If I couldn't vote Democrat, I'd vote Paul, that's for sure.

What's the fiat money thing, anyhow? I never understood it. Could someone explain? In plain English, would help.

The current paper money is by definition "fiat money", i.e. it has no real backing other than the faith in credit of the US Government. Fiat money isn't bad, it's actually a better way to have the Federal Reserve run monetary supply versus the gold standard or any other schemes.

> and apparently believes that we invaded Iraq
> largely because they wanted to price their oil in
> euros.

Largely? No. No one but Dick Cheney knows why we "largely" (so to speak) invaded Iraq.

Partially? Yes, I have to think so. I imagine that was also partially (not fully, not exclusively, not publicly) a warning to Chavez who has mentioned the same thing a few times.

Cranky

Kevin, why do you always put "fiat money" and "fiat currency" in scare quotes when discussing Ron Paul. Do you not know what fiat money is?

http://en.wikipedia.org/wiki/Fiat_currency

And if you think the gold standard is weird, look who else thinks it's a good idea:

http://www.youtube.com/watch?v=caIgP3Mnb6g

Ron Paul is right on the war, and dead wrong on virtually everything else. I do agree with him, though, that Iraq's wanting to price oil in euros was a cause of the war. That, plus Bush's Oedipus complex.

Why did we invade Iraq? Why isn't our money fiat money, (this is what they taught me in school)?

Now - you've got it!!

jmauro:

"Fiat money isn't bad, it's actually a better way to have the Federal Reserve run monetary supply versus the gold standard or any other schemes."

That is a highly debatable statement. But it's of critical importance, which is why it's such a foolish disservice of Kevin to brush it off with useless "crank" and "weirdo" statements when it comes up.

It has not been proven that fiat money can work, and if you think it has please tell me when it has worked at any point in history.

And please don't say now. We've hat a fiat dollar since 1971 and we've racked up almost all of our $9 trillion in debt since then.

Paper money is fiat money by definition. Everyone agrees with that. What Paul wants to do is put the dollar back on the gold standard. Which is crazy, I'm told.

Boronx --

Read this article to see why our money isn't really money; and why gold and silver are not the relics we are told.

"Why is gold money? Several years ago, at a dinner party in New York, I was discussing this very topic with a smart and senior portfolio manager at Salomon Brothers. At one point, he grabbed an empty beer bottle, held it up and asked me why gold was money, any more than that bottle. This pretty well captured the mainstream skepticism toward gold. So it seems like a pretty good starting point."

http://www.goldensextant.com/LLCPostings4.html

Still, if I had to choose between Ron Paul and, say, Rudy Giuliani for president, would I vote for Paul? You bet. There are worse things than being a crank.

How about the fact he's anti-semitic? James Kirchick of the liberal New Republic reports neo-Nazis are supporting him, and Ron Paul still has not given back money given to him by the Nazis. How can you justify that? Of course, I shouldn't be surprised liberals don't care about Paul's fervent backing by anti-Semites and Israel haters. This is one more reason why supporters of Israel like myself don't trust liberals or Ron Paul.

blogs.tnr.com/tnr/blogs/the_plank/archive/2007/11/12/ron-paul-s-nazi-supporters.aspx

"not only have neo-Nazis vocally expressed support for his campaign and form a crucial part of his online spam
brigades, but one of their leaders has donated money and the Texas Republican hasn't decided yet whether to return it."

Another Ron Paul post!? Kevin, do you have to meet some kind of reader comment quota these days?

As for Ron Paul, I can modify a favorite bumper sticker to summarize my opinion: Ron, Save Me From Your Followers!

FZappa: "It has not been proven that fiat money can work, and if you think it has please tell me when it has worked at any point in history."

It worked pretty well this morning, when I bought groceries at Ralph.

"Paper money is fiat money by definition. Everyone agrees with that."

No one who knows what they're talking about agrees with that, and you don't appear to be in that group. Paper money itself is not fiat money if there are assets (like gold and/or silver) backing it, i.e. if it is convertible to that asset upon demand. THAT'S what real money is.

"What Paul wants to do is put the dollar back on the gold standard. Which is crazy, I'm told."

This seems to sum up the anti-gold standard argument: "I don't understand it, so it must be crazy."

In addition to Alan Greenspan (see youtube I linked to at 9:18, even Ronald Reagan wanted to go back on the gold standard:

www.reason.com/blog/show/123377.html

the ideas of libertarians are basically the same thing as laissez-faire capitalism of the nineteenth century. It produced chaos, misery and inequality then, and produced the Progressive era as a response. Why would anyone expect a different result now?

Bruce Wilder:

"[Fiat money] worked pretty well this morning, when I bought groceries at Ralph's."

But those groceries cost more than they did last year, Bruce, about 10% more, right? That's because about 10% of the value of your fiat money has been stolen by the Federal Reserve and its member banks in the past year. That doesn't happen with a gold (or other hard assets-backed) standard.

Here's your fiat money over the past year, Bruce. Check out the 5-year chart for an even more ugly picture -- the dollar has lost 40% of its value osince 2001.

If this fiat money is "working" for you, then you must lots of money to burn.

http://quotes.ino.com/chart/?s=NYBOT_DX

Alan Greenspan AND Ronald Reagan wanted to back to the gold standard? Are these argument points you expect to convince liberals, or drive them away?

Ron Paul knew that invading Iraq was a bad idea from the word go, which is more than you can say of John Edwards or Hillary Clinton (or any of the other Republican candidates). Of course that's not a very high standard, since anyone with a lick of sense knew that.

And it's not as if these idiots were callow 16-year olds: they're tested, grown-up fools, weighed and found wanting. We know for sure that they have lousy judgment: today that's pretty much a _prerequisite_ for the Presidency.

You know what you have to do, laddies !

FZappa

Please don't drag Zappa into this. The guy had plenty of crazy policy preferences of his own but unlike Ron Paul he could at least play the guitar like a goddamn motherfucker.

Over the long haul, Ron Paul may be right on more of his economic policy than you'd guess.

