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07/13/2007 - 10:55am

Your Federal Income Taxes Pay For Nothing


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This may be well-known to some people, but most of the American public is completely unaware.

In 1913, Congress established the Federal Reserve, a cartel made up of private banks (that is, the Federal Reserve is not a government agency). When Congress needs money to spend and it doesn't have it, the Federal Reserve prints it and loans it to them. We pay interest on this loan, currently around $900 billion each year.

Guess what else is $900 billion per year -- The amount of federal income tax collected from Americans. So the income taxes you pay to the IRS don't actually pay for anything, they just pay interest on a debt, and an unneeded debt at that.

Why is the debt unneeded? Because Congress has the constitutional authority to coin money themselves. So why would Congress borrow money and pay interest on it when it doesn't have to?

Because Congress is only allowed to create money out of gold and silver. The Federal Reserve, while it has no authority under the constitution, prints paper money that is worthless. It only has value because they say it has value and we believe them. Because of this, they are the cause of virtually every monetary crisis this country has suffered in the past 100 years, including the Great Depression.

Here's an example. Let's say that I'm a very wealthy developer, and I need to borrow money to develop land. Money that I borrow in large quantities was recently printed by the Federal Reserve. When I make my purchases, I make them at a set price. But once I've flooded the market with new paper money, the market will realize the increased money supply and cause monetary inflation -- That is, increased prices without an increase in demand or a decrease in supply. By the time this new money makes it to the middle and lower classes, the money is worth less because prices have gone up.

This is why "the poor get poorer and the rich get richer" and "the middle class is disappearing" as we so often hear. The vast majority of people don't understand this, and they blame the free market and lack of government regulation for this. And then they call for government assistance like universal health care and education.

As we know, the government spends more money than it brings in, which is why we have this inflation problem that causes the middle and lower classes to become poorer. So what would happen if government started providing for universal health care and everything else? They would spend more money that they don't have, which means they would print more money, which means the debt would go up, inflation would go up, poor people would get even poorer, rich people would get even richer, and we'd be feeding this perpetual cycle; because we'd need the government to provide even more.

Why would the government want spend money so irresponsibly? Because spending money without increasing taxes is traditionally what gets politicians re-elected. And the banks that own the Federal Reserve like it because the more the government spends, the more it borrows, and the more interest the Federal Reserve collects from the federal income tax.

How do we get out of this cycle? First, we get rid of the Federal Reserve and we put our government back onto a sound money system (that is, it has backing like gold and silver), because they should only be able to coin money out of things that are actually money. This would virtually eliminate monetary inflation so prices stabilize and prices don't keep skyrocketing.

Then, we get rid of the IRS. Without the federal income tax, we don't really need them anymore. And without an income tax, people will have more control over their money.

Of course, we could keep looking at things on the surface and say that the government should keep taking care of us, giving all of our money to the rich and leaving nothing for us. It was Adolf Hitler who said, "Lucky for rulers that men do not think."

Edit - 7/22/07, 9:12pm:
Several people have asked for sources for this information. It was compiled from various interviews with Congressman Ron Paul, G. Edward Griffin (author of The Creature from Jekyll Island), Edwin Vieira, "American: Freedom to Fascism", and "Fiat Empire". It should be noted that there are some criticisms to "American: Freedom to Fascism". Like always, you should determine for yourself if you believe the claims made are fact.



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Posted by: nobody
07/18/2007 10:54pm

The trillions of dollars of federal taxes we collectively pay are spent by paying the wages to the millions of federal employees, from bureaucrats in the IRS and a plethora of other agencies to postal workers to agents of the intelligence and security agencies to soldiers in the armed forces, and just as much is spent in subsidizing private-business ventures via corporate welfare (subsidies to big corporations mostly in the military-industrial complex but also in the pharmaceutical, agricultural and other industries, as well).

Even if the private Federal Reserve system were exchanged for a publicly owned bank that stuck to a gold-standard, the federal government would still need to collect taxes (through the IRS) to pay the wages of it's millions of employees and to finance all the corporate welfare that is required to maintain American military superiority over the rest of the planet (which is the sole reason that the USA enjoys economic superiority over every other nation, and the sole reason most individuals in the USA enjoy a higher standard of living over nearly everyone else on Earth). So your idea that getting rid of the Federal Reserve system would lead to an end of taxation and the dismantling of the IRS is just a tad unrealistic.

