Ron Paul and the Gold Standard

Ron Paul has talked and written about the need for a gold standard.

See: http://www.ronpaul2008.com/articles/843/the-political-and-economic-agenda-for-a-real-gold-standard/

The current international monetary crisis proves to me that he is right.

The Federal Reserve bank controls interest rates and money supply by setting interest rates for inter-bank (including the Fed. via the discount rate) and by buying and selling government securities. This gives them the ability to inflate the money supply without the limitation that currency convertibly into gold would impose.

The Greenspan fed was concerned about deflation after the dot-com bubble and Sep. 11 and reduced the Fed Funds target rate to bellow 2%. These low rates were maintained for too long and helped create the housing bubble. This cycle goes on and on.

The high inflation of the late 70's was controlled by reduction of money supply growth by the Paul Volker Fed. At the time money supply (M1, M2, etc.) were reported frequently and in the business news daily.

In the last twenty five years international capital markets have developed which I believe have made it difficult to measure the actual money supply. Part of the measurement equation is velocity of money; this is now around the globe at the speed of light. Foreign central banks hold trillions of dollars and this money is leveraged through the international financial system.

Even if Ron Paul is not elected president, he has raised the issue and attracted many people to free market and sound money policy.


Papers which followed the Gold Commission (on which Ron Paul served) Report:

http://www.cato.org/pubs/journal/cj3n1/cj3n1-13.pdf