Fiat money is quite literally conjuring 'money out of thin air'. It fuels rapid, non-sustainable inflationary economic expansion, creating an economy with an underlying value basis of... absolutely nothing.

Human nature being what it is, fiat currency will inevitably be exploited to create pseudo-wealth far beyond a rational and sustainable level.

If something happens (as it sooner or later will) to implode the monetary system, there will be nothing left but ashes and cinders... as there is no tangible basis for the currency.

Of course, to adopt his policies will kicking the foundation out of our current world economic system... which certainly wouldn't be pretty in the short run.

Many of the democrats I know are saying if Hillary is the democratic candidate they will vote for Ron Paul.

"the ideas of libertarians are basically the same thing as laissez-faire capitalism of the nineteenth century. It produced chaos, misery and inequality then, and produced the Progressive era as a response."

Another benefit of the gold standard is that it's much harder to start a war with one. Why? Because governments have to borrow to fight wars, and if you're on a gold standard you can't just print up (or digitally "print up" nowadays) all the money you need. This is what our government does now, and it's why it took from George Washington to Ronald Reagan to reach our first trillion in debt, and why we've added another $8 trillion since Reagan. Note that we went off the gold standard completely in 1971.

Count up the wars in the 20th century and the wars in the 19th. 19th was much more peaceful; if the corrupt bankers and corrupt government officials hadn't taken the world off the intl. gold standard in the 19-teens, WWI would've last a few weeks, as no government could have afford the pointless butchery that occurred.

This is standard crank stuff. And who coined the silly term "fiat money" anyway?

The gold standard is as arbitrary as the current system. Why should gold be accorded such status? Platinum is scarcer, copper more useful, and tacos more delicious.

All currency is a set of agreements among people and nations regarding the currently-assessed relative worth of whatever the country owes and produces. The same with "prices", which are also nothing more than a complex set of agreements about the relative worth of things. And really, so are wages and salaries.

So can we stop the crazy talk?

Many of the democrats I know are saying if Hillary is the democratic candidate they will vote for Ron Paul.

Riiiight. I'm sure they are.

Also, how do they plan on voting for him? As a write-in? He sure as hell isn't going to be on the ballot.

"Alan Greenspan AND Ronald Reagan wanted to back to the gold standard? Are these argument points you expect to convince liberals, or drive them away?"

OK, let me give you a liberal argument for the gold standard, which Ron Paul brings up frequently: inflation is a tax that hurts the poor and middle class a lot harder than it hits the rich.

On a gold standard you have very, very little inflation; if the issuing body starts putting more dollars out there than is justified by the growth of the economy, people will redeem their dollars for gold and the printing press screeches to a halt.

With fiat money, lobbyists, bankers and politicians create endless money out of thin air (like Bernanke's $41 billion last week). That causes inflation, which reduces the value of every dollar out there. You and I don't feel it too badly, but the poor, middle class and elderly get hit hard.

Inflation is a transfer of wealth from the people to Wall Street, because they get to use the money before prices go up to reflect the increased money supply.

This is what our government does now, and it's why it took from George Washington to Ronald Reagan to reach our first trillion in debt, and why we've added another $8 trillion since Reagan.

If the Republican's could control their spending we wouldn't have this issue.

jprichva:

"The gold standard is as arbitrary as the current system. Why should gold be accorded such status?"

jprichva, read the article I link to at 9:23. The quote I clipped and pasted here directly addresses why gold and silver are accorded the status of money.

"So can we stop the crazy talk?"

Ah, I never get tired of the refrain: someone hasn't taken the time to understand the gold standard, ergo it must be "crazy."

Damn Kevin, you hit the ball with the sweet part of the bat.

Paul is a crank. Congress and the the judiciary would stop his foolish ideas. But he would not be a wild man with the United States military. Rudy would be dangerous.

With Paul, we would have sort of a non-President. The Democrats, with a majority in both houses, would be able to run the country. The government would not be very efficient with a non-President, but Paul would not get us into horrible situations like the Iraq war.

The Presidency would be wasted on Paul, but neither would it be an instrument of destruction.

"If the Republican's could control their spending we wouldn't have this issue."

No politicians, at any time in any country, have been able to control their spending under fiat money. It simply doesn't work.

Again, to see why, please read the article I link to at 9:23.

So if you use Fiat money to buy an Italian car, I guess it is about Euros, huh?

Switching to the gold standard is even dumber than Kevin allows. At least theoretically, a fixed-exchange rate regime like the gold standard can have some benefits via reduce risk and encouragement of international investment. But if the U.S. does it and no one else does you get none of the reduced risk and all of the loss of discretionary monetary policy.

It gets even better. I saw Paul in a video at google say he favored abolishing the income tax and replacing it with a uniform tariff.

So with Ron Paul you get all of the bad value judgements of libertarians (to hell with you) with none of the redeeming value of understanding how markets work. Maybe that's why Andrew Sullivan likes him?

Why should gold be accorded such status? Platinum is scarcer, copper more useful, and tacos more delicious.

Unlike copper, gold doesn't tarnish. Gold is easier to divide than platinum, which is a useful property of money.

"Switching to the gold standard is even dumber than Kevin allows. At least theoretically, a fixed-exchange rate regime like the gold standard can have some benefits via reduce risk and encouragement of international investment. But if the U.S. does it and no one else does you get none of the reduced risk and all of the loss of discretionary monetary policy."

If the U.S. does it everyone else would follow suit immediately, because they'd be stupid not to. There are zero, count 'em zero non-fiat national currencies in the world right now, and if there was even one, there'd be a rush to buy it. People want security with their money and backed currencies provide it.

Swiss franc went off gold in 2002. If it came back on I'd switch every cent I had into it, and so would anyone else who understands money and the condition of the international financial system at the moment.

We've hat a fiat dollar since 1971 and we've racked up almost all of our $9 trillion in debt since then.

Well yeah, but its only fiat debt.

Idiot.

Cranky like a fox!

Interesting article on this subject over at Glen Greenwald's:

http://www.salon.com/opinion/greenwald/2007/11/12/paul/index.html

Cranky

"Well yeah, but its only fiat debt."

