Archive for June, 2007

June 22, 2007

Replace FED with Silver Standard

Thomas G. Brown |

The case for a return to a gold or silver standard is one that has been overlooked, ignored, or all out scoffed at by those in charge of the money supply. Who are these people in charge? Well according to the Constitution this should be the Congress. But, our current system allows a quasi private bank deal with the money supply. This is the exact opposite of what our founding fathers intended and has created what they feared a central bank that produces fiat money.

Our current system has the Federal Reserve, essentially a private bank which sells paper money that they create out of thin air to the Federal Government. The government buys this money with Treasury bills which offer interest. Now the government has no money to pay off the bill so they pay down on the interest only. Where you might ask does the government come up with the scratch for interest if it can’t create it’s own money. Simple the Federal Income tax. What you thought we used that money to pay for public services…..no, no my friend the bulk of these funds go to pay the interest on our governments loans. And who receives the interest payments.

When a country gets away from real money that is gold and silver the money ceases to maintain value and eventually becomes worthless. The money we carry around today has nothing backing it just a hope by the government that you have faith it’s worth something, Faith is something for a church or a synagogue not for a money supply.

The number one reason for a currency backed by silver or gold (i prefer silver as it’s an industrial metal) is that you can only create as much as you have in reserves. An easy example would be the Treasury holding 100 oz of silver with a current value of $14 an ounce. We’ll that wound allow you to have $1,400 in money out in circulation. If the value of the silver goes up a dollar will get you less silver thus the money supply will be tightened. Conversely if the value of silver drops a dollar will buy you more silver which will loosen the money supply. You will not have to rely on the Federal Reserve Chairman and the Open Market Committee to set interest rates to do this fuction.

In addition the bubbles we have scene in the markets will be reduced in destructive nature in that a central bank will not have control over money supply but the market will dictate how much money could be put into circulation.

With this system the IRS could be eliminated as we would not need the income tax to pay down the debt. You might be asking, how would we pay for services the government provides? Easy, there already taxes that tax care of these services such as roads, defense, and the like. These taxes are voluntary taxes such as sales tax, taxes on cigarette taxes, alcohol taxes, taxes on gun sales, licenses, permits, and the like. These are all taxes you can opt out of by not participating. If you don’t want to pay for a fuel tax, then you can ride a bike, if you don’t want to pay for a cigarette tax don’t smoke.

In closing the Silver(or Gold ) Standard is the a wise choice for many reasons. I hope someday we go back to this monetary policy and create a stable economy once again.