by 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Legal tender laws should be repealed at the Federal level.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.