Which means it can never be repaid, which is why the Federal Reserve (and every other central bank in the world) is basically a legalized system of eternal serfdom. If you don't get rid of it, your children and grandchildren will work for the Federal Reserve's benefit an ever-increasing number of weeks per year.

Note that the Federal Reserve is a private corporation of private banks.

This is why getting rid of the Fed is of the utmost important. Jefferson killed the first central bank, Jackson killed the second, but the third has stolen from this country since 1913. Ron Paul will be the man to kill it.

Learn more about the Fed here:

http://www.youtube.com/watch?v=iYZM58dulPE

Greenwald castigating Kevin Drum for his lazy "weirdo" and "fruitcake" statements re Ron Paul, from the article Cranky Observer links to at 10:02:

"This whole concept of singling out and labelling as "weirdos" and "fruitcakes" political figures because they espouse views that are held only by a small number of people is nothing more than an attempt to discredit someone without having to do the work to engage their arguments. It's actually a tactic right out of the seventh grade cafeteria. It's just a slothful mechanism for enforcing norms."

First, gold is money. It always has been. It’s the clear choice of free markets throughout recorded history.

That’s the brilliant opening of the argument in favor of gold as money in the article that FZappa keeps promoting. Forgive my sarcasm, but it’s stupid.

Gold is not money. Give me an ounce of gold to spend this minute, I go the the drug store and neither I nor the drug store staff have any idea what they should give me for the ounce or any part of the ounce. If FZappa is there, he also has no clue.

Currently, my friend, gold is not money. Comprende? It’s not the clear choice of fee markets throughout the world. You are incorrect.

If the U.S. does it everyone else would follow suit immediately, because they'd be stupid not to.

Hey, Einstein. Your entire premise (fiat money is stupid and the whole world uses it) is that the whole world is stupid.

Here's a little fact you maybe might get around to swallowing before your time on earth expires: money, which is a medium of exchange and a store of value, is by its nature unstable.

Get used to it.

FZappa (or any other gold stadard advocate) can you explain one thing: If we were to switch to using gold as money, wouldn't that be tantamount to handing over the entire wealth of the country to those who currently own the gold? (I assume that would include you?)

Forgive my sarcasm, but it’s stupid.

Not only that, it's retarded too.

jprichva writes:

The gold standard is as arbitrary as the current system. Why should gold be accorded such status? Platinum is scarcer, copper more useful, and tacos more delicious.

Precisely. The middle class and the poor would also be hurt more in a recession on the gold standard too.

Paper currency is fiat money.

I think Greenwald makes some excellent points re: Paul. Just because you disagree with him, doesn't mean he's crazy. For example, I had thought Paul's argument for the gold standard was simply insane, but there's actually a reasonable case for it, once I put aside my bias and looked at it. I don't agree with him on the issue, but I no longer think Paul is a nutjob for taking the position.

Incidentally, since one of the mantras we hear chanted repeatedly, even here, is "Why can't politicians be more 'authentic?'", I give you Ron Paul as exhibit B (Kucinich would be exhibit A). Paul obviously believes in his agenda, and can argue it reasonably well, but he's dismissed as a "crank." So much for "authenticity."

So if you use Fiat money to buy an Italian car, I guess it is about Euros, huh?
Posted by: thersites on November 12, 2007 at 9:48 PM
&&&&&&&&&&&&

Wow, OMG! Fiat made these really cool and reasonably affordable mid-engined thingies a long time ago:
http://en.wikipedia.org/wiki/Fiat_X1/9
Warning: Get used to driving through a lot of curves at moderate speeds before going real fast. If you are used to front-engined vehicles you may be in a for an unpleasant surprise.

"Ron Paul knew that invading Iraq was a bad idea from the word go"

I'm pretty sure he would have thought entering WWII in Europe was a bad idea. An idealogue is a lot like a stopped clock.

jprichva, read the article I link to at 9:23. - FZappa

No. I will not read your article, because it is stupid. Similarly, I will not read articles plugging Intelligent Design, the Singularity, the Rapture, the thesis that Hillary Clinton killed Vince Foster, the Feminists Killed The Neanderthals theory, or the ravings of people who claim that Einstein was wrong. They are wastes of my time.

When people tell you in simple terms that the gold standard is every bit as arbitrary as government-issued fiat money, they are trying to distill down for your (and my) plebeian intellects the accumulated background knowledge of the entire field of modern economics. The appropriate response on the part of someone like you, or me, who does not have a Ph.D. in economics, is not "But what about my brilliant insight??? Ha! I have proven you, and all other economists, wrong!" No. The appropriate response is: "I see. But...I'm still confused; explain this to me." You know why? Because economists KNOW WHAT THE FUCK THEY'RE TALKING ABOUT. And you and me don't.

And, yes, gold is arbitrary. The economies of coastal Africa ran for centuries on a currency of cowrie shells. They were superior to gold, because they allowed for a certain degree of inflation, but came from sources outside of Africa; gold wasn't a good currency because it was mined in huge quantities by the Ashanti, which would have completely distorted the regional economies.

Little ole jim:

"Gold is not money. Give me an ounce of gold to spend this minute, I go the the drug store and neither I nor the drug store staff have any idea what they should give me for the ounce or any part of the ounce. If FZappa is there, he also has no clue.

Currently, my friend, gold is not money. Comprende? It’s not the clear choice of free markets throughout the world. You are incorrect."

Believe me, Jim, I know almost exactly how much an ounce of gold is worth at any time.

I think you need to read the entire article Jim, instead of making me type its points out to you. Briefly, the dollars you take to the drugstore can and are stolen from your wallet by your country's central bank over time. They do this b printing up as much money as they want to, which reduces the value of the dollars in your possession.

There was a time, Jim, in the not-too-distant past, when our coins had real silver in them and our dollars were backed by gold -- and your drugstore wouldn't take them if they weren't.

We're heading back to that time real soon. Is your portfolio ready for a valueless dollar?

Mine is.

gtg folks. Adios.

