Ron Paul is interviewed about “dumping the faith-based Federal Reserve system”. He talks about the history of the gold standard and the dollar, and proposes a transition period where free-market gold currencies could openly compete against the dollar.
Channel: Fox Business
Reporter: It’s not too long ago the dollar was as good as gold. In fact, dollar bills were labeled gold certificates, so just imagine if the dollar was as good as gold once again. If confidence is one of the failures of our financial system right now, would a gold standard restore the faith and confidence and allow us to move on? The loudest voice in favor of dumping the faith based Federal Reserve System going back to the gold standard is Congressman Ron Paul; he joins us now by phone tonight. Good to hear you Congressman, thanks for coming in, appreciate it.
Ron Paul: Thank you, good to be with you.
Reporter: So, tell us what the possibility, how would we go about going back to gold standard?
Ron Paul: Well we have some pretty good history to look at; we can look at our own history. We went off the gold standard during the civil war period, and the gold price soared, a couple hundred dollars, from twenty dollars. We lived in a different time then, in the 1970s they passed a Resumption Act and they had a three year period and a lot of part 1870s, and there was a transition. They quit printing greenbacks, they withdrew some greenbacks, they balanced the budget and we weren’t running a welfare-warfare state. And the people, believe it or not, trusted their government and it was a non-event and three years the dollar was as good as gold at twenty dollars an ounce. England, after World War I, tried to do the same thing, but they had too many pounds circulating. They went back to an old price and they didn’t withdraw any pounds so it didn’t work, and now we have a bigger problem. The transition would be pretty tough, not written and talked a lot about this and you’d have to device a system where there would be a transition where maybe you could have a gold standard competing with a paper standard and then obviously gold would win out.
Reporter: Well sure.
Ron Paul: People would eventually go to gold because the paper, we’re getting down to the bottom right now. The last thing before they really rushed to gold is the Treasury bill.
Reporter: And that’s about popped hasn’t it the dues on that?
Ron Paul: Look at what the rates have done just recently so if money quits flowing in there or what if a few foreigners decide to dump some of that stuff then the panic is uncontrollable. Then you’re going to see gold instead of being pressed twenty dollars a day, it might be a hundred dollars or two hundred dollars a day, I believe that is conceivable.
Reporter: Alright, well let’s see if we can get a close-up of what I’m holding in my hand right now. This is an old dollar, I don’t know if you can see it. Can you get any closer than this? This is a silver certificate that was issued, I guess they stopped issuing it about thirty, forty years ago something like that. But is this what you are envisioning? Where a dollar bill that does have a signature, a dollar after all is a contract. There are two signatures in there including the treasury secretary, and those signatures mean this is a contract that a year from now the money that you earn should be worth about as much, and if not, if you have any doubt about this you can trade it in and you can see up on top there it says, “Silver certificate for gold or silver.” Is this what you want again?
Ron Paul: To some degree, but there’s been a lot of writings about how you might do this in the private market and not have a government monopoly, because we did have shortcomings in our gold standard because we have bimetalism and we have artificial prices fixed between gold and silver. You don’t want that, you’d have to be on a gold standard or a silver standard, but you could. Hayek has written about baskets of currencies and having this work in the private market. A competing currency could be private but, yes, eventually what you’d want to do, a lot of people say, “Oh we don’t want no gold, we can’t carry all that gold around in our pockets.
Ron Paul: No, I think your point that you’re making is right. You’re still going to have certificates or you’re going to have electronic entries. There are people today who are trying to promote this idea through electronic gold, but the problem is the legal tender laws force us to use dollars in all settlements, so one of my goals in Washington to move in that direction would be to repeal legal tender laws. Actually, all we need to do is obey the Constitution because it’s still very clear it hasn’t been repealed that only gold and silver can be legal tender. Believe it or not, they don’t even obey the Constitution anymore.
Reporter: We believe it now. We’ve seen enough examples of that unfortunately in the last couple of months. Congressman, thank you so much for being here, appreciate it.