The fact that the federal government is presently only collecting enough taxes to pay the interest on it's debts is a new phenomenon, though it has a tendency to recur, as it did in the 80s under another leader who campaigned on the claim that he would reduce the size, scope and spending of the federal government but did neither. He only reduced taxation, to the minimal level needed to keep up with paying the interest on the government's debt, but increased spending, as well the scope and size of the federal government, thus increasing the government's debt, and the amount of interest generated by debt.

Even if we had a gold-standard, the poor would get poorer and the rich would get richer. Inflation isn't the only trick the rich have to make sure of that, and inflation can still occur under a gold-standard, as it often did in the centuries prior to the complete departure from the gold-standard (which happened a few decades after the incarnation of the Federal Reserve system).

The idea of returning to a gold-standard is completely unworkable, considering the total value of the real property in the USA alone (ignoring the rest of the world as we so often do) is about 30 times the total value of all the gold ever mined. Of course, some Swiss bankers who own a large percentage of the world's gold reserves would love to see the price (aka real value) of gold go up 10000% but it wouldn't benefit anyone but them. And it certainly would not benefit them, or anyone else, if government's took their gold by force to institute a new gold standard.

Could it be that such men who have billions in gold reserves spend millions promoting the idea of the gold-standard? I would guess so. Not that they actually believe they will ever succeed at getting government's to adopt a gold standard (and buy their gold), but in the hopes that they will convince the less than fully informed and knowledgeable people that it may eventually happen, thus said people buy something completely useless (gold) as an investment, driving up the price of their reserves. That's my opinion on the gold-standard and why it is mentioned (promoted) so much.

The Native Americans were fooled into trading their fortunes for worthless beads for making pretty trinkets, and most people today laugh at them for being so naive. However, most don't recognize that the entirety of white, European culture (and most others) was equally duped into desiring a worthless yellow metal, whose only use is making pretty trinkets, in much the same way.

Posted by: alpha
07/19/2007 11:06pm

The older paper currency backed by silver and gold deposits stated on their face to be a promissory note "redeemable upon demand by the bearer" of said note for such precious metals.

This ensured the government could not order the printing of more face value currency than it actually had on deposit in the form of silver and gold.

This is what a gold standard is. When the price of world gold markets went up, it took less dollars to buy something. When it went down, it took more. Plain and simple.

Whether tied to precious metals or even something else, like salt, it was based on the fact that the government could not overprint more money than it had actual reserves on hand to back it (the paper note) up.

What you have now is a fiat (meaning fake or false) form of monetary system.

That is, the government borrows the money from the Fed at face value and agrees to repay the debt on that same face value with interest also determined by ...the Fed.

There is nothing to limit how much paper money can be printed because there is nothing that it represents. It's not actually tied to or based on anything of actual value.

Ink and paper costs little compared to the finished cost of any printed material. And in this case, it actually costs the same to print $1 bills as it does to print $100 bills or even $1,000 bills, for that matter. The amount of ink and paper yields the same number of finished, cut bills.

The Fed prints this money at a cost of about $21 per thousand dollars of face value (these are old figures and the current cost is probably higher.)

Then it lends this newly generated money to the government at "full face value" and gets to decide how much interest it's going to charge for it, to boot.

Now wonder then, how we are so in debt to the Fed. It's an incredibly efficient money making system...
for the Fed!

We, the taxpaying public, are the true public servants of the royalty class (government officials) as we labor to payback the face value and interest of their fiat money scam.

If you can't see that, then maybe, just maybe, you are part of the problem.

Today's appearance of a middle class is based solely on the availability of easy credit. Credit card companies, banks and other lending institutions play the same game as the Fed. They lend worthless printed paper to borrowers and charge interest for the privilege.

Think about it. How many peole could sustain their current lifestyles if they had to have the cash on hand first?

Those that can do so are called the non-working rich. Those that can't do so are called the non-working poor.

It falls upon us, the working class to support both ends of the non-working class.

And that's regardless of whether the Democrats are in power or the Republicans.

The Dems conveniently benefit themselves and their cronies in pushing monetary programs for the non-working poor.

The Reps conveniently benefit themselves and their cronies in pushing tax cut programs for the non-working rich.

