Is it too late to save the "VALUE" of the American dollar?

Question

Ron Paul wants to again back the dollar with Gold/Silver as mandated in the constitution.
According to this report there is approximately 157,000 metric tonnes of Gold in existence. {1 tonne is 32,150 ounces}
http://www.plata.com.mx/plata/plata...
So, there is plenty of Gold available despite what critics say. Of course the price per ounce may sky-rocket until an equalibrium is reached.

[edit] To Ducky,
Article I
Section 10
"Make anything 'BUT' Gold & Silver a tender { websters:an unconditional offer of money } in payment of debts.

Answer 1

Article I, Section 10, U.S. Constitution

No State shall…coin Money, emit Bills of Credit, make any
Thing but gold and silver Coin a Tender in Payment of Debts.

Article I, Section 8, U.S. Constitution

The Congress shall have Power to…coin Money, [and] regulate the Value thereof



A brief timeline:

Prior to 1913, the first year of the Federal income tax, and the year of the founding of the Federal Reserve System, gold and silver coins, stamped by the U.S. Mint were the principal money used in this country. This was not merely tradition, but it was a constitutional imperative, as we shall see. The U.S. Coinage Act of 1792, consistent with the Constitution, provided for a U.S. Mint, which stamped silver and gold coins. One dollar was defined by statute as a specific weight of gold. The Act also invoked the death penalty for anyone found to be debasing money.

Gold & silver certificates were also issued, as a convenience. It was clear that they were not gold, but equally clear that they represented and could be redeemed for physical gold on demand.

As time wore on, and additional monies were needed to finance wars, patch up the (first) Great Depression, pay for social programs, etc., the unconstitutional coupling continued. Here are some of the low lights:

1922 - As a result of wartime inflationary pressures, the gold exchange standard was adopted. The dollar and the pound sterling were officially declared 'as good as gold' - deemed fit to be used along with gold in the monetary reserves of other countries

1933 -April 5 - One month after his inauguration, at the nadir of the Great Depression, President Roosevelt declared a national emergency and unconstitutionally ordered all gold coins, gold bullion, and gold certificates to be turned into the Federal Reserve banks by May 1st under the threat of imprisonment and fines. It was a national confiscation of gold and silver.

June 5 - Congress enacted a joint resolution, that all gold clauses in contracts were outlawed and no one could legally demand gold in payment for any obligation due to him. This resolution is clearly in violation of Article 1, section 10 of the Constitution.*

1934 - The Gold Reserve Act of 1934 officially prohibited private persons subject to U.S. jurisdiction from holding gold for monetary purposes. It became illegal for U.S. citizens to own gold! The old standard was officially dead.

The result was this:

Exhibit B: The series 1934 D Federal Reserve Note

This is what happened to our money in just 6 short years:


Note the change in verbiage. All references to gold have been subtly replaced, while retaining the overall appearance of the bill. A casual observer would hardly notice the difference. It still says that $10 dollars will be paid to the bearer on demand. But in what? It does not say.

And then there is the bizarre disclaimer on the face of the bill: "This note is legal tender for all debts public & private, and redeemable in lawful money at the U.S. Treasury or at any Federal Reserve Bank."

If the bill is redeemable in lawful money, doesn't it imply that the bill itself in not lawful money?

This disclaimer continued on the bills until 1963, when….

1963 - New Federal Reserve notes with no promise to pay in "lawful money" was released. No guarantees, no value. This is also the year of the disappearance of the $1 silver certificate. Once again, a subtle shift in plain view.

1965 - Silver is completely eliminated in all coins save the Kennedy half-dollar, which was reduced to 40 percent silver by President Lyndon Johnson's authorization.

1968 - June 24 - President Johnson issued a proclamation that all Federal Reserve Silver Certificates were merely fiat legal tender and could not really be redeemed in silver.

1971 - Aug 15 - President Nixon closes the international gold window. U.S. Dollars are no longer redeemable in gold for international settlements. This marked the beginning of the current, anchor less floating currency regime, an not coincidentally, a decade of inflation.

