The Federal Reserve and the Gold Standard

End the Fed?

The nation does not need to go back to a gold standard, though this certainly wouldn’t hurt. The nation has the right to coin its own currency and that currency can be backed by the authority of the U.S. government and nothing else. It does not need to be backed by gold. The point of the gold standard is to help control inflation—to keep the dollar supply at a level limited by the amount of gold possessed by the government. It gives those who use the dollar the confidence to accept it as a medium of exchange. Since the country was taken off the gold standard by Nixon, and since the nation long ago handed over the right to print money to the Federal Reserve, it both gave up its sovereignty to this banking cartel and the limit on money supply that the gold standard gave. Nixon tried to fix this latter problem by using the oil standard—the petrodollar was born thanks to an agreement between Saudi Arabia and the U.S. in which the former would only use USD when transacting oil exchanges—which made everyone trading oil need to get USD too.

However, this prop is not as effective as a gold standard in many ways: first, the oil standard can be taken away—as is currently being seen by countries who make other arrangements for oil in order to bypass the USD—nations like Russia, China, Iran and so on. Plus, it does not place a limit on the money supply. The Fed, for instance, has been acting like a printing machine—and since 2008 with QE 1, 2 and 3, the money supply has increased dramatically, which has led to inflation (i.e., the devaluation of the dollar and the rising cost of just about everything). Ending the Fed, as Ron Paul puts it, would be one step in addressing the issue of inflation and the erosion of the value of the dollar. It would allow the government to take back its sovereign right to coin its own currency and not have to rely on bankers to do it for them (the Fed, by the way, prints their fiat money and then loans it to the government, which must pay interest on it—and how this makes any economic sense to anyone is really the big question). The real reason the Fed is needed is because it buys US debt—Treasuries—and helps to ensure that the U.S. can continue to fund the military industrial complex without being held accountable to U.S. voters, who if there was no central bank to intervene with its fiat dollars would undoubtedly be more aware of what money really is.

My question is: Why does the government think it needs to “borrow” money from the Fed in order to fund its programs? The government has the right to coin its own currency, backed by its own authority. It shouldn’t have to borrow anything from its central bank. So long as it is actually exchanging the money for real labor, then the system will work fine. This is the system that Germany used to get out of its insane hyperinflation in the 1930s. The country put people to work and their work was rewarded with a Germany currency backed by the government, which had the full confidence of the people because it had the people’s interests at heart: it wanted to see Germans back to work again. The U.S. has bankers’ interests at heart. It wants to ensure that bankers always have jobs, and if the bankers have to keep printing money in order for their system to be perpetuated, and if that printing causes the working class to suffer because all of a sudden their savings (if they even have any) are suddenly worth less, so be it. The U.S. does not care about the worker—if it did, it would end the Fed, and it would stop printing up trillions in order to prop up phony markets and bogus promises made to workers by pension funds who need markets to yield them a nice fat return to avoid going bust and leaving pensioners hanging—which is going to happen anyway.