That's why they call it Washington, DC (District of Criminals)


Posted by: nobody
07/20/2007 7:23am

You both omit the fact that when the dollar bill or hundred dollar bill or whatever dollar bill is worn out and taken out of circulation, the Federal Reserve gets nothing. The interest made by "loaning" money to the government as you both call it is called seigniorage and that occurs whether there is a gold standard or not, and it usually is more profitable for a national bank that issues money within a gold standard system than a non-gold standard system.

For example, in the current system, the Fed is allowed to produce a trillion (or whatever it is) dollars in bills a year, but each year has to remove a trillion dollars (or so) from circulation of no longer usable currency. It's not as if the government just let's the Fed create a trillion dollars a year and add that to their ledger, because they also have to destroy nearly the same amount each year and remove that from their ledger. Granted inflation occurs when the fed is permitted to print considerably more than it destroys, however, the Fed also has the power to adjust interest rates to curb said inflation.

Under a gold standard, the national banks that issue currency would profit from inflation. For example, when they issue a $500 note (which for the sake of example has a value of exactly one ounce of gold) they will make a profit a few years later when they buy back the note and destroy it (they will give the redeemer less than an ounce of gold, due to inflation, and keep a bit of gold, giving the redeemer the current amount of gold that has a value of $500). Historically that rate of "return" has been far more profitable for the banks than the 2-10% interest rates that have been the norm for the past generation or so under our system. It's inconceivable to me to think that any person who thinks about economics would think that the national banks who are responsible for maintaining the money supply of such a rich and prosperous country (or any country for that matter) would do so free of charge, i.e., without making a modest profit.

It's surprising to see Libertarians (who normally advocate free markets and the privatization of most government functions and oppose "publicization" or socialization of private industry) to be so adamantly opposed to keeping the production of money privatized.


Lastly, Ayn Rand's "Capitalism: The Unknown Ideal" includes a speech given by Alan Greenspan in 1965 entitled "The Gold Standard." Greenspan was a staunch defender/advocate of the gold standard and became Federal Reserve Board Chairman. Why do you think that is? Interesting and I'd say mandatory reading (for those interested in this subject), anyway: http://www.usagold.com/gildedopinion/greenspan.html
or try http://64.233.167.104/search? q=cache:gGEVH2FcO9QJ:www.usagold.com/ gildedopinion/greenspan.html +the+gold+standard+alan+greenspan+rand& hl=en&ct=clnk&cd=1&gl=us&client=firefox-a

Posted by: Pizpot
07/21/2007 4:32pm

TO Nobody,

Property taxes cover you area not income tax. The property gets a road, school nearby, fire department, police, and a portion of the collective army. So please, think again.

Posted by: Nick Coons
07/21/2007 5:46pm

<The trillions of dollars of federal taxes we collectively pay are spent by paying the wages to the millions of federal employees, from bureaucrats in the IRS and a plethora of other agencies to postal workers to agents of the intelligence and security agencies to soldiers in the armed forces, and just as much is spent in subsidizing private-business ventures via corporate welfare (subsidies to big corporations mostly in the military-industrial complex but also in the pharmaceutical, agricultural and other industries, as well).>

This isn't true, and I should have clarified that more in my post. Federal income taxes only account for about one-third of the federal government's revenue. The other two-thirds are too numerous to mention, but a huge amount come in from government investments.

The Federal Reserve was created in 1913 (and we did just fine without). The Income Tax was also created in 1913, specifically to pay for the interest accumulated by borrowing from the Federal Reserve. These two entities are needed to cancel each other out, and neither is needed without the other.

On the other hand, if you accept the socialist notion that government should take care of you from cradle to grave, then you can't abolish the income tax and the IRS, because that income will be needed to fund these expenditures. But such expenditures are much better provided by the market.

<Even if we had a gold-standard, the poor would get poorer and the rich would get richer.>

Not to the degree that it happens now. Poor people are poor and rich people are rich mostly due to their choices and somewhat due to their circumstances. With the Federal Reserve, there wouldn't be a government force widening this gap.

<Could it be that such men who have billions in gold reserves spend millions promoting the idea of the gold-standard?>

I'm not necessarily advocating returning to the gold standard, simply that we have to have some sort of non-fiat money. I honestly don't know what that answer is. But gold worked reliably as money for thousands of years before failing paper currencies. A one-ounce gold coin would buy today the same thing it would by 2,000 years ago. The value of gold has stayed very much the same as the value of items.