1980 - Gold reaches an all time high of $850/oz, as world confidence in the Dollar plunges.

This gets us fairly well caught up on the current situation. Clearly, the money we use today is not, by definition, constitutional, and has not been since 1934. We have come a long way from 1794, when the debasing of money was punishable by death. Now the government does it at will. Today, the dollar holds the record as the longest running fiat currency, ever. But the mighty dollar is an emperor with no clothes. It powers the world, sets the price of oil, gold, and a working man's wages, all without a constitutional leg to stand on, nor a standard of value to back it.

Answer 2

Why would the government want to save the value of the dollar. A devalued dollar makes exports cheap and imports expensive. With the current trade defecit at record levels the government is likely trying to narrow this. What better way then by allowing the currency to depreciate. If we decide to deviate from a floating rate currency to a pegged rate currency. If we elect to go back to a pegged currency then there could be problems. Fixed currencies, can often lead to severe financial crises since a peg is difficult to maintain in the long run. This was seen in the Mexican (1995), Asian and Russian (1997) financial crises: an attempt to maintain a high value of the local currency to the peg resulted in the currencies eventually becoming overvalued. This meant that the governments could no longer meet the demands to convert the local currency into the foreign currency at the pegged rate. With speculation and panic, investors scrambled to get out their money and convert it into foreign currency before the local currency was devalued against the peg; foreign reserve supplies eventually became depleted. In Mexico's case, the government was forced to devalue the peso by 30%. In Thailand, the government eventually had to allow the currency to float, and by the end of 1997, the bhat had lost its value by 50% as the market's demand and supply readjusted the value of the local currency. Countries with pegs are often associated with having unsophisticated capital markets and weak regulating institutions. The peg is therefore there to help create stability in such an environment. It takes a stronger system as well as a mature market to maintain a float. When a country is forced to devalue its currency, it is also required to proceed with some form of economic reform, like implementing greater transparency, in an effort to strengthen its financial institutions. Since the US has a strong regulating system and strong capital markets it wouldn't be in our best interest. Additionally the USD is the benchmark for many of the worlds currencies and creates demand. If we lose the benchmark it may cause items such as oil to be priced in a different currency causing further true depreciation and undermining the pegging system. Depending on Gold stores and scarcity this may prove to be an extremely poor long term plan.

Answer 3

Heck No, it is never too late. Look at Japan, they sure recovered. All USA has got to do is team up with Canada and the richer countries in South America and make up one currency that will be eventually higher than Euro or the British Pound. But I'm pretty sure USA will do something drastic like invading another nation, etc. to improve economy. Otherwise, let it be so Australian dollar will eventually be equal and it can merge into the one megacurrency as well.

Answer 4

Yea, well that's not the problem.

The current situation with the dollar is one where there is a strategy. A low dollar value makes US made products very cost effective overseas and acts as a trade barrier to imported products.

You can thank the low dollar for keeping our economy afloat and encouraging tourism from abroad.

No amount of gold or silver would change that, this isn't a "vote of confidence" for the US currency, it is a monetary strategy currently in place.

It will likely swing back in another 5 to 10 years.

Answer 5

No, Never to Late.

What Article of the Constitution mandates that the dollar be backed by gold / silver ?

Answer 6

To put in perspective how much Gold there is the world. Think of the Washington Monument. If it were made of solid Gold, it would be made out of ALL of the world’s Gold.

No, I do not think our money needs to be backed by Gold. The value of our dollar is not in trouble. It’s not great but it’s not terrible.

Selling our debt is not a bad thing in and of itself. If we sell it to China, it’s a lot like China making an investment in our country. Meaning they find it in their best interest that our country succeeds in some way. They’re not looking to destroy our country. Whether or not they’re trying to own our country, is another discussion.

Answer 7

Wow, great idea - if you like the idea of an economic disaster that would make the Great Depression pale into historical insignificance.

Answer 8

Funny thing is that you likely won't give me your dollars, which are hardly worthy anything.

Answer 9

not until the value of the american way is fixed... yeah I know that didn't make much sense, but you get my drift...