of doing it, but then it seems like we'd be right back were we started.

I don't think so. The very act of lending money "creates" money. That's how lowering the interest rate raises inflation. (Of course with out the Fed, wouldn't interest rates be dependent on the free market? I don't know, maybe that changes this.)

That's the obvious plus, but it only works as long as the inflexibility of the money supply can be delt with, as well as keeping the money supply in sync with the economy.

Also, it's not 100% sure that gold is the world choice anymore. Oil almost seems like a better option now because it has intrinsic value. Unfortunately that make the Middle East even more of a problem.

Actually, you can think of lending like this: imagine you have 3 friends who decide to place $10 in your care with a guarantee that you'll give them $11 after 3 months (you are now a very small bank) then you've got another friend who begs you for $20 and agrees to pay it back with $5 interest after 2 months. You just gave your friend a loan of $20, but you'll get back $25 after he pays.
Now, you're probably thinking that at one point, money was created because I have 3 people with $10 each in the bank, and one person with $20, so that's a total of $50... but I only had $30 to start with. This is perfectly valid because those 3 people that gave the bank $10 really don't have that money. If all 3 of them demanded to withdraw their money, it's not possible.
Basically, it's the same ammount of money except that the person with the loan is going to have to put another $5 into the bank from another source due to interest. That $5 brought in from the loan will then be turned around to give someone else a loan. Basically, the banks don't have your money anymore, they just say they do. Hence the reason they have stipulations limiting either how much you can withdraw or how fast/soon you can withdraw.

In all reality, it doesn't need to be gold. It could be any commodity with similar attributes.

Economics just says that supply and demand should determine prices and supply. Government should not be able to artificially change money supply on a whim like they can now. With gold, we would have a fixed amount of something, and it would be literally impossible to inflate a money supply.

The problem with the system now is that it's not like the Federal Reserve Board can just say "uh-oh, inflation, we can get rid of it by raising interest rates / increasing reserve requirement / lowering discount rate", and then it's gone. Inflation has an affect on purchasing power of the individual greatly, and greatly changes the outlook people have on how to spend their money. Whether it be through fiscal policy or monetary policy that they treat the economy, they both have slightly bad outcomes.

No, no, I'm not talking about interest. My econ teacher explained it the other day, and I'm going to have to read over it again. It's really confusing. Maybe I'll try to explain it once I start studying for my econ final. (Hey, if I can explain it I must be able to understand it, right?)

oh dear god, its horrible if you think about how FDR would choose how much that gold was worth during the Depression...

Gold still has the problem our current currency does. Yeah, it's nice that you can exchange a dollar for a certain amount of gold but that doesn't mean the price of gold is fixed. The value of currency would be constantly fluctuating, just like it does now, because the price of gold fluctuates.

The best currency would be energy and/or food. A grain of rice gives me the same amount of energy every time I eat one. I know what I'm getting with a grain of rice. Or a killowatt will always do a certain amount of work.

While I agree that the gold standard would still mean value would change, the advantage is that the value cannot be artificially inflated. That is the main problem with the fiat system. Value under gold standard would still change just like a fiat currency through supply and demand, but it could never be ARTIFICIALLY changed and could never be inflated.

Well, it could be artificially changed if the U.S. owned most of the world's gold.

And it's not like that's never happened before.

Well, what I mean is that it can't be created in thin air. In today's system, the government can just say "****, we need to increase money supply", and run to the treasury and print out money. You can't exactly print out gold :/. That alone would help a lot curb inflation.

I'm no political or economic expert, but as I understand Ron Paul's economic position, his stand on the gold standard is only part of it.

Ron Paul thinks it's in the nations best interest to Privatize EVERYTHING, including currency. He has a very well known beef with the Federal Reserve bank, and the gold standard is the first step in dissolving the Reserve Bank and turning currency over to the private sector.

I honestly don't know what the gold standard would do to inflation, or to the value of the dollar internationally, but the idea of private money scares the bejesus out of me.

Setting the value of gold-backed currency because you own all the gold and changing the money supply are two ways to do the same thing.

Oh yeah I saw this one; it has Bruce Willis and Samuel L. Jackson in it.

that's probably because you hate freedom and love to be oppressed

anyway, as a jew w/jew gold, I fully support this measure

Pulp Fiction or Die Hard?

I dunno, the one with all the gold.

The book "Making Money" by Terry Pratchett jokes about this topic. It actually provides pretty good arguments against gold as a backing currency.

we don't have enough gold to go back on the gold standard. there's simply too much money in the US for it to be backed up by its respective amount in gold.

Ron Paul is a nutbar.

Thank you for your insightful contribution to this discussion.

I think the government should stay off the Gold Standard, so that
the Pound can reach a level that would keep our exports competitive.

Die Hard 3

I think you mean Die Hard with a Vengence.

We should really switch to a silver standard instead.

Free Silver!

I support a return to the Gold Standard. The dollar seems so worthless to me. A dollar forty for a Pepsi in a vending machine? Ridiculous.

The only problem is, with gold at ~ $764 per troy oz, adoption of the Gold Standard seems like it would be pretty tough...

Thats it! We're going home!

Oh yeah! I'm going to start bombarding [atom] with neutrons to form Au!

How about them apples.

i swear i just clicked that and my internet freaked out
|:

Warlock! Burn him!

Gold closed at $806 yesterday. If you had invested when you read my post/quote on the spot market, you could be RICH!

Ron Paul more like Ron pAul

http://www.opensecrets.org/pres08/moneyweb.asp?cycle=2008

(end)

Anyone else read that as "Ron Paul and the God standard." ?

What the ****?

Corporations have their hands in politicians.

Where have you been since 1791?