MONEY: How transition to a metal backed currency

FROM AN EMAIL TO ECONOMIST WRITER

Dear X:

As an injineer, I’m not a social scientist. Some say I am not even social. As a “gold bug”, I am adding to supply of that relic. My question is one of philosophy, history, and practicality.

I first became aware of inflation (i.e., monetary fiat inflation as opposed to all the other distractions that are called inflation) when in Manhattan College in some course or another, vonMises was an assigned collateral reading. I had a prof, who I can’t remember, was always on Crusoe’s Island. I got a D, so I didn’t take much away from the course. My next brush with education about it was a visit to the Smithsonian where I saw the incredible shrinking French franc. The original French Franc of Louis I was a gold coin that looked more like a small hockey puck than a coin. The last French Franc of the monarchy Louis XVI was a tissue paper thin button. That is what governments do. They debase the currency. They redefine money to give themselves more and the people less. Paper money is even easier to inflate. No coins to shave! I then experienced the Carter inflation of the 70’s with 18% interest rates. And the WIN (Whip Inflation Now) absurd buttons. Lately I’ve read about the Liberty Dollar, silverization of the Mexican peso, and the golden dinar. I’m also remotely aware of Say’s Law which I will paraphrase as “if you had some gold and some paper, which would you spend first?”. I think is a fair translation.

So with that context, how do the people of say New Hampshire, with all those willing Free State Project members, transition from Federal Reserve Banknotes (that I sarcastically called FRBies) to a metal backed currency (i.e., the Liberty Dollar, gold or silver bullion coins, something else)?

I’ve posed this question to Walter Williams, Lew Rockwell, and anyone else who I thought might have an answer. Never had a good answer. Care to take a stab at it?

Does it take a TEOTWAWKI (The End Of The World As We Know It) scenario to get rid of the Federal Reserve? With all the fighting and bloodshed to get to peace and economic honesty? Or is there a peaceful path to end “counterfeiting”? With all the “stuff” that the Federal Gooferment could sell off, it would seem possible to make good on all the promises. Sell off land in Nevada and Alaska to pay for Social Security? I can’t see how anything good will come out of our current direction. Nothing likely except more inflation.

Care to share your thoughts about this topic?

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3 thoughts on “MONEY: How transition to a metal backed currency

  1. I have heard through the grapevine that the U.S. will positively move to a metals backed currency system by the end of September, 2007? Have you heard anything about that?

  2. I guess that the silent theft of 95% of your savings between 1970 and 2000 doesn’t qualify as being “broke” and unnecessary of a fix.

    The Federal Reserve Bank, which is neither “federal”, a “reserve” of anything, nor a “bank”, issues fiat paper currency backed by nothing more than what? At least the French Kings had to shave your gold coins to rob you blind. The FED just runs it’s printing press.

    The people’s savings and investments, yours and mine, are full of hot air. Just look at any commodity like houses! I’m sitting in a house that cost 8k$ new in 1950. Today it’s supposedly worth $350k. Did the boards become antiques? No the dollars are worth less. When compared to the rate of inflation, I think that you’ll find that investments are far behind the curve.

    The question is when does the bubble burst? Or is there a way to deflate the balloon without getting people killed? We’ve had the lessons but did we learn?

    Two gold ounce coins in Roman times bought a fine men’s toga. Two gold coins today is about 1300 Federal Reserve “dollars” which will buy a nice suit. Some things stay the same.

    By the way, where did all the wealth stolen by the inflation tax go? Warfare, welfare, and the pockets of the politicians and their pals. Argh!

    My advice put your faith and 5% in gold; not the politician’s pocket. Besides a sleeve of gold coins makes an excellent inheritance. Read the stories of the German hyperinflation and you’ll get a sense of what happens when the balloon start to rise ever faster, the Chinese want something for their greenbacks, and the Social Security / Medicare Ponzi scheme presents its bill!

    It won’t be blogs that are the problem then. :-(

  3. I have to take the opposite position my good friend. Inflation has been around for as long as I have been alive (5 cent loaf of bread when I was 5 yrs old), and for as long as this country has been around, and probably even longer than that! My position is that old addage, ‘if it ain’t broke, don’t fix it!’ The paper currency has survived a lot of ‘stuff’ over the years, and now we are moving to a ‘digital’ dollar, so we have a new form of currency that will cycle through, then we will probably go back to paper one day! And people’s savings and investment accounts have never been so good. As the cost of goods go up, prices and wages go up. It is all relative. I think the worries over the economy are proliferated by the ‘talking heads’ on TV, and some blogs. :-)

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