Ron Paul on the Gold Standard and Competing Currencies

Channel: Fox News
Date: 10/5/2009

News Anchor: 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 and 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, we appreciate it.

Ron Paul: Thank you, good to be with you.

News Anchor: So, tell us what the possibility is. How do we go about going back to the 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 to a couple of hundred dollars from 20 dollars. But we lived in a different time then. In the 1870s they passed the Resumption Act and they had a 3 years period in the latter part of the 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 in three years the dollar was as good as gold at 20 dollars an ounce.

England, after World War I, tried to do the same thing, but they had too many pounds circulating and 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. I’ve written and talked a lot about this and you’d have to devise 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, people would eventually go to gold because with the paper we’re getting down to the bottom right now. The last thing before they really rush to gold is the Treasury bill.

News Anchor: Well, that’s about popped, hasn’t it? The juice on that?

Ron Paul: Yeah, 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. You’re going to see gold instead of being increased by 20 dollars a day, it might be 100 dollars or 200 dollars a day. I believe that it’s conceivable.

News Anchor: Okay, let’s see if we 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 30-40 years ago, or something like that. But is this what you are envisioning where a dollar bill that does have a signature… the 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 trade it in and you can see on top it says “silver certificate for gold or silver”. Is that what you want again?

Ron Paul: To some degree. But there have 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 had bimetalism and we had prices artificially fixed between gold and silver. You don’t want that. You have to be on a gold standard or a silver standard. Hayek has written about baskets of currencies and how this could work in the private market. A competing currency could be private. A lot of people say, “Oh, we don’t want gold, we can’t carry all that gold around in our pockets.” 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 not, they don’t even obey the Constitution anymore.

News Anchor: We believe it now, we’ve seen enough examples of that, unfortunately, in the past couple of months. Congressman, thank you so much for being here. We appreciate it.

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