But why would someone with billions in gold reserves care whether or not we went back to a gold standard? If they have billions in gold reserves, then they have billions in gold reserves whether or not gold is the standard.

I wouldn't recommend buying gold as an investment, because it doesn't increase in value. The only time it superficially increases in value is when the value of the dollar goes down. But that's not gold going up, that's the dollar and other currencies going down.

<The Native Americans were fooled into trading their fortunes for worthless beads for making pretty trinkets, and most people today laugh at them for being so naive. However, most don't recognize that the entirety of white, European culture (and most others) was equally duped into desiring a worthless yellow metal, whose only use is making pretty trinkets, in much the same way.>

Except that civilization has accepted gold as a valuable item for many millenia. This is much better than some arbitrary entity printing something on paper and simply declaring that it has value.

<The interest made by "loaning" money to the government as you both call it is called seigniorage and that occurs whether there is a gold standard or not, and it usually is more profitable for a national bank that issues money within a gold standard system than a non-gold standard system.>

It occurs because money is being borrowed, which happens when the government overspends. The government should not be borrowing.

<For example, in the current system, the Fed is allowed to produce a trillion (or whatever it is) dollars in bills a year, but each year has to remove a trillion dollars (or so) from circulation of no longer usable currency. It's not as if the government just let's the Fed create a trillion dollars a year and add that to their ledger, because they also have to destroy nearly the same amount each year and remove that from their ledger. Granted inflation occurs when the fed is permitted to print considerably more than it destroys, however, the Fed also has the power to adjust interest rates to curb said inflation.>

Interest rates should be determined by the market.

<Under a gold standard, the national banks that issue currency would profit from inflation. For example, when they issue a $500 note (which for the sake of example has a value of exactly one ounce of gold) they will make a profit a few years later when they buy back the note and destroy it (they will give the redeemer less than an ounce of gold, due to inflation, and keep a bit of gold, giving the redeemer the current amount of gold that has a value of $500).>

But you assume that monetary inflation would still occur, and it would not at the rate that it does now.

Technically, we were on a gold standard until 1971, but the price of gold was set arbitrarily. That's still fiat money. When the government, or a government-established monopoly, is allowed to set the value of gold in a currency, then issue that currency, there's no point in being on a gold standard.

Our Constitution says that Congress has the authority to coin money out of gold and silver only. This would be a good system of money. In lieu of actually carrying around gold and silver coins, we could use a currency that had a fixed value. For instance, $1,000 = one ounce of gold. And this value would be fixed. As soon as it's allowed to be changed, we have monetary inflation, and we have banks profiting from said inflation as you've described.

<It's inconceivable to me to think that any person who thinks about economics would think that the national banks who are responsible for maintaining the money supply of such a rich and prosperous country (or any country for that matter) would do so free of charge, i.e., without making a modest profit.>

I don't expect banks to do anything free of charge. What I expect is to not have a bank in control of our money system, and this is not constitutionally allowed.

<It's surprising to see Libertarians (who normally advocate free markets and the privatization of most government functions and oppose "publicization" or socialization of private industry) to be so adamantly opposed to keeping the production of money privatized.>

You're confused. Even though the Federal Reserve is a collection of private banks, it's only semantically different from a government agency, because it's a government-established monopoly. If private organizations were allowed to create competing currencies, then the market could determine which currency it liked best, and Libertarians would probably be satisfied.

<Lastly, Ayn Rand's "Capitalism: The Unknown Ideal" includes a speech given by Alan Greenspan in 1965 entitled "The Gold Standard." Greenspan was a staunch defender/advocate of the gold standard and became Federal Reserve Board Chairman. Why do you think that is?>

If I were to guess, I would say that in spite of knowing that a gold standard was best, he's only human and the temptation of controlling an entire country's monetary system (and acquiring the wealth and power that came along with that position) was too much to pass up.

Posted by: Jerry Kindall
07/21/2007 6:52pm

<I>What you have now is a fiat (meaning fake or false) form of monetary system. </I>

"Fiat" actually means "by decree," not "fake" or "false."

Posted by: Nick Coons
07/21/2007 7:40pm

<"Fiat" actually means "by decree," not "fake" or "false.">

Perhaps that commenter misspoke about the literal meaning of the word, but in its use it's effectively the same.

