September 15, 2008 - By True Patriot and Congressman
Ron
Paul
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Legal tender laws should be repealed at the Federal level.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.
Read more Articles by Ron Paul at http://www.house.gov/paul/legis.shtml
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