Martin Gale: I think Paul may be an authentic crank. I hope he is. I note you did not mention why you disagree with him regarding gold.

Paul found a reason to vote against the supplemental appropriation that would have contrained the President's war making power and ended the Iraq occupation. He voted with his fellow Republicans when it counted.

He's a crank, I hope. Because the most obvious alternative explanations for that vote is that he's a fraud or complete idiot.

RON PAUL IS THE MESSIAH!

JS at 10:09 -- real quick -- a gold standard is not perfect, I favor (as does Paul) a modified form of the gold standard based on a basket of commodities.

But we simply cannot have fiat money. Always leads always to ruin. Every single time, since Roman emperors started removing the silver from their coins (as we did as well last century -- 100% silver became 90% silver became 40% silver became the worthless copper & nickel things we call quarters!)

What the gold standard fans seem most irritated by is that the rest of us are so naive about fiat money that the system actually works okay (not great, but neither did the gold standard). Reagan and Volcker were even able to choke off inflation by restricting the supply of fiat money. The must have really pissed off the gold bugs. Kind of like the anti-tax people who claim the income tax is illegal, and we are fools to pay it. Yet they end up in jail and we go about our lives, so who are the real fools?

I prefer to stick with Bryan on this one: “You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.�

Believe me, Jim, I know almost exactly how much an ounce of gold is worth at any time.

Because, after all, gold is not money, is it?

I don't know from no Gold Standard, and don't have a useful opinion, but:

a) abolish minimum wage? terrible idea
b) abolish income tax? terrible idea

BTW give Kevin credit for this; at the start of his post, he links to the Greenwald article himself, so you don't need to link to it again.

Paul is a crazy dude. I hope he gets as many votes as he can from those primary voters, but it scares me that the one federal institution that libertarian wants to get rid of the most is the one that does its job the best! (Federal Reserve, of course)

I still don't understand why we're talking about how bad our currency is when inflation has been lower in the past 15 years than any time since the 19th century. And that time of tight monetary policy didn't exactly get us the growth rates we've come to depend on ...

Interestingly, I live in a country where gold IS used as currency: Vietnam. Gold is used to buy houses here, because of historical suspicion towards the value of paper money. (Everyone's savings were wiped out during a period of hyperinflation in the late 80s, I believe.) The result is basically a giant pain in the ass. Obviously you don't want to buy your gold too long before you trade it for your house, because fluctuations in the value of the gold could screw up your savings. So you save in dollars, mostly, and then buy a huge quantity of gold right before trading it for your house. The constant demand for sudden large amounts of gold means that the price of gold in Vietnam runs several dollars an ounce higher than the price outside Vietnam. And buyers and sellers have to keep a constant eye on trends in the gold market as an additional layer of uncertainty in the transaction. It's just a pointless superstition which will gradually disappear as the country's monetary policy, which has been exemplary for 15 years, reassures the populace that it's okay to use money to make large purchases.

One of my libertarian friends told me that he once asked Paul about his currency thing, given low inflation, and Paul's response was something along the lines of how he doesn't believe the official statistics.

Not that he doensn't believe in hedonic pricing or the Boskin Commission's findings, but that the government is literally lying to us. Jesus ...

Well at least he's not an egomaniac torturer.

I just realized that I may have accidentally scoffed at the idea that the government lies to us. Wish that I actually felt that way ...

I remain skeptical that the economists at the BLS are lying about a statistic that is easily verifiable independently using publicly available data (which it has been).

Gee, thanks Kevin, I think.

Hey you should appreciate the Paulians, they make your alexia.com ratings go up everytime you mention his name.

Just one question though, why are liberals so afraid of their own rhetoric? "Power to the People," is as much a part of Paul's lexicon as it was any New Leftist in the 1960s.

I take it that was all a phase of your youth right?

repealing the 16th amendment wouldn't just eliminate the personal income tax. It would also eliminate the corporate income tax and the payroll tax. We're talking really crazy there. Also, if Paul really wants to repeal the 16th amendment he is being totally dishonest about his tax plans.

Fiat money is, well the kind of money we know about. Long ago, money was precious metal. Minting coins was just a way of certifying the weight a purity of the metal. Often the value of a coin was the value of the coin if melted down.
The first paper money could be exchanged for a fixed amount of precious metal (true in the USA until the 30s).

Fiat money is money which does not imply a right to demand a fixed amount of some good from the issuing state. It is valuable only because other people accept it. Fiat money can lose all value (it has from time to time).

Everyone uses fiat money these days. The world is much richer than it ever was. Ron Paul is a crank.

Ron Paul is a crank who seeks to make the lives of average Americans radically more insecure.

His Libertarianism is okay as an affectation of a clever adolescent, but it's a disaster as a scheme to run a real nation populated by real people.

Marx's comments on the relationship between the commodity fetish and religion are very apt in this regard. The same people who have trouble understanding how one could be moral without believing in God become anxious over the idea that money doesn't "stand for" something. When you try to walk their approach one step further -- why is God moral, and who tells you what God believes? why is gold valuable, and who promises you that your paper money is redeemable in gold? -- they get even more upset.

The word "fetish" probably derives from the Portuguese, and seems to have been invented during the encounter of Portuguese traders with African economies where gold was of little value, while European cast copper bracelets were prized. It is in other words an emanation of the upsetting idea that exchange value is arbitrary. Gold standard backers are basically fetishists.

Fiat = We print a bunch of promissory notes, ship them off to China, and get back real goods!
Great scheme, for awhile, until we get fiscally reckless Presidents. Paul actually knows more about money than people think.

Now, we see that the dollar is dropping faster than the boxers of a stallwart Republican. Hyper inflation is right around the corner, which is the terminal stage of fiat.

I dont agree with abolitioning min wage, disparity is high enough.

I would think a flat tax would be a good thing.

It's too bad FZappa bugged out, because I want him to explain this statement of his:

There are zero, count 'em zero non-fiat national currencies in the world right now, and if there was even one, there'd be a rush to buy it. People want security with their money and backed currencies provide it. Swiss franc went off gold in 2002.