Posted by: General Public
07/21/2007 8:15pm

<I'm not necessarily advocating returning to the gold standard, simply that we have to have some sort of non-fiat money. I honestly don't know what that answer is. But gold worked reliably as money for thousands of years before failing paper currencies. A one-ounce gold coin would buy today the same thing it would by 2,000 years ago. The value of gold has stayed very much the same as the value of items.>

The basic necessity of every living organism is energy - food/fuel so this is what should back a currency. Indian economic system worked well for past 5000+ years using food as currency, coinage currency did exist in parallel but the villages were using "food grains" as "currency" this insulted farmers/villagers from vagaries of inflation till about 1970 when the Govt. made farmers to accept paper currency though a forced food grain levy system.

<Our Constitution says that Congress has the authority to coin money out of gold and silver only. This would be a good system of money. In lieu of actually carrying around gold and silver coins, we could use a currency that had a fixed value. For instance, $1,000 = one ounce of gold. And this value would be fixed. As soon as it's allowed to be changed, we have monetary inflation, and we have banks profiting from said inflation as you've described.>

I agree. For any "currency" to be "valid" the issuer should guarantee redemption against food/fuel.

Gold - we canonot eat it nor can we use it to grow food the primary requirement to sustain life, so Gold is just another token, which again needs redemption to realize "value" (value means anything that will sustain life) one token (paper currency) cannot be backed by another token(gold).


Posted by: Nick Coons
07/21/2007 8:32pm

<Gold - we canonot eat it nor can we use it to grow food the primary requirement to sustain life, so Gold is just another token, which again needs redemption to realize "value" (value means anything that will sustain life) one token (paper currency) cannot be backed by another token(gold).>

A very good point. As I mentioned, I don't necessarily advocate a gold standard, but I advocate it over the random printing of paper money.

One of the inherent problems with food is that it perishes. A country can't simply have an indefinite store of food, the way a country would with something like gold in Fort Knox, to back a currency. Any ideas on how food/fuel would be used in standard transactions as currency, or the backing of a currency?

Posted by: anonymous
07/21/2007 9:23pm

"When Congress needs money to spend and it doesn't have it, the Federal Reserve prints it and loans it to them. We pay interest on this loan, currently around $900 billion each year.

Guess what else is $900 billion per year -- The amount of federal income tax collected from Americans. So the income taxes you pay to the IRS don't actually pay for anything, they just pay interest on a debt, and an unneeded debt at that."

Publishing figures like this without a reference is poor journalism to say the least. Until I see some primary sources as reference I don't believe a word of this.

Posted by: Tyson Hinrichs
07/21/2007 9:52pm

Backing an economy with food/fuel is a horrible idea because it leads to conflicts BECAUSE they are necessities. Adopting gold as a monetary system is a good idea BECAUSE GOLD IS NOT a necessity; People don't absolutely need it to survive.

Posted by: J
07/21/2007 11:33pm

I know nothing about economics, but maybe currency could be backed by land. Land allows for the growth of food/fuel.
And to avoid conflict over necessary backings, can't we make arbitrary restrictions on what backs the currency as well as we arbitrarily say gold could back a currency.

Posted by: Gereral Public
07/22/2007 1:27am

<One of the inherent problems with food is that it perishes.>

Food perishes that is the beauty of the food currency based economics, no problem of inflation, it is self regulatory that is how the Indian village economy prospered for 1000's of years.

<A country can't simply have an indefinite store of food, the way a country would with something like gold in Fort Knox, to back a currency. Any ideas on how food/fuel would be used in standard transactions as currency, or the backing of a currency?>

It is pretty simple all we need to do is define 1 currency = 1 kilo calories of energy. Then limit validity of the currency to 180 days or forced redemption obligation by the issuer. This will give adequate liquidity in the market and any bluff/inflation by the currency issuer will be called in 180 days.

When energy based currency system comes into existence the banking system has be suitably modified. The function of issue of currency will be separated from banks to a separate business which will buy food/fuel issue currency and redeem currency with food/fuel at a small fixed discount rate for operating expense it will be essentially a warehousing operation like Fort Knox but instead of gold it will store "valuable" food/fuel. The banks will do all transactions in actual currency, no cheques (this is where the fractional inflation lurks). Banks will accept currency for deposit and loan out currency at interest, all banking transactions will be done with real currency or electronic equivalent of the same, banks can only loan out currency they have in hand! Cheque has no place in the era of electronic clearing system and networked economy.

