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Ron Paul: We Must Have Parallel Currencies

Before the United States House of Representatives, Subcommittee on Domestic Monetary Policy, Hearing on Sound Money: Parallel Currencies and the Roadmap to Monetary Freedom, August 2, 2012

One of the most pressing issues of our time is the push for monetary freedom. The only sound monetary system is one which protects sound money and allows consumers, businesses, and investors the freedom to transact in the currency of their choice. The importance of sound money is summed up nicely by Ludwig von Mises: "It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments." It is no wonder that governments fight tooth and nail against sound money, as sound money protects the well-being of the middle class and the poor while preventing the expansion of government.

Governments throughout history have sought to monopolize the issuance of money, either directly or through the creation of central banks. The growth of central banking in the 20th century allowed governments to monetize their debt in an indirect manner while still ensuring a ready market for government debt. And central banks' slow but sure debasement of the currency allowed governments to repay their debts in devalued money. What debtor would not want such a sweetheart deal?

Indeed, the 20th century witnessed a revolt by governments against the strictures of sound money. In some countries such as Weimar Germany the revolution came quickly and the results were both immediately apparent and instantaneously disastrous. In other countries such as the United States, the revolt came more gradually, with the destructive effects of money printing only recently becoming apparent to more and more Americans.

Over the past 100 years, the Federal Reserve has continually pumped new money into the economy, resulting in a 96 percent devaluation of the dollar. This devaluation does not affect everyone equally, as the banks who receive this new money first benefit from using it before prices rise, while average Americans suffer the price rises first and receive only a trickle of money well afterward. In this way the Fed enriches Wall Street while impoverishing Main Street, leading to a growing disparity of wealth.

The wealthy are always able to protect the value of their assets against inflation to an extent that the middle class and poor cannot. Anyone with enough money and resources can set up a foreign bank account denominated in euros or Hong Kong dollars, or purchase gold and silver that will be safely stored in London or Singapore. The rich are best able to purchase precious metals, the only ones able to invest in high-yielding hedge funds, and the ones most able to shelter their assets from punitive taxation.

All the legislation and regulation that ostensibly protects the average American from losing money in fact does exactly the opposite. It keeps the average American from being able to defend against inflation by investing in precious metals, forces him into mediocre investment opportunities that do not even keep up with inflation, and leaves him at the mercy of the taxman. Compared to their counterparts in other countries, the average American has far fewer financial options available to them.

Mexican workers can set up accounts that are denominated in ounces of silver, and can take delivery of that silver whenever they want, tax-free. In Singapore and some other Asian countries, individuals can set up bank accounts denominated in gold and silver. Debit cards can be linked to gold and silver accounts so that customers can use their gold and silver to make point of sale transactions, a service which is only available to non-Americans. In short, Americans have far fewer options to protect their wealth than citizens of many foreign countries do.

The solution to this problem is to legalize monetary freedom and allow the circulation of parallel and competing currencies. There is no reason why Americans should not be able to transact, save, and invest in the currency of their choosing. Unfortunately, decades of government restrictions and regulations have hampered and prevented the circulation of parallel currencies and destroyed the familiarity of Americans with any sort of money aside from Federal Reserve Notes or bank deposits denominated in U.S. dollars. The thought of introducing parallel currencies undoubtedly scares many people who understandably wish to minimize their financial risk.

All financial activity is fraught with risk. Most people understand the risks inherent in stock or bond investment, but the risk of holding savings accounts or cash is still drastically under-appreciated. Everyone is familiar with the maxim "Don't put all your eggs in one basket" and investors and savers are constantly urged to diversify their portfolios, yet the U.S. government continues to set roadblocks that force Americans to transact and save in dollars that continue to depreciate.

According to the government's official figures, price inflation runs around two percent per year which means that, since interest rates on savings accounts are near zero, the real rate of return on savings accounts is negative. Anyone holding a savings account or cash is losing nearly two percent of the value of his savings per year with this relatively mild inflation. Some private economists estimate that actual price inflation is running closer to nine percent per year, which would make the loss from holding dollars enormous.

Even greater danger comes during bouts of hyperinflation, such as during Weimar Germany and more recently in Zimbabwe. But when Zimbabwe's dollar became worthless, people began to use U.S. dollars, South African rand, and Zambian kwacha to conduct transactions. Similarly in Weimar Germany, many individuals resorted to using dollars, pounds, and precious metals. So despite the economic hardship wrought by hyperinflation, not all economic activity ground to a halt, largely due to the circulation of parallel currencies. Should the United States ever face a hyperinflationary crisis, which due to the Fed's quantitative easing is very possible, the only means of survival would be through the use of parallel currencies.