As I recall, the US went off gold under Nixon. If Switzerland was the only country around in the early part of this decade with "real money", under FZappa's reasoning, everyone in the world would have been buying up Swiss francs and the every Swiss citizen and holder of francs would have become gazillionaires.

But didn't this happen. And not only that, Swiss went to "fiat money" and as far as I can tell, they seem to be doing as well as they were before.

So, it seems like the whole story is bull.

Except, maybe the US Feds blackmailed and bribed the Swiss into switching! And they would have gotten away with it if it hadn't been for those meddling Ron Paul kids!

How do gold standard proponents propose switching to the gold standard?

People don't own gold in relative proportion to their ownership of American dollars. Do we just say to the vast majority of people who own little to no gold, sorry, you're impoverished now?

This is a serious question, not snark.

Gggooollldddd! OK gold lovers, I spent 30 minutes reading various pro and con gold websites. Let's assume I bought the gold standard argument (I don't). How do we go back? My basic understanding suggests that this would be extremely disruptive to the US and the World--what are the potential repercussions? Who will be the winners and losers? And most importantly, what will it do to the value of my house and mortgage. If you don't have a GOOD, DEFINITIVE answer to the last question, then your policy argument is absolute, total BS.

The world is much richer than it ever was. Ron Paul is a crank. --Robert Waldemann

The world has more IOU's than it ever has.

Yeah, I have no idea how they reconcile that. Obviously if you make the dollar redeemable in a certain portion of the gold owned by the US government, that would set the value of US government gold incredibly high. Which would make everybody with a gold earring a millionaire.

I'm pretty sure that Paul doesn't want to go to the Gold Standard. If I'm not mistaken (by no means assured), then he wants instead to eliminate the monopoly on currency that the Fed currently has. Get rid of national currency, and let private currencies arise and compete with each other. If one has too loose a monetary expansion (read: inflation tax), then there will be an exodus to a tight-wad currency dealer.

I don't think anyone has any idea how to get back to an asset-backed currency, but that could also be wildly mistaken.

The world has more IOU's than it ever has.

Under the gold standard, a dollar is an IOU for a quantity of gold. Which has no value in itself, except inasmuch as it can be traded for the things produced in the world's economy. Which is exactly what you can do with a dollar, under fiat money. Gold is a redundant step.

That a piece of paper is theoretically backed by a tangible asset does not do anything to hinder the expansion of credit if people are determined to expand credit rapidly -- as the current situation with SIVs (theoretically backed by tangible assets in the form of real estate) shows.

FZappa: sorry but inflation just scares the crap out of the Fed because it threatens the holdings of the wealthy. That's why Greenspan, Bernanke, et al. obsess about wage increases and too many people working. Can't have that!

I, for one, would love to pay off my mortgage with inflated dollars. The trick is outrunning inflation. Duh.

The Paul faithful are anti-amnesty, conspiracy theorists. Man never walked on the moon. The Fed is just visible tip of the Illuminati banking wing draining our wealth via fiat money and straw men. The great irony is akin to What is the Matter With Kansas: many of the Paul followers are toast in a Ron Paul realized world. I know many and they tend to be low income techs, and very intelligent. But they are not doing well these days.

On the other hand, I really hope Paul has an effect on this election that is similar to that of Gene McCarthy back in the day. The great thing about Paul is that his only hope is actually saying what he thinks. Nutjob or not, he is doing this country a great service. I would like to think that a 3rd party Paul candidacy would do to the Republican nominee what Nader did to Gore. I hope...

Ron Paul and the gold bug want to protect against a theft of value through inflation. Paul's inflation is the insidious type caused by the Fed "printing money" by manipulating the money supply (and according to Paul, having listened to him lecture Bernanke last week, no longer disclosing M3).

Paul seems loath to admit, though, that the prime architect of inflationary money supply is his party's fearless leader. GwB has, in 7 oh so very long years more than doubled the Federal Debt. So if I take FZappa's point about the invidious Federal debt growing only since 1972 (although he's wrong about that, too) then why hasn't an idealogue like Paul repudiated the Republican Party and GwB?

Paul shouldn't leave the Republicans behind because he wants to run as a third party candidate, but because he must believe their policies, so antithetical to his beliefs, cannot stand.

Call me when Paul drops the Republican Party and forms the Gold Party. Will Fox still let him appear in the debates? if so, somebody should ask him to recount Spain's experience with the gold standard in the mid to late 16th century. Inflation? With gold? He might even want to talk about Gresham's Law.

In other words, Ron Paul isn't a liberal. That doesn't make him a crackpot or a fruitcake. I think that was Greenwald's point. So attacking him for not being a liberal is kind of...pointless.

Platinum is scarcer, copper more useful, and tacos more delicious.

Well I know what my choice is.

Has Greenwald totally lost his marbles?

Do we have to pretend that the likes of Paul should be given a serious hearing in our polity?

This is lunatic. I hate to break it to you, Glenn, but if, in fact, Paul's policies across their breadth were to see the light of day in our country, we would be hoping desperately for a return to the relatively sane and sound policies of none other than George W Bush himself.

Was Bush out of line when he proposed that SS be partially privatized? Or when he vetoed S-chip? Or when he pushed for enormous tax cuts for the rich?

Does Greenwald have absolutely no grasp of the fact that what Paul is seeking is infinitely more extreme, more punishing to the middle class and poor, more damaging to our entire system of government as we know it than anything that Bush has or ever will think of proposing?

Is Greenwald a totally clueless fool?

Yes, on an issue here and there, Paul sounds reasonable; but even there, if those "reasonable" beliefs are cranked out by an ideology and theory of government that is in countless ways pernicious, why act as though Paul has something important to communicate to us all?

I'm sure Scientologists have on occasion something to say we might all agree makes sense -- must we then invite them in to instruct us on proper behavior?

What the hell is wrong with Greenwald for taking this bizarre stance?

It's not that he's not a liberal, Orson. Duh. It's that he's a crackpot and a fruitcake.