Now what if energy production over shoots, no problem, the more energy is produced and consumed the more prosperous the society is..... since wealth = energy.


Posted by: Ryan
07/22/2007 7:18am

Actually, the Federal Reserve pays its profits back to the US Treasury.

http://www.geocities.com/CapitolHill/Senate/3616/flaherty7.html

Posted by: Nick Coons
07/22/2007 7:27am

<Publishing figures like this without a reference is poor journalism to say the least.>

I am not a journalist, nor do I portray one on television. Any resemblance to actual journalism is completely coincidental. This is just a blog :-).

<Until I see some primary sources as reference I don't believe a word of this.>

Fiat Empire:
http://video.google.com/videosearch?q=fiat+empire

American: Freedom To Fascism:
http://www.freedomtofascism.com

Here are just two, the first of which has already been mentioned here.

Posted by: nobody
07/23/2007 9:26am

The link Ryan gave is quite good. I hadn't seen it before, but I'm glad he linked it. On the various pages, it addresses (in a better way than I have) almost all of the points you've brought up that I disagree with you about.
Here is the main page from the link he gave:
http://www.geocities.com/CapitolHill/Senate/3616/FedReserveFacts.html


There are a lot of flaws in our system, and conspiracy theorists tend to talk about flaws which don't exist rather than those that need addressing. For example, there are a lot of people that talk about the 911 conspiracy, which is absurd, and it's a waste of time when people should be talking about and doing something about Bush's actual failings and faults, rather than those fictitious faults that conspiracy theorists invent.

Posted by: Arvind
07/23/2007 11:11am

Anyone ought to be able to issue to issue credit notes, backed by anything they wish. Their trustworthiness and creditworthiness will determine if their credit notes gain currency. I believe the market will naturally select payments in trusted gold and silver certificates. That will end this dicsussion once and for all.

Posted by: Nick Coons
07/23/2007 11:18am

Arvind,

I agree with you, we should have competing currencies, and let the market determine which one it wants to use.

Posted by: Arvind
07/23/2007 12:05pm

For all those who are interested, here is an excellent explanation by Murray Rothbard on how money came into being, evolved and how precious metal currencies are naturally selected by free markets. it is a MUST read before you even start talking about monetary policy.

http://www.mises.org/rothbard/rothmoney.pdf

Posted by: doody
07/23/2007 2:13pm

More bitching and an invitation to a mises website. ****.

The Fed is a counterfeiter. The end.

Posted by: General Public
07/24/2007 5:24am

@Aravind
<http://www.mises.org/rothbard/rothmoney.pdf> Rothbard opens the discussion with "The Value of Exchange" but does not define "value/wealth", without defining value/wealth further discussion has no meaning.

Posted by: nobody
08/06/2007 1:06am

Arvind, Anyone Can issue currency/notes. There were times in US history when it was illegal to do so, but now is not such a time.

There are alternative currencies, however the Federal Reserve Notes that we all use are what the market has chosen. The world markets are turning to foreign currencies (primarily the Euro and Pound) although Federal Reserve Notes were the currency of choice on the world markets for several decades.

There are alternative currencies to those made by states (governments), which are in fact backed by Gold, however, they are not universally accepted because the vast majority of people just don't have any clue.

Technically, we were on a gold standard until 1971, but the price of gold was set arbitrarily. That's still fiat money. When the government, or a government-established monopoly, is allowed to set the value of gold in a currency, then issue that currency, there's no point in being on a gold standard.

"Our Constitution says that Congress has the authority to coin money out of gold and silver only."

True, but it does not say that the government can not pass legislation that allows for a universal form of money that is not gold-backed.

"This would be a good system of money. "

No, it would be terrible.

"In lieu of actually carrying around gold and silver coins, we could use a currency that had a fixed value. For instance, $1,000 = one ounce of gold. And this value would be fixed."

That's ludicrous for advocates of free-markets economics, like fixing the price of cotton or the price of sugar or the price of any other commodity. Gold, like anything else, fluctuates in value, which is why there are $5 dollar notes (i.e, $5 worth of gold per the current value of gold), not .02 ounce notes in gold-standard based money systems.

