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I’ve discussed just a few
benefits of sound money in the last two weeks, and contrasted them to the
perils of fiat currency. Sound money keeps government spending in
check, keeps trade fair and honest, which reduces the temptations, and many
underlying causes, for governments to wage wars. It also gives you the
peace of mind of knowing that your savings will be able to sustain you in
your retirement.
So if sound money is such a good
thing, what is stopping people from simply trading with each other in gold
and silver? Why are you still being paid in fiat dollars, and why
can’t you pay for gas in gold? The answer is that the government
has enacted policies that provide considerable stumbling blocks to such
transactions.
One of the main stumbling blocks
is Federal legal tender laws, which state that government-controlled fiat
currency MUST be accepted for many kinds of monetary transactions. In
light of this, Gresham’s
Law takes effect. Gresham’s
Law states that bad money drives out good money. Meaning, if someone is
forced to accept your bad money, it is to your advantage to pass it off, like
a hot potato, in exchange for something of value. Any good money you
have, you will hoard. Eventually, real money is driven out of
circulation and under people’s mattresses, so to speak. In the
absence of legal tender laws, people are free to accept the medium of
exchange of their choice, and are likely to insist on payment in something of
real value.
Related to legal tender laws,
contracts in gold are not enforced. Meaning if two parties agree to
exchange goods or services for gold, and end up in a dispute, the courts will
simply settle the dispute in Federal Reserve notes. Governments should do
very little, in my estimation, but it should enforce contracts and property
rights through the courts. But in this instance it shirks this basic
duty, when it comes to gold, as one way to keep control of our economy and
the medium of exchange. One is also expected to pay sales tax on the
purchase of gold. This is as ludicrous as if you paid sales tax at the
bank when you converted dollars into quarters! The IRS also expects you
to pay capital gains tax on gold, which is so backwards, since gains on gold
really represent decline in the value of the dollar!
Legal tender laws should be
repealed at the Federal level. Congress has the Constitutional duty to
protect the integrity of our money. However, since it has passed this
duty off, and the Federal Reserve has only debased our currency, Congress
should no longer force Americans to do business in dollars if they would
prefer to transact in gold, or silver, or cigarettes or seashells, for that
matter. Free people should be free to associate and do business in ways
that benefit them. Instead they are forced to use the unstable dollar
to their own detriment, and the benefit the government.
Ron Paul
www.house.gov/paul
Congressman Ron Paul of Texas enjoys a national reputation as the premier advocate for liberty in politics today.
Dr. Paul is the leading spokesman in Washington for limited constitutional
government, low taxes, free markets, and a return to sound monetary policies
based on commodity-backed currency. For more information click on the Project Freedom website.
Published with the authorization of Dr. Paul.
Copyright Dr. Ron Paul
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