It is horribly unjust to force the American people to do business with a dollar that is continuously debased by the Federal Reserve. Forcing a monopoly currency with legal tender status onto the people benefits the issuer (government) while harming consumers, investors, and savers. The American people should be free to use the currency of their choice, whether gold, silver, or other currencies, with no legal restrictions or punitive taxation standing in the way. Restoring the monetary system envisioned by the Constitution is the only way to ensure the economic security of the American people.

http://paul.house.gov/index.php?option=com_content&view=arti...

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Resolution


Competing Currencies is fine as a proposal, as a band-aide.

But it does not really fix the problems of having this corrupt debt-generating and debt-pyramided monetary system, or deal with the cost of living consequences of it.

Sure, if you can save (but a lot of people cannot), then this proposal will give you an alternative place to store money, and the conversion rates applied may protect what you've saved.

But you will still get your paychecks in dollars, and since the Central Banks control the supply of dollars, that paycheck will still be worthless...or more and more worthless as time goes by.

The only way to fix the system is to do what Aaron Russo ("America: From Freedom From Fascism") and others have pointed out, which is that you have to get the Bankers out of the business of creating money. They can lend it, and they can Invest it -- but they cannot be the ones to create money.

The way the Government was supposed to work was that: a) Congress was supposed to appropriate all the money in view of the public (transparently), and b) The U.S. Treasury (not Goldman Sachs) was supposed to create the money with no borrowing, and no fabricated debt introduced back to the public.

That would be a transparent (honest) money system. But the current money system is illegitimate and it will continue to distort the whole value-of-income, and the cost-of-living structure .... unless it is abolished.

Competing currencies does fix anything. It just gives people with savings (which is not most of Americans who are living from paycheck-to-paycheck) a savings option.

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property, until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

--Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin, 1802

--

"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that vies is above the hand that takes.

Money has no motherland; financiers are without patriotism and without decency; their sole object is gain."

--Napoleon


Resolution

What you see as a band-aide, I see as a Plague to the Fiat Currency. It would put an end to the corrupt debt generating because allowing competing currencies, allows the sound money institutions to flourish. It would signal the start of a Transition, where as the institutions with the most confidence will win out. I would even think the transition would go over suprisingly well compared to just riding the current system until failure(which is what most countries do before the lightbulb goes on)
This discussion of competing currencies is VERY important to ending the deflation of our wealth.

Thomas Jefferson-All tyranny needs to gain a foothold is for people of good conscience to remain silent.

People aren't stupid

Back when the dollar was in the doldrums relative to the Euro, shopkeeps in NYC were accepting euros.

If it weren't for the fact that metal sales are taxed, I think it would be the same.

This is as important as auditing the Fed. Ron's just decades of everyone else in terms of understanding how the government / the Fed have hosed generations of us.

Sound money?

You'd think this would be a no-brainer to any respected, elected official that is charged with the stewardship of this Nation. I think a high schooler could embrace the notion of sound money with no secrecy of printing phoney money. But, what do we have in our Congress, a bunch of corrupt individuals who conspire to benefit from the rigged system. Right there in plain sight.

alan laney

Ron Paul's Congress critter

Ron Paul's Congress critter colleagues:

Who are these people you call "savers", Dr. Paul? Isn't this behavior bad for the economy?

I must be willing to give up what I am in order to become what I will be. Albert Einstein

About Saving Being Called Bad

It's funny you mention that about "savers." Every bit of logic should tell you that people saving their money is a good thing. It doesn't mean they aren't buying things. But that's what the market report always seems to say, that whenever consumers are saving more that it's hurting the economy - and people need to keep spending. The economic teaching system is like set up to be its own propaganda arm.

www.standardexcellence.net - Bringing you Oklahoma, Texas and national news & opinion that matters for liberty.

100 trillion dollar bill

You can get these on Amazon or Ebay. Good to give to your friends to start up a conversation on the effects of a monopoly on money.

http://goo.gl/4be3q

we can put Obama's portrait

we can put Obama's portrait on that one.

23

Or better

Get some Shire Silver and start using it. Build up a local network of merchants, and just ignore the Fed.

Shire Silver - a better bullion that fits in your wallet.

Sounds good in theory,

but in reality isn't this the best recipe for a SWAT team in front of your door within couple of weeks?

reedr3v's picture

It's the "building the network" part that is hard,

at least if we live outside the Shire.