The staggering failure of Republican conservatism over the past decade ought to lead people to become more liberal. The danger with a crackpot like Paul is that he presents an opportunity for a certain percentage of frustrated, libertarian-leaning conservatives, recognizing the total failure of their current policies and leadership, to defect not to liberalism (or a grudging centrism), which would be a sane and productive response, but to mad cloud-cuckoo-land. Rather like too many frustrated '70s liberals, instead of moving to the new vibrant center in the '80s and working for Gary Hart or Al Gore, ended up working for Leonora Fulani.

Ya Know....: Fiat = We print a bunch of promissory notes, ship them off to China, and get back real goods! Great scheme, for awhile, until we get fiscally reckless Presidents.

A sustained high trade deficit can ruin a country's economy even without fiscally reckless Presidents.

More to the point, a gold (or silver) standard doesn't prevent a country from running a large trade deficit or surplus. Think China and the Opium Wars or Maximillian in Mexico.

If China (PBoC) buys Treasury Securities, they're making a loan to the US government. They can make such loans whether or not the dollar is backed by gold.

So let's summarize the groupthink here: "Paul is batshit crazy about everything. Oh, except for the war".

hm, now isn't that convenient exception most peculiar?

We had "fiat money" in the Civil War. We survived that. If Nixon hadn't taken us off the gold standard, we'd be broke 10 times over by now.

That said, while Ron Paul is a crank, he's not just a crank. He's also made a number of quasi-racist statements in the past.

So let's summarize the groupthink here: "Paul is batshit crazy about everything. Oh, except for the war".

hm, now isn't that convenient exception most peculiar?

From the Church of Scientology, which I gather we must now take with great seriousness:

CHURCH OF SCIENTOLOGY INTERNATIONAL POSITION ON THE WAR IN IRAQ

The Church of Scientology International joins with other religious institutions in America and abroad in cautioning the United States government to exercise reason and restraint in seeking to find a peaceful solution to overcoming international terrorism and creating peace in the Middle East.

L. Ron Hubbard wrote in May of 1950: “Wars never solve the need of wars...The quarrel of society with society, nation with nation, has many causes, all of them more or less irrational. There have been many times when one society was forced to crush another less sentient than itself. But with each clash, new traumas were born both in the international scene and with the societies themselves. There is no national problem in the world today which cannot be resolved by reason alone.�

We are not unmindful that there is evil in the world and that this evil must be restrained for the good of all peaceful nations on Earth. But we stand with our fellow churches in urging the President to work with other nations in removing that evil from the world by means of a just and rational approach.

A sustained high trade deficit can ruin a country's economy even without fiscally reckless Presidents. -ALex
Thats true enough, but dont you think an MBA President would be a bit more responsible? Actually I think this Iraq oil adventure was a last ditch effort to save the dollar. Truly bad planning.

Paul is a crank on economic issues and on issues related to the authority of the government. That said, he's a consistent and morally dedicated crank who sticks to his principles. Greenwald's column points out that Paul has been principled in his opposition to expansion of the government's surveillance powers and to the degrading of habeas corpus and other individual rights. That's a fair point to make. But while being honest and principled are good things, they're not everything. Paul's willingness to stand against the crowd on civil rights issues is accompanied by a willingness to stand against the settled consensus of the scientific, expert and professional communities in fields like economics. That's a deal-breaker. In that sense, he's part of the problem with today's Republican Party, not part of the solution.

Ron Paul is also a racist.

In his first stint as a Congressman, had strong connections to Patriot/survivalist groups, and indulged in some of the racist "urban war to come" type talk that some of those groups did.

An example? A 1992 screed on African-American "racial terrorism" in Los Angeles, in which Paul insists that "our country is being destroyed by a group of actual and potential terrorists -- and they can be identified by the color of their skin."

Read this Watching Those We Choose post for the details:

http://proctoringcongress.blogspot.com/2007/11/ron-paul-another-round-of-ssdw.html

Is Rudy still worse? Perhaps. But, it's a difference of degree at best and not kind.

I keep telling Kevin he is crazy for attacking the economic arguments without having anything substantiative.

My father was a gold bug in the 1980s, and so I have little patience for them. The only difference between gold and the Fed is who has the power to manipulate the currency.

With that said, the arguments that the Fed are driving us into the poor house are correct. If you look at the 1980s means of measuring inflation (which was changed in the 1990s because of claims that it was "overstating inflation") we are currently running at 10% inflation. In apples-to-apples comparison, our inflation now is exactly what it was measured as in 1982. This is killing the American consumer. What does the Fed do? Drop interest rates to protect the stock market therefore devaluing the dollar and hurting the consumer more.

And for all his craziness, Paul is the only one pointing out this honest truth to Bernanke. In that regard he is useful. The issue is that we do not need to do something as crazy as the gold standard to fix this. We just need another Fed chief like Volcker. Yes that was painful, but it is best for us in the long run.

Greenwald is right, the word he used over and over is “principled�.

Ron Paul is a principled conservative. And yet it is the partisan tactics of Josh, Kevin, Matt and other bloggers to trash people they don't agree with or haven't really done the homework, and then provide ready excuses for congressionalDems when they fail to hold Bush accountable and even join Bush in dismantling the US Constitution.

And Greenwald touched upon the subject of Hillary Clinton and countless times she has supported the Bush administraions awful policies. Strange how the blogger fail to see what Hillary is really like.

Like for instance Bush pardon Libby, well the Clinton's pardon Marc Rich, and lets not forget that Clinton was the first one to try and start an pre-emptive war with Iraq, preach WMD, and tell us that Bush's 16 words were just a mistake.

It is nice to see that Greenwald isn't so parisan that he's crossed-eyed, the way so many of big name bloggers are these days.

With the election just around the corner...

It's time to get fooled again!
.

Paul is batshit crazy about everything, including the war. The old saw that a stopped clock is right twice a day is, of course, utterly wrong: a stopped clock conveys no useful information at all, and therefore can't be said to be right about anything.