"As soon as it's allowed to be changed, we have monetary inflation, and we have banks profiting from said inflation as you've described."

Yes, exactly, in any money system based on a gold standard where the price of gold is freely determined by the markets, there will be inflation and/or deflation of currency (dependent on the change in the value of gold), just as there is in any other type of money system (i.e., the change in the value of the currency in question).

A gold standard wouldn't change that, and contrary to the myths you've been exposed to, the Fed is not ripping us off of every cent we pay in tax.6JbyhG

Posted by: nobody
08/06/2007 1:18am

"If private organizations were allowed to create competing currencies, then the market could determine which currency it liked best, and Libertarians would probably be satisfied."

Private organizations can create competing currencies, but a few libertarians (and anarchists and others) are not satisfied, because the market overwhelmingly chooses Federal Reserve Notes.

libertydollar.org
e-gold.com

Posted by: Arvind
08/06/2007 2:49am

"Private organizations can create competing currencies, but a few libertarians (and anarchists and others) are not satisfied, because the market overwhelmingly chooses Federal Reserve Notes."

That is an absurd statement. FRNs are accepted because by law no one has the right to refuse them for "all debts public and private". That is the definition of legal tender.

An artificial demand is created for them because the government demands taxes in FRNs. That is why they have gained currency. If fact, in the years after the Fed was established private gold ownership, which used to be the traditional store of value was abolished. The fiat dollars americans received in return were immediately devalued in what was perhaps teh greatest heist of Americans' wealth up to that point !!!



Posted by: Arvind
08/06/2007 2:57am

"In lieu of actually carrying around gold and silver coins, we could use a currency that had a fixed value. For instance, $1,000 = one ounce of gold. And this value would be fixed."

Weight is the distinctive unit of a tangible commodity, and so trading takes place in terms of units like tons, pounds, ounces, grains, grams, etc. Gold is no exception. Gold, like other commodities, will be traded in units of weight.

It is obvious that the size of the common unit chosen in trading makes no difference to the economist.

Even when countries were on the "gold standard," people thought in similar terms. American money was "dollars," French was "francs," German "marks," etc. All these were admittedly tied to gold, but all were considered sovereign and independent, and hence it was easy for countries to "go off the gold standard." Yet all of these names were simply names for units of weight of gold or silver.

The dollar began as the generally applied name of an ounce weight of silver coined by a Bohemian Count named Schlick, in the sixteenth century. The Count of Schlick lived in Joachim's Valley or Jaochimsthal. The Count's coins earned a great reputation for their uniformity and fineness, and they were widely called "Joachim's thalers," or, finally, "thaler." The name "dollar" eventually emerged from "thaler."

Please read monetary history before you make statements like the above.
[http: // www.mises.org / rothbard / rothmoney.pdf] is a good start.

Posted by: Nick Coons
08/06/2007 8:07am

<"Our Constitution says that Congress has the authority to coin money out of gold and silver only."

True, but it does not say that the government can not pass legislation that allows for a universal form of money that is not gold-backed.>

Then you misunderstand how the Constitution works. It doesn't have to say that they can't do it in order to prevent them from doing it. It has to say that they can do it in order to allow them to do it.

So instead of saying "They can do it because it doesn't say they can't," an accurate statement would be "They can't do it because it doesn't say they can."

<"In lieu of actually carrying around gold and silver coins, we could use a currency that had a fixed value. For instance, $1,000 = one ounce of gold. And this value would be fixed."

That's ludicrous for advocates of free-markets economics, like fixing the price of cotton or the price of sugar or the price of any other commodity. Gold, like anything else, fluctuates in value, which is why there are $5 dollar notes (i.e, $5 worth of gold per the current value of gold), not .02 ounce notes in gold-standard based money systems.>

You're right, I was unclear. The price of gold, like anything else, can fluctuate because of market forces. What I was intending to refer to are arbitrary prices fixes by government, which should not be allowed.

Posted by: Arvind
08/06/2007 8:20am

In response to [General Public]
Rothbard opens the discussion with "The Value of Exchange" but does not define "value/wealth", without defining value/wealth further discussion has no meaning."

Agreed. Value is subjective. For instance I value my salary more than 8 hours of my time so I voluntarily exchange my time for my salary. My employer clearly feels the other way - valuing my time more than my salary. This exchange enables both of us to obtain what we value in exchange for something we possess but value less.

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