From the folks at Americans for a Free Republic:
Could a full convertible gold standard be legally implemented in today's world with the amount of paper currency that has been floated by the Fed throughout the 20th century? No, it couldn't. But tomorrow's world is going to be radicalized beyond our conventional imaginations of today. America's almighty dollar could possibly go the way of the Argentine peso. That is how serious the mess is that we are in. Would the call for a new money system free from government manipulation resonate with voters in the midst of such a disaster? It certainly would; but we will need to have strong, articulate voices manning the megaphones to explain why and how.
The great majority of economists in our government and in our colleges today will naturally attempt to deny the necessity of such a step, becoming almost apoplectic upon hearing that the utilization of gold money is being advocated. They will go to great lengths to try and convince their audiences that the economy's money supply must be continually inflated via the Federal Reserve in order to produce growth. But this is totally erroneous! America's productive growth during the 19th century was spectacular, and there was no Federal Reserve pumping unconvertible paper money into the system at all.
For example, the Consumer Price Index decreased by 30% from 43 to 30 between the years 1800 and 1913 (an average of 1/4 percent per year). This was because the money supply of this time, being tied to gold, was next to impossible to expand with a printing press in excess of the growth of goods and services. As a result, there was no upward pressure on prices.
In contrast, today we no longer use gold as money, but paper printed by the Federal Reserve as it sees fit. As a result, the Consumer Price Index increased by 1,663% from 30 to 529 in the years 1913 to 2000. This was because the money supply was created at a far faster rate than the production of goods and services -- all of which should tell us quite clearly that government money managers are not reliable and never will be, and that a fiat paper money system will never be stable. [The above percentages are taken from The World Almanac 2002, p. 103.]
When the above figures are combined with other vital 19th century statistics, we readily see that the Keynesian claim of "growth needing inflation" is a fallacy. During the 19th century due to the dollar being backed by gold, we enjoyed gently deflationary prices (the beneficial kind of deflation) and yet also rapid economic growth of all goods and services. America's GDP increased over 500% in just the years 1870 to 1913, averaging 4.3% annual growth, and real wages for the workingman tripled. In comparison, we average about 2.5% annual growth today, real wages are stagnant, and we are plagued by inflationary prices brought on by the Federal Government's relentless monetary expansion, with a possible gargantuan credit collapse now looming ahead to balance our government created excesses. [These figures are taken from The Statistical History of the United States from Colonial Times to the Present, Fairfield Publishers, 1960, pp. 91, 141, 409, 413.]
The Keynesian claim of monetary inflation being a requisite for healthy economic growth is thus totally in error. So also is its claim that only with government control over the currency and banking system can we have "stability" in our economy. Growth will take place very nicely without government inflation of the money supply; and what's more, it will be real growth, not the frenzied, speculative, boom-bust kind of growth our Great Society dreamers have given us. As for stability, how can any logical observer of the 20th century claim that the Fed's inflationary monetary policy has given us stability? Yet this was the publicly announced reason for the Fed's creation in 1913. It was going to be the great "stabilizer" of the banking system and our economy. Yet it has brought us precisely the opposite.
The reason the collectivists throughout the country oppose the stable monetary policy of a gold-backed system is because they know their ever-expanding welfare state is tied directly to Keynesian inflationary policy. Without the ability to egregiously inflate the money supply year after year, the vast panoply of big government programs could not be financed because American citizens would not pay for such fiscal extravagance with taxes. Without such welfare programs, the collectivists' egalitarian dream of a Great Planned Society, regulated and manipulated from Washington, is dead.
The future of America lies in ending the Keynsian inflation-deflation cycle. This requires the restoration of a gold-backed money system. The answer to so many of our problems would come if we would just end excessive monetary inflation by the Fed. Prices of goods and services would stop relentlessly rising. Excessive labor union demands would subside. Capital formation would increase. True prosperity would result. Poverty would shrink at a faster pace. Yet life would churn at a more moderate and predictable pace. The elderly would be able to keep the security they worked for. Jobs would stop leaving America for third world countries. And we could all get off this infuriating treadmill of never quite catching up with our bills. In general, life would again be stable, productive, and free rather than the speculative, frenzied, Washington managed economy that has evolved under the whip of collectivist-liberal ideology.
It's interesting to note that in the last 80 years, the economic cycle of boom and bust has been experienced and seemingly accepted as the natural order of things. I wonder how long the American people will continue to be sheared like sheep by the money masters.
The following, from the same link, sounds almost radical but given that this country was established as a republic and not a democracy (pdf), it's actually quite appropriate.
But such a flat tax must be a REAL flat tax, not the imposters put forth by the likes of Steve Forbes and Dick Armey. These two attempts to promote a flat tax were no answers at all because of their huge personal exemptions ($36,000 for a family of four). They would greatly increase the amount of people who pay zero taxes, and thus the amount of people who have infinite demand for government services. This type of "tax reform" is totally assinine. If we wish to shut down the inferno of government growth and spending, then we must truly shut down the PROGRESSIVE RATES that are causing its relentless expansion, which means all voters must pay the same rates, which means no exemptions!
As sure as the sun will come up tomorrow, however, liberals will attack any genuine "equal rate tax" as unfair to the poor people. So if a floor is to be established under which no one will have to pay the tax, i.e., an exemption for those under the poverty level, then a provision must be included in the tax bill stating that those who are exempted from paying are to also be excluded from voting. Remember we are trying to restore a RESPONSIBLE electorate and legislature. This cannot be done if voters get their services free. All who vote must pay the tax period! This is the only way they will act responsibly. This is human nature. After all, we deny children the right to vote. Why do we do this? Because they are not mature enough to vote responsibly. The same principle applies to men and women who are exempt from taxes; they will never vote responsibly. They will possess "infinite demand" for government services.
The entire AFR website offers some important reading and I encourage you to visit.