Paul may have come to the right conclusion about the desirability of preemptive war, but he does so for batshit insane reasons--i.e. he's a paranoid-conspiracy-theory based rabid and unreasoning isolationist. Like the stopped clock and time, Paul isn't in any meaningful sense right about Iraq. Paul's position on Iraq leads one to, of course, believe that he wouldn't make the mistakes that Bush has made in Iraq, but it should also make all people realize that Paul can't be trusted on foreign policy at all; any situation calling for either diplomacy or military action would almost certainly be turned into a complete disaster of Bushian Iraq proportions under a hypothetical President Paul.

All of Paul's policies are driven by conspiracy theory and the utter rejection of both empiricism and the need to account for human nature when trying to predict human behavior. He's an economically illiterate pseudolibertarian crank, lacking the depth and reasonableness of analysis found in a typical flat-earther or creationist.

Paul can come across as refreshing and likable because he speaks his mind and seems fairly honest unlike almost all politicians, but anyone who takes the time to see what he's actually being honest about should be much more scared than refreshed.

What the goldbugs persistently refuse to admit is that money creation becomes limited by gold production under their scheme, no matter what happens with the economy in general. Going back to the gold standard almost automatically guarantees a deflationary impetus, because transactions increase faster than money can be created. Demanding a return to the gold standard in the modern world without the prospect of major new gold discoveries is the stupidest, most brain-dead policy man has ever advocated. It guarantees another Great Depression, period. Ask Ron Paul how his policy avoids it and demand a rational response rather than the Ron Paul patter we usually get.

As far as I can tell, Paul has a consistent, principled set of stupid and wrong ideas. If someone is consistent but very wrong, does that make him a crank? Who knows. But at least we can agree that his ideas are stupid and very wrong, and if they are an example of (the dying gasp of) true conservatism, then that just goes to show how stupid and wrong conservatism is. I myself wouldn't say they are, though; he's a libertarian, not a conservative. As such, he shows not how stupid and wrong conservatism is, but how stupid and wrong libertarianism is.

And yes, I have some economics training. Whether you call it crank or not, the gold standard is stupid, though proving that to a fervent believer of AU-good/CHO-bad, can be as tricky as proving that flouridated water doesn't sap your precious bodily fluids.

The gold standard folks are funny. Earnest and funny.

Ron Paul is a well-documented affliate and supporter of racist, white supremacist organizations and lines up with a "states rights" mentality that still can't get over the result of the Civil War.

It's not incumbent upon those of us who can think straight to research Ron Paul's background on these matters--it's up to his supporters to figure it out for themselves.

The vast majority of them are political neophytes who aren't going to participate in normal politics and who don't want to think too deeply. They are scientologists without the charisma and they need a messiah to tell them why they're broke, why they're marginalized, and why they have such uncomfortable thoughts about the people who have darker skins than they do.

The vast majority of them are political neophytes... They are scientologists...

PR, I wonder if that's what they are. It seems that much of his support (and probably most of the contributions to his campaign) come from the "impending crash" financial "industry", the network of "gurus", publications, boiler-room operations, and websites that try to scare people about a perennially about-to-happen global financial bust and talk them into buying gold and silver as protection and investment. They have been around forever, and they are having a party right now because gold has hit $800/oz.

Consider this news item from freemarketnews.com: FMNN recently reported on hard-money advisor Peter Schiff asking everyone on his 60,000-plus e-mail list to donate $2300 to the campaign of GOP presidential candidate Ron Paul (R-Tex) - and now an FMNN feedbacker "Jhe" has written to advise other "hard-money" advisors to do the same.

Check out also this site hawking "Ron Paul Liberty Dollars" in copper, silver, and gold, including "Limited Editions". (Note the Ron Paul campaign ad on the left).

Ron Paul Liberty Dollars also sold at:
http://www.libertydollar.org/ld/ronpauldollar

So I think thet there is something else going on here than naive libertarianism, and that is what explains the huge campaign contributions -- they are trying to help their investment along. And I suspect that most of these "hard money" gold-hawking campaign contributors are war hawks as well.

Ron Paul is also a global warming denier.

This is further evidence that he is a crackpot though in this instance his crackpotism is fully in line with the other republican presidential candidates.

Here's something else about gold:

Its value is set purely by human emotion, too. Its value is a "fiat" value no more and no less than paper money.

If you wanted a utilitarian "backing" for money, why not the Coal Standard? The Oil Standard? The Uranium Standard?

Hell, among precious metals and their real-world value, the Silver Standard and the Copper Standard make far more sense than the Gold Standard.

few days ago... http://globaleconomicanalysis.blogsp...bank-gold.html

Fox News: "So why do we need a central bank?"

Greenspan: "Well the question is a very interesting one. We have at this particular stage a fiat money which is essentially money printed by a government and it's usually the central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or currency board or something of that nature because unless you do that, all of history suggests that inflation will take hold with very deleterious effects on economic activity. ... There are numbers of us, myself included, who strongly believe that we did very well in the 1870-1914 period with an international gold standard".

Fox News: "We did well without the Federal Reserve. People forget that."

And from the Gold article posted above:
"Over the next five years, until they stopped the presses in 1780, Congress issued about $241 million face amount of irredeemable, non-convertible paper bills known as “Continentals.�11 The bills served their purpose, keeping the armies in the field, but how they functioned in practice is described in the following passage12:

A barber wallpapered his shop with Continentals. An old soldier, wounded in the leg, used a bundle of his pay as a bandage, and coined the word “shinplaster,� which was later used to describe any sort of money that could not be redeemed. A ship’s crew discharged in Boston, and paid off in now worthless currency, found a way of making suits out of the paper bills and paraded through the streets. “For two or three years we constantly saw and were informed of creditors running away from their debtors, and the debtors pursuing them in triumph, and paying them without mercy,� wrote [a contemporary observer]."

Back to Kevin's bottom line statement: If I had just Ron Paul and Rudy Giuliani on my ballot, I wouldn't vote. I might take a crap in the voting booth and leave a hot steaming turd on top of the machine, but I wouldn't vote for either one of them.

Not voting's an option, Kevin.

You've all been raised with the notion that humans add the value of money by agreement. Well, what happens when the Chinese don't agree? They're actually starting to buy up a lot of gold for their treasury. With all the US pressure to unpeg to the Dollar, they'll probably move to gold and hasten their growth. When their treasury floods the market with $2 trillion USD in favor of gold, you'll see how fast paper falls.

The main failure of gold standard loonies and other purveyors of moronic economic ideas is not to understand one of the most basic laws of economics: There is no such thing as actual value.

There is only agreed-upon value. So even a gold standard solves nothing, because the "value" of gold could float against other metals the way currencies float against each other right now. For that matter, gold could float against other commodities.

All matters of price, wage, salary, and currency are a set of agreements among interested parties, agreements which reflect societal values more than any notion of "intrinsic worth". Why do we pay CEOs obscene salaries and dedicated teachers so little? Who is really providing social value? Why was fish inexpensive when I was a tad, and beef expensive, and now the best fish costs twice as much as a steak? We make societal choices that are reflected in our entire wage/price/currency structure. And pegging the greenback to anything, gold or tacos or cowrie shells, doesn't change that.

Steve--

If the Chinese had $1 trillion dollars worth of gold in their reserves, and decided to dump them in favor of lichee nuts, you would also see how fast the price of gold falls. Anything that causes a glut on a market depresses price.

hey kevin, don't let glenn greenwald hear you, or you'll get a spanking in salon! just ask dave neiwert!

Gold is rare enough to be absorbed into the market if $1 trillion were dumped. People would want it. Gold is valuable, period. Always has been, always will be. We can argue why, but it's never lost value. People wouldn't want the USD. It loses value every day.

I thought Fiat money was the amount of cash it takes to buy a cute Italian car that breaks down all the time.

Fix it again, Tony!

An interesting point about the gold standard:

The Great Depression happened while Germany, France, Britain and the United States were on the gold standard. Britain had only returned to the gold standard in the late 1920s.

Please note: gold is worth what it is worth. If I announce that gold is henceforth worth a trillion fooframs per ounce, and I order my National Bank to print a billion trillion fooframs in consequence, the foofram, oddly enough, would not buy you very much even though my economy was based on gold.

This Paul stuff is senile nonsense. The only amazing thing is that he hasn't come out for free silver yet.

(I seem to remember an Onion post in which Bush's first Secretary of the Treasury came out for an aluminum standard, which makes just as much sense.)

So, the argument for fiat money is that monetized debt is better than monetized market capitol?

"So even a gold standard solves nothing, because the "value" of gold could float against other metals the way currencies float against each other right now. For that matter, gold could float against other commodities."

the value of gold floating against other metals and commodities (or even the rotting remains of fiat currencies) is what would be termed 'prices'. who asserted that a gold standard would solve the problem of pricing? of course prices would fluctuate, but they would do so with an order of magnitude less interference from the government.

but I agree with Paul's current position, which is to repeal legal tender laws and tax code that restrain the acceptance of alternatives to fiat currency. gold is just one of those alternatives.

Another benefit of the gold standard is that it's much harder to start a war with one.

But any time a government actually wants to start a war, it can just as easily remove itself from the gold standard as well. Who's going to enforce a country from going off the standard to start a war? And the country that gets invaded will likewise do the same. So the gold standard is no protection against wars. Fiat money doesn't start wars.. people do.

I don't think that the US invaded Iraq specifically to keep the currency of trade in dollars rather than Euros. I think the US invaded Iraq in an odd math, for the purpose of permanently securing the supply chain in oil.

Its odd math as the term "permanent" when applied to fossil fuels is a misnomer. Fossil fuels are finite, and whether by permanent, the proponents mean 60 years or 40, its still a disconnect.

Also, that negotiation and contract were not considered secure. But, that suggests that the entry into the war was stimulated by a desire to pay back the specific large energy donors to Bush/Cheney's campaign in the way that the Bush/Cheney administration understood what that meant. (Remember Cheney's close-door energy briefings with large oil and mineral investers?)

It IS however a large threat to one of the sources of value of the dollar, that it currently serves as medium of exchange for large markets. I have no objective basis to assess what portion of the value of the dollar is supported by that function, but I would expect at least 10%.

A quick shift from external causes engages downward spirals of reciprocal bases of value. For example, there is positive-feedback loop oriented currency trading/speculation.

So, Euros would be useful not only for European Union trade, and export and import functions to the somewhat contained European markets. They would come to be more useful to the additional purposes, and dollars would be less useful.

Euros are not ready to serve as a fully global currency though, and would probably end up in an environment of even greater currency volatility as there isn't sufficient Euros in global circulation, nor the means to regulate them as a global money supply.

In contrast to the Paul/goldish thesis that a gold standard would ensure currency stability, I would expect that if anything, attempting to move to the gold standard would REDUCE the relevance of the dollar in the world economy.

And, then CAUSE the devaluation of the dollar much further and more rapidly, relative to other currencies and commodities.

So I think thet there is something else going on here than naive libertarianism, and that is what explains the huge campaign contributions -- they are trying to help their investment along. And I suspect that most of these "hard money" gold-hawking campaign contributors are war hawks as well.

Actually, I think it's worse than that. I think these nuts actually want to crash the world economy and make everybody start over again. Hardcore libertarians believe that civilization is a lie, the social contract is illegitimate, and that the Hobbsean war of all against all is the proper state of humanity.

Paul is a flake, to be sure. But the thing about pricing oil in Euros instead of US$ has been around for a while.

It should be obvious that GWBush's interest in getting rid of Saddam was because Saddam tried to kill his daddy in 1993. That's been verified for years. The other co-conspirators may have had other motives, but that was GWBush's.

I might take a crap in the voting booth and leave a hot steaming turd on top of the machine, but I wouldn't vote for either one of them.

I just hope you're not one who's early in to the polls there, SG...

Ron Paul knew that invading Iraq was a bad idea from the word go, which is more than you can say of John Edwards or Hillary Clinton (or any of the other Republican candidates).

He also "knew" the Civil Rights Act was "a bad idea from the word go."

What's your point? An all-encompassing, crackpot theory of economics and politics is bound to lead to some good decisions occasionally, just